Meaning of Actionable Claim under Transfer of Property Act,1882

 

Video Lecture:

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Meaning of Actionable Claim

Interpretation of actionable claim as per section 3 of Transfer of Property act, 1882 and Chapter VII of the act covers “Transfer of Actionable Claims” and provisions of the same are covered under sections 130-137.

 

Interpretation of actionable claim as per section 3 is:

“Actionable claim” means a claim to any debt, other than a debt secured by mortgage of immovable property or by hypothecation or pledge of movable property, or to any beneficial interest in movable not in 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, conditional or contingent.

For understanding this interpretation, first need to comprehend the meaning of debt:

(First this part of above interpretation will be discussed: “Actionable claim” means a claim to any debt, other than a debt secured by mortgage of immovable property or by hypothecation or pledge of movable property, or to any beneficial interest in movable not in possession)

Debt may be:

a)      Secured or;

b)      Unsecured

Secured Debt: Secured debt means when the creditor (who provides debt) takes security (any movable or immovable property) from the debtor (who asks for debt) for repayment of his money.

It states that security can be movable and immovable.

When debt is secured by immovable property, it means that debt is secured by mortgage.

And when debt is secured by movable property, it means that debt is secured by a pledge or hypothecation.

Unsecured debt:  If there is no security of any movable or immovable property, debt is unsecured.

And as per section 3, only unsecured debt is an actionable claim.

Note: Debt does not only mean loan rather any obligation to pay certain sum of money may be called a “debt”.

(Now, the following italic and bold part of interpretation will be explained: “Actionable claim” means a claim to any debt, other than a debt secured by mortgage of immovable property or by hypothecation or pledge of movable property, or to any beneficial interest in movable not in 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, conditional or contingent.)

 

Debt may be:

a)      Existent Debt: The debt is existent when a debt or sum of money becomes due and has to be payable at present for instance, the claim of arrears of salary.

b)      Accruing debt: Accruing means to increase over a period of time, so, where a debt is payable on a future date, the debt is accruing. For example, if Mr. A promises to pay Rs. 3,000/- to Ms. B as maintenance allowance on 15^th of every month, the claim of Ms. B against Mr. A is an accruing debt before 15^th of that month.

c)      Conditional or contingent debt: As the word indicates, conditional means based on some condition which can be fulfilled by parties and contingent means any condition which is beyond the control of parties.

For instance: Mr. A promises to Mr. B Rs. 5,000/- if he marries Ms. C within one year.  So, in this case, claim of Mr. B of Rs. 5,000/- is based on condition of his marriage. Hence it is conditional debt.

And if Mr. A promises to give Mr. B Rs. 5,000/- on the birth of first child of Mr. B only the male child, this is a contingency which makes it contingent debt.

(Now, the following italic and bold part will be explained: “Actionable claim” means a claim to any debt, other than a debt secured by mortgage of immovable property or by hypothecation or pledge of movable property, or to any beneficial interest in movable not in 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, conditional or contingent.

Claim to Beneficial interest not in possession of the claimant: This states that right of a person to take possession of a movable property from the possession of another, is the actionable claim of that person if claimant has beneficial interest in that property.

(What is beneficial interest?

Beneficial interest is the right to possession.)

In this way, following conditions are necessary for an actionable claim:

1. The claim in movable property

3. The beneficial interest or the right of possession of the claimant is recognized by the court

2. The movable property is in possession of another person

 

 

The interpretation clearly provides that if a person is already in possession either actual or constructive, there will not be any claim of possession.

Actual Possession of goods means Mr. A is having physical control on some goods but constructive possession means he is having key of  a warehouse where goods are being stored.

Hence, actionable claim includes

1.      Unsecured Money Debt; and

2.      A claim to beneficial interest in movable property not in possession of the claimant.

And beneficial interest in movables can be classified into two categories:

Movable which are “chooses in possession” are tangible movable properties e.g. table, television, car etc. which are capable of being possessed.

Movable which are “chooses in action” are intangible movable properties e.g., claiming for money or, claim of movables i.e. beneficial interest in the movable.

Hence, beneficial interest in movables or chooses in action are knows as actionable claims.

 

Examples of Actionable Claims:

(i)                 Claim for the arrears of rent;

(ii)               Claim for the money due under insurance policy;

(iii)             Claim for the return of earnest money;

(iv)             Right to get back the purchase money when the sale is set aside;

(v)               Right of a partner to sue for an account of the dissolved partnership firm;

(vi)             Muslim woman’s claim for her unpaid dower;

(vii)           Right to get the proceeds of a business

Examples of non-actionable claims:

(i)                 Right to get damages (uncertain sum of money) under the law of torts or for breach of a contract;

(ii)               Claim for mesne profits (i.e. claim to produce of profit of a disputed property by decree holder who was not in possession of the property)

(iii)             Copy right of a book or any other original work of skill e.g. invention is not actionable claim because it already vests in the possession who have it;

(iv)             Although a debt is an actionable claim but the debt passed in a judgment i.e. a decree or judgment of a debt is not actionable claim because no further action is to be maintained for its recovery;

(v)               Where a decree provides for a future action is to be maintained for its recovery;

(vi)             Where a decree provides for a future decree, this future decree is also not actionable claim.

Case Laws

State of Kerala and Others v. Mini Shamsudin and Other 2009 The court said that actionable claims are "goods" and movable property but it is not covered under the provisions of sales tax acts.

Jugalkishore Saraf v. Raw Cotton Limited 1954 The Supreme Court held that a judgement debt or decree is not an actionable claim.

Sunrise Associates v. Government of NCT of Delhi 1998 Appeal (2006) Supreme Court held that the right to participate in a draw is a beneficial interest in movable property. The object of the participation would be to win the prize. Transfer of right is thus a beneficial interest in movable property not in permission. It was held that a lottery is an actionable claim.