Actionable Claims Under Section 3 TPA: What Can Be Transferred and What Cannot
Date Published
Not every right to receive money can be transferred as an actionable claim, and not every claim you can sue on is an actionable claim. That is the confusion this topic clears up.
Section 3 of the Transfer of Property Act, 1882 defines the term, and Chapter VIII of the Act deals with its transfer. The definition was added by an amending Act, so check the year in your Bare Act. Aspirants of the Civil Judge Exam, PCS J Exam and APO Exam get questions here mostly as short notes and as lists of examples.
Where actionable claims fit
The Transfer of Property Act does not cover every kind of transfer or every kind of property. It does not deal with transfers by operation of law, such as transfers in execution of a court decree. It covers only inter vivos transfers, meaning transfers between living persons by act of parties. It mainly deals with immovable property, though some provisions apply to movables.
An actionable claim is an intangible movable property. The article draws this from Section 2(7) of the Sale of Goods Act, 1930, which defines goods as every kind of movable property other than actionable claims. That exclusion would not be needed if actionable claims were immovable, so they must be a kind of movable property.
The two kinds of actionable claim
Section 3 recognises only two types:
· A claim to an unsecured debt.
· A beneficial interest in movable property.
Other claims can also be enforced in court, such as secured debts and suits for defamation or nuisance, but they do not count as actionable claims.
Claim to an unsecured debt
An unsecured debt is a money obligation of a certain amount that is not covered by security such as a mortgage, pledge or hypothecation. It is not limited to loans. It also covers obligations like rent or payment on the sale of property.
Three requirements apply: a monetary obligation, no security and certainty of amount. Citing Sunrise Associates v Government of NCT of Delhi, AIR 2006 SC 1908, the article says an actionable claim may be existent, accruing, conditional or contingent.
· Existent debt: Already due and payable now. Example: the price of a house, payable on sale.
· Accruing debt: Due now but payable on a future date. Example: a month's salary, which is due through the month but payable on its last day.
· Conditional debt: Payable when a condition within the parties' control is fulfilled. Example: A will pay Rs. 1,000 if B buys C's house.
· Contingent debt: Payable when an event beyond human control happens. Example: A will pay a sum if C's ship sinks.
Beneficial interest in movable property
This arises where a person has a right to possess a movable property that is not in his possession. Three requirements: it is movable property, it is not in the claimant's possession, and the claimant has a legal right to possess it.
The article's example is a car sold to B. If B has paid but cannot get the car, he can go to court and claim it. If the keys were handed over, B has constructive possession and cannot claim possession. And if the seller was a minor or of unsound mind, the contract is void, so B has no legal right to possess and has no actionable claim.
Read Blog: Lease Under TPA: Sections 105–117 Explained
Examples of actionable claims
The article lists:
· Claim for arrears of rent.
· Claim for money due under an insurance policy.
· Claim for return of earnest money.
· Right to get back purchase money when a sale is set aside.
· A partner's right to sue for an account of a dissolved firm.
· Right to claim a benefit under a contract for the purchase of goods.
· Right to get the proceeds of a business.
In each of these, the amount is certain and definite, so the claim can be transferred.
What is not an actionable claim
· Damages for tort or breach of contract: The amount is uncertain, and it is not part of the original transaction. Principal and interest on it are certain, but damages are not.
· Personal tort claims: A right to sue for defamation is personal to the person defamed and cannot be transferred. A nuisance claim attached to a property can pass with the property to a buyer.
· Mesne profits: In Jai Narayan v Kishun Dutta, AIR 1924 Pat 551, the Court held mesne profits are unliquidated damages and a mere right to sue, not an actionable claim.
· Copyright, patents and trademarks: These already vest in the owner and are governed by their own Acts.
· A decree or judgment for debt: After judgment, no action subsists to be transferred.
Who cannot buy an actionable claim
Section 136 bars a judge, legal practitioner or officer connected with any court from buying or trafficking in, or agreeing to receive any share of or interest in, an actionable claim. A court will not enforce such a claim at his instance or at the instance of anyone claiming through him.
The article links this with Section 6(h)(3), which says property cannot be transferred to a person legally disqualified from receiving it. The reason is the impartiality of the judiciary. It quotes the Privy Council in Kerakoose v Serle: it is of great importance that no officer of a court should be exposed to suspicion that his official conduct may be influenced by personal consideration.
For a future judge, this rule is practical: you cannot deal in actionable claims once you are in the service of the court.
Answer-writing tip
Start with the Section 3 definition and the two kinds. Give one example each of existent, accruing, conditional and contingent debt. Then add the list of non-actionable claims and finish with Section 136. A table or two-column list helps in a Mains answer.
Common Questions on Actionable Claims
Where is actionable claim defined?
Section 3 of the Transfer of Property Act, 1882, with transfer dealt with in Chapter VIII.
What are the two kinds of actionable claim?
A claim to an unsecured debt, and a beneficial interest in movable property not in the claimant's possession.
What is an unsecured debt?
A certain money obligation not secured by a mortgage, pledge or hypothecation.
What is the difference between conditional and contingent debt?
A conditional debt depends on a condition within the parties' control. A contingent debt depends on an event beyond their control.
Is a claim for damages an actionable claim?
No. The amount is uncertain and not part of the original transaction.
Are mesne profits actionable claims?
No. Jai Narayan v Kishun Dutta held they are unliquidated damages and a mere right to sue.
Is an actionable claim movable or immovable property?
Movable and intangible, as inferred from Section 2(7) of the Sale of Goods Act, 1930.
Can a judge or lawyer buy an actionable claim?
No. Section 136 bars judges, legal practitioners and court officers from doing so.
Why does Section 136 exist?
To protect the impartiality of the judiciary and the integrity of court proceedings.
Is a decree for debt an actionable claim?
No. After the judgment, no action remains that could be transferred.
What to Remember
Two kinds, four types of debt, a list of what is excluded, and one disqualified class of buyers in Section 136. That is the whole topic in a nutshell.
Nitesh Sir and the Aashayein Judiciary faculty explain property law concepts in simple language with Judiciary Notes, PYQ practice and Mock Tests for the Civil Judge Exam, PCS J Exam and APO Exam. For guided Judiciary Coaching, Online Judiciary Coaching and reliable Judiciary Study Material, join Aashayein Judiciary today.