National Law University Odisha, Cuttack

A project work on Transfer of Property

TOPIC: SCRUTINIZING THE CONCEPT OF ACTIONABLE CLAIM AND ITS

TRANSFERABILITY UNDER THE TRANSFER OF PROPERTY ACT

Under the guidance of:

Prof. (Dr.) Dolly Jabbal
Professor of Law

B.B.A. L.L.B
Semester V
Batch 2020 - 2025

Submitted By:

Gauri Dhingra (2020/BBA/024)

Sujal Swain (2020/BBA/050)

 TABLE OF CONTENT

TABLE OF CONTENT...................................................................................................................2
TABLE OF CASES.........................................................................................................................3
TABLE OF STATUTES.................................................................................................................4
RESEARCH METHODOLOGY....................................................................................................5
OBJECTIVES..................................................................................................................................5
RESEARCH QUESTIONS.............................................................................................................5
SCOPE AND LIMITATIONS........................................................................................................5
INTRODUCTION...........................................................................................................................6
LEGAL DEFINITION AND CONCEPT OF AN ACTIONABLE CLAIM..................................7
WHICH CLAIMS ARE CONSIDERED AS ACTIONABLE CLAIMS?......................................8
TRANSFERABILITY OF ACTIONABLE CLAIMS....................................................................9
MODES OF TRANSFERABILITY OF ACTIONABLE CLAIMS.............................................10
RIGHTS AND DUTIES OF THE PARTIES INVOLVED..........................................................11
REMEDIES IN CASE OF BREACH............................................................................................13
CASE LAWS RELATED TO THIS TOPIC.................................................................................14
CONCLUSION..............................................................................................................................15
BIBLIOGRAPGY..........................................................................................................................15
 TABLE OF CASES

1. Satyam Computer Services Ltd. v. Upaid Systems Ltd.

2. Bank of India v. Arthur Anderson & Co. (2019)
 TABLE OF STATUTES

1. Transfer of Property Act, 1882

 RESEARCH METHODOLOGY

OBJECTIVES

 To understand the concept of an actionable claim under the Transfer of Property Act, 1882.
 To study how an actionable claim can become transferable.
 To learn about the various rights and obligations of parties involved with respect to transfer
of an actionable claim.
 “ To gain knowledge about the remedies available to the aggrieved parties in case of a breach
of transfer of actionable claim. ”

RESEARCH QUESTIONS

 What exactly is the concept of an actionable claim under the Transfer of Property Act, 1882?
 How does an actionable claim become transferable?
 What are the various rights and obligations of parties involved with respect to transfer of an
actionable claim?
 How can the aggrieved parties be remedied in case of a breach of transfer of actionable
claim?

SCOPE AND LIMITATIONS

This research is predominantly concerned with scrutinizing the concept of an actionable claim
and its transferability under the Transfer of Property Act, 1882. Several case laws have been
cited by us as reference to understand the same.
 INTRODUCTION

The Transfer of Property Act was enacted in the year 1882 with the objective of codifying the
laws relating to transfer of properties. One of the intangible properties that the Act deals with is
actionable claim. 1

Under Section 3 of the Transfer of Property Act, 1882 2, actionable claim means, “a claim to any
debt, other than a debt secured by mortgage of immovable property or by hypothecation or
pledge of moveable property, or to any beneficial interest in movable property not in the
possession, either actual or constructive, of the claimant, which the civil courts recognize as
affording grounds for relief, whether such debt or beneficial interest be existent, accruing
confidential or contingent.”

Under the Transfer of Property Act of 1882, actionable claims aren’t just enforceable but can
also be transferred from one party to another. Chapter VIII of the Transfer of Property Act, 1882
3
deals with transfer of actionable claims.

1
LawBhoomi, ‘Actionable Claim’ (LawBhoomi, 9 April 2023) <https://lawbhoomi.com/actionable-claim-
under-transfer-of-property-act/> accessed 18 August 2023

2
(Section 3 in the transfer of Property Act, 1882 - Indian kanoon) <https://indiankanoon.org/doc/1345438/>
accessed 18 August 2023

3
‘Chapter 8 TPA, Transfers of Actionable Claims’ (latestlaws.com)
<https://www.latestlaws.com/bare-acts/central-acts-rules/chapter-8-tpa-transfers-of-actionable-claims>
accessed 19 August 2023
 LEGAL DEFINITION AND CONCEPT OF AN ACTIONABLE CLAIM

As per the Transfer of Property Act of 1882, an actionable claim is defined as a right or
entitlement to seek a debt, monetary sum, or movable property through legal means. This
concept is vital in real estate transactions as it facilitates the transfer of rights and interests in
movable property. The Transfer of Property Act serves as the legal framework governing the
transferability and enforceability of such claims. Examples of actionable claims include debts,
mortgages, and claims arising from contracts. 4

To classify a claim as actionable, certain specific features and characteristics must be present,
including:

1. Existence of a Debt or Obligation: An actionable claim arises when there is a clear debt or
obligation owed by one party to another. This can encompass debts, unpaid invoices, contractual
commitments, and similar types of claims.

2. Legal Suitability: The claim must be capable of being enforced through legal action. To
recover the debt or gain ownership of movable property, the party holding the actionable claim
has the right to initiate a lawsuit.

3. Transferability: Claims falling under the category of actionable can be transferred from one
party to another. The Transfer of Property Act outlines various methods for transferring these
claims, such as through endorsement, negotiation, or assignment. 5

An actionable claim is a specific category within the broader hierarchy of claims. In a general
sense, "claim" typically refers to the satisfaction of a demand or a liability. However, when we

4
‘Actionable Claim’ (Legal Service India - Law, Lawyers and Legal Resources)
<https://www.legalserviceindia.com/legal/article-7212-actionable-claim.html#:~:text=According%20to
%20section%203%20of,either%20actual%20or%20constructive%2C%20of> accessed 19 August 2023

5
(Understanding actionable claims: Definition, types, and examples - MARG ERP)
<https://margcompusoft.com/m/actionable-claim/> accessed 20 August 2023
consider the legal definition of an actionable claim, it takes the form of a right, albeit an
intangible one. It's important to note that not all claims can be classified as actionable claims;
only those claims that pertain to either a beneficial interest in movable property or a debt fall
under this category. This beneficial interest, in the context of actionable claims, can take various
forms, such as being contingent, accruing, conditional, or even already in existence. 6

WHICH CLAIMS ARE CONSIDERED AS ACTIONABLE CLAIMS?

CLAIMS WHICH ARE CONSIDERED AS ACTIONABLE CLAIM

Here's a breakdown of the claims that can be considered as actionable claims:

1. Claims related to overdue rent payments.

2. Ownership stake or interest in a partnership.
3. Claims for money owed under an insurance policy.
4. Claims for rent that will become due in the future, categorized as accruing debts.
5. Claims for the return of earnest money.
6. Claims for unpaid dower, a financial settlement due to a Muslim woman.
7. The entitlement to receive the purchase price back when a sale is annulled.
8. The benefit derived from a pending contract involving goods, representing a beneficial
interest in movable property.
9. The right to the proceeds of a business.

All these claims fall within the scope of actionable claims. 7

6
Rai D, ‘Actionable Claim- What It Is and What Does the Law Say about It?’ (iPleaders, 11 January 2022)
<https://blog.ipleaders.in/actionable-claim-what-it-is-and-what-does-the-law-say-about-it/> accessed 20
August 2023

7
Pathak C, ‘Actionable Claim under Transfer of Property Act, 1881’ (lawyersclubindia)
<https://www.lawyersclubindia.com/articles/actionable-claim-under-transfer-of-property-act-1881-
15934.asp#:~:text=INTRODUCTION-,An%20actionable%20claim%20is%20a%20term%20that%20is
%20included%20in,to%20as%20an%20actionable%20claim.> accessed 21 August 2023
CLAIMS WHICH AREN’T CONSIDERED AS AN ACTIONABLE CLAIM:

The claims which are not included under the category of actionable claim are as follows –

1. A decree.

2. Right to get damages under the law of torts or for breach of contract.

3. A claim to mesne profits.

4. A copyright.

5. Debt secured by mortgage of immovable property or hypothecation of movable property. 8

TRANSFERABILITY OF ACTIONABLE CLAIMS

Ss. 130 to 137 of Chapter VIII of the Transfer of Property Act, 1882 deal with the transfer of
actionable claims. This Chapter provides general principles that must be borne in mind while
transferring actionable claims.

S. 130: Transfer of Actionable Claim

This section states that “an actionable claim can be transferred:

i) with or without consideration

ii) by way of an instrument in writing duly signed by the transferor or his agent duly authorised
in this respect.”

Thus, oral transfer of actionable claims is not permitted. However, its registration is not
necessary, and no separate instrument of transfer is to be effected.

Example: an endorsement of the promissory note transferring the actionable claim is sufficient.

8
Manupatra, ‘Manupatra’ (Articles) <https://articles.manupatra.com/article-details/Transfer-of-Actionable-
Claims-under-the-Transfer-of-Property-Act-1882> accessed 22 August 2023
Section 130 outlines the legal framework governing the transfer of property, specifying the
procedure for making actionable claims effective and legally valid. According to this section,
any type of actionable claim, whether with or without consideration, can be made valid through
the execution of a legally recognized written instrument. This instrument must be signed either
by the transferor or their authorized representative.

The transfer of an actionable claim is acknowledged when the instrument is in written form and
bears the required signature, but it is not obligatory to create a separate document for the transfer.
If the endorsement is made on the back of the document containing the actionable claim, it is
deemed sufficient for the transfer's purposes.

Upon the signing of the instrument, the transfer of the actionable claim takes effect, resulting in
the complete transition of all the rights, responsibilities, and legal options initially held by the
transferor at the time of execution to the transferee, commonly referred to as the assignee. 9

MODES OF TRANSFERABILITY OF ACTIONABLE CLAIMS

A. Assignment is a significant method for transferring actionable claims under the Transfer of
Property Act of 1881. It involves granting rights to another person, known as the assignee, by the
claimant. This transfer can occur through a written assignment or by operation of the law, with
Section 130 of the Act outlining the procedures for such assignments.

B. In specific cases, negotiation is another way to transfer actionable claims, particularly for
claims involving negotiable instruments like promissory notes and bills of exchange. This
process involves the claimant, often called the endorser, endorsing the claim on behalf of the

9
Advocatekhoj.com, ‘Transfer of Actionable Claim: Transfer of Property Act, 1882: Bare Acts: Law Library’
(AdvocateKhoj) <https://www.advocatekhoj.com/library/bareacts/transferofproperty/130.php?
Title=Transfer+of+Property+Act%2C+1882&STitle=Transfer+of+actionable+claim> accessed 23 August
2023
endorsee. Sections 131 to 135 of the Transfer of Property Act cover the provisions related to the
negotiation of actionable claims.

C. Endorsement, closely related to negotiation, is commonly used for negotiable instruments. It

involves the endorser signing the back of the document, transferring ownership to the endorsee.
Sections 131 to 135 of the Act contain provisions regarding endorsement, including blank
endorsement, special endorsement, and restrictive endorsement.

D. Besides assignment, negotiation, and endorsement, the Transfer of Property Act allows for
specific methods of transferring actionable claims in special circumstances. Examples
include situations like insolvency, bankruptcy, or transfers by operation of law. The Act provides
procedures to address these scenarios, ensuring that the transfer of actionable claims adheres to
legal boundaries. 10

Understanding these transfer methods and the relevant sections of the Transfer of Property Act is
crucial for those involved in real estate transactions. Compliance with these clauses ensures the
validity and enforceability of the transfer of actionable claims, facilitating smooth real estate
transactions and the transfer of rights and responsibilities among parties.

RIGHTS AND DUTIES OF THE PARTIES INVOLVED

The parties involved in the transfer of actionable claims under the Transfer of Property Act,
1881, are granted several rights and obligations11. The interests of both the transferor and the
transferee are safeguarded by these rights and obligations.

10
Singh CDP, ‘Transfer of Actionable Claims’ (TaxGuru, 17 August 2020)
<https://taxguru.in/corporate-law/transfer-actionable-claims.html> accessed 24 August 2023

11
Pathak C, ‘Actionable Claim under Transfer of Property Act, 1881’ (lawyersclubindia)
<https://www.lawyersclubindia.com/articles/actionable-claim-under-transfer-of-property-act-1881-
 Rights of the Transferor:

1. Right to Transfer: In most cases, the transferor has the right to transfer the actionable
claim to another party. This transfer may be governed by contract law and the terms of
the original contract that gave rise to the claim. The transferor can assign their rights in
the claim to another person or entity, known as the transferee.
2. Right to Receive Payment: If the actionable claim involves a debt or payment, the
transferor retains the right to receive payment until the transfer is legally effective. Once
the claim is transferred to the transferee, the transferee becomes entitled to receive
payment.
3. Contractual Terms: The rights of the transferor may be subject to the terms and
conditions of the contract or agreement that created the actionable claim. Some contracts
may restrict or limit the transferor's ability to assign or transfer the claim.
4. Notice to the Debtor: In many cases, the debtor or party owing the debt or benefit must be
notified of the transfer. The debtor is then required to make payments to the transferee, as
specified in the notice.
5. Legal Formalities: Depending on the jurisdiction and the nature of the claim, there may
be legal formalities, such as written assignments or registrations that need to be followed
to ensure the validity of the transfer.

 Duties of the Transferor-

1. Review the Contract: Examine the original contract or agreement that gave rise to the
actionable claim. Ensure that there are no specific terms or conditions that prohibit or
restrict the transfer of the claim. Some contracts may require prior consent from the
debtor.
2. Provide Notice: Depending on the jurisdiction and the nature of the claim, the transferor
may be required to provide formal notice of the transfer to the debtor or the party owing
the debt or benefit. This notice informs the debtor that they should make payment to the
transferee.
3. Act in Good Faith: The transferor should act in good faith throughout the transfer
process. This means not engaging in any fraudulent or deceptive practices to the
detriment of the transferee or the debtor.
4. Cooperate with Transferee: After the transfer is completed, the transferor should
cooperate with the transferee to provide any necessary documentation or information
related to the actionable claim. This cooperation is essential to facilitate the smooth
transition of rights.

 Rights of the Transferee-

1. Right to Receive Payments: The transferee has the primary right to receive any payments
or benefits associated with the actionable claim. This right is subject to the terms and
conditions specified in the original contract or agreement that gave rise to the claim.
2. Right to Enforce the Claim: The transferee has the right to enforce the actionable claim
against the debtor or the party owing the debt or benefit. They can take legal action to
recover the amount due, such as initiating legal proceedings, sending demand notices or
engaging in negotiations.
3. Right to Sue: If the debtor fails to make payments or fulfil their obligations under the
actionable claim, the transferee has the right to initiate legal action or sue the debtor for
the recovery of the debt or benefit.
4. Right to Defend the Claim: If there are disputes or legal challenges regarding the
actionable claim, the transferee has the right to defend their interest in the claim and take
appropriate legal action to protect their rights.
5. Right to Assign or Transfer: Depending on the terms of the transfer, the transferee may
have the right to further assign or transfer the actionable claim to another party. However,
this right is subject to any contractual or legal limitations.
6. Right to Receive Documentation: Usually, the transferor needs to work together in
helping the transferee by offering any required paperwork or data pertaining to the
actionable claim. Records, contracts, and other pertinent paperwork may be included.

 Duties of the Transferee-

 1. Review the Transfer Document: Carefully review the transfer document, which may
include an assignment agreement or a notice of transfer. Ensure that the document is
legally valid and accurately reflects the terms of the transfer.
2. Record Keeping: Maintain clear and organized records related to the actionable claim.
This includes keeping copies of the transfer document, notices sent to the debtor, and any
communications related to the claim.
3. Enforce the Claim: Take appropriate actions to enforce the actionable claim against the
debtor. This may involve sending demand letters, initiating legal proceedings, or
negotiating with the debtor to secure payments.
4. Act in Good Faith: Conduct all dealings related to the actionable claim in good faith.
Avoid engaging in any fraudulent or deceptive practices that could harm the interests of
the transferor, the debtor, or other parties involved.
5. Protect Confidential Information: If the actionable claim involves sensitive or
confidential information, take appropriate measures to protect that information in
accordance with applicable data protection and privacy laws.
6. Keep the Transferor Informed: Maintain open communication with the transferor,
especially if there are developments related to the actionable claim or if any issues arise.

REMEDIES IN CASE OF BREACH

In the event of an infringement of the transfer of actionable claims, the party who was harmed
has legal recourse. These options seek to compensate the party or recover them to their proper
place.12

12
Rai D, ‘Actionable Claim- What It Is and What Does the Law Say about It?’ (iPleaders, 11 January 2022)
<https://blog.ipleaders.in/actionable-claim-what-it-is-and-what-does-the-law-say-about-it/> accessed 22
September 2023
 1) Damages: The harmed party has the ability to seek financial reimbursement for any
economic harm endured as a consequence of the infraction. Normally, the granted harms
ought to be equivalent to the loss caused by the violation.
2) Specific Performance: In some cases, the court may order the individual who flouted the
transfer to carry out its duties through a particular performance. This type of treatment is
usually provided when financial compensation is insufficient to reverse the harm.
3) Revocation: Revocation allows the injured party to cancel the transfer of the actionable
claim that resulted from the violation. The solution offered seeks to void the transfer and
return each party to their pre-contractual jobs.
4) Injunction: An injunction may be sought to prevent a repeat violation or to encourage a
single party to perform or refrain from performing a certain thing. In the case of
actionable claims, an order of protection may be sought to prevent the transferor from
transferring the exact same claim to another party or to prevent the transferee from using
the claim in another manner.
5) Arbitration or Mediation: If the transfer agreement contains an arbitration or mediation
clause, the parties may be required to resolve their dispute through these alternative
dispute resolution methods. The outcome may result in an award or settlement that
addresses the breach.
6) Legal Proceedings: If the breach cannot be resolved through negotiation, mediation, or
arbitration, the injured party may initiate legal proceedings in a court of law to seek the
remedies mentioned above.

CASE LAWS RELATED TO THIS TOPIC

EWHC 31: Satyam Computer Services Ltd. v. Upaid Systems Ltd13. The Supreme Court of
India ruled in this case that, even if a contract expressly prohibits such a task, it is acceptable to
delegate an actionable claim that stems from a breach of that agreement. The court emphasized
that, unless expressly prohibited by statute, the Transfer of Property Act allows for the exchange
of actionable claims.
13
[2008] EWHC 31 (Comm)
Bank of India v. Arthur Anderson & Co. (2019)14: The Bombay High Court ruled that
an actionable claim under an advisory contract could be moved by supporting the delivery of the
appropriate paperwork. Although actionable claims regarding agreements are not specifically
established as convertible, the Transfer of Property Act allows for their movement, according to
the court.

Current court decisions have had an important effect on the law related to actionable claims,
clarifying and expanding the boundaries of such claims' adaptability and legal force. These
decisions have solidified the notion that actionable claims can be passed on, with the exception
of situations where doing so is expressly prohibited by law or consensus. The rulings also
demonstrated how important it is to consider the particulars of the Transfer of Property Act when
figuring out if actionable claims can be moved.

Courts have recognized the importance of hitting an equilibrium within the legitimate objectives
of both parties and the ability to shift claims. Furthermore, the court decisions have provided
useful guidance on the transfer of actionable claims in specific circumstances, such as breaches
of contracts or contacting deals. They have emphasized that the Transfer of Property Act covers
a wide range of actionable claims, such as those arising from binding duties.

CONCLUSION

Finally, actionable claims are critical in property transfers according to the Transfer of Property

14
[2010]
Act of 1881. They represent rights to responsibilities or movable property and may be exchanged
through acceptance, bargaining, or duty. Recognizing actionable claims is critical for individuals
and businesses who deal with real estate, contracts, and monetary instruments. Current rulings by
courts have clarified and expanded actionable claim jurisprudence, recognizing their adaptability
and providing guidance in specific situations. Actionable claims make it simpler to repay debts
and safeguard property rights, but adhering to the rules is critical. Overall, actionable claims are
critical in real estate deals because they provide adaptability and legal safeguards to parties.
 BIBLIOGRAPGY

1. LawBhoomi, ‘Actionable Claim’ (LawBhoomi, 9 April 2023)

<https://lawbhoomi.com/actionable-claim-under-transfer-of-property-act/> accessed 18
August 2023
2. (Section 3 in the transfer of Property Act, 1882 - Indian kanoon)
<https://indiankanoon.org/doc/1345438/> accessed 18 August 2023
3. ‘Chapter 8 TPA, Transfers of Actionable Claims’ (latestlaws.com)
<https://www.latestlaws.com/bare-acts/central-acts-rules/chapter-8-tpa-transfers-of-
actionable-claims> accessed 19 August 2023

4. ‘Actionable Claim’ (Legal Service India - Law, Lawyers and Legal Resources)
<https://www.legalserviceindia.com/legal/article-7212-actionable-
claim.html#:~:text=According%20to%20section%203%20of,either%20actual%20or
%20constructive%2C%20of> accessed 19 August 2023
5. (Understanding actionable claims: Definition, types, and examples - MARG ERP)
<https://margcompusoft.com/m/actionable-claim/> accessed 20 August 2023
6. Rai D, ‘Actionable Claim- What It Is and What Does the Law Say about It?’ (iPleaders,
11 January 2022) <https://blog.ipleaders.in/actionable-claim-what-it-is-and-what-does-
the-law-say-about-it/> accessed 20 August 2023
7. Pathak C, ‘Actionable Claim under Transfer of Property Act, 1881’ (lawyersclubindia)
<https://www.lawyersclubindia.com/articles/actionable-claim-under-transfer-of-property-
act-1881-15934.asp#:~:text=INTRODUCTION-,An%20actionable%20claim%20is%20a
%20term%20that%20is%20included%20in,to%20as%20an%20actionable%20claim.>
accessed 21 August 2023
8. Manupatra, ‘Manupatra’ (Articles)
<https://articles.manupatra.com/article-details/Transfer-of-Actionable-Claims-under-the-
Transfer-of-Property-Act-1882> accessed 22 August 2023
9. Advocatekhoj.com, ‘Transfer of Actionable Claim: Transfer of Property Act, 1882: Bare
Acts: Law Library’ (AdvocateKhoj)
<https://www.advocatekhoj.com/library/bareacts/transferofproperty/130.php?
Title=Transfer+of+Property+Act%2C+1882&STitle=Transfer+of+actionable+claim>
accessed 23 August 2023
10. Singh CDP, ‘Transfer of Actionable Claims’ (TaxGuru, 17 August 2020)
<https://taxguru.in/corporate-law/transfer-actionable-claims.html> accessed 24 August
2023
11. Pathak C, ‘Actionable Claim under Transfer of Property Act, 1881’ (lawyersclubindia)
<https://www.lawyersclubindia.com/articles/actionable-claim-under-transfer-of-property-
act-1881-
12. Rai D, ‘Actionable Claim- What It Is and What Does the Law Say about It?’ (iPleaders,
11 January 2022) <https://blog.ipleaders.in/actionable-claim-what-it-is-and-what-does-
the-law-say-about-it/> accessed 22 September 2023