Section 130 of The Transfer of Property Act, 1882
1(1) The transfer of an actionable claim 2[whether with or without consideration] shall be effected only by the execution of an instrument in writing signed by the transferor or his duly authorised agent, 3*** shall be complete and effectual upon the execution of such instrument, and thereupon all the rights and remedies of the transferor, whether by way of damages or otherwise, shall vest in the transferee, whether such notice of the transfer as is hereinafter provided be given or not: Provided that every dealing with the debt or other actionable claim by the debt or or other person from or against whom the transferor would, but for such instrument of transfer as aforesaid, have been entitled to recover or enforce such debt or other actionable claim, shall (save where the debtor or other person is a party to the transfer or has received express notice thereof as hereinafter provided) be valid as against such transfer.
- (2)The transferee of an actionable claim may, upon the execution of such instrument of transfer as aforesaid, sue or institute proceedings for the same in his own name without obtaining the transferor's consent to such suit or proceedings and without making him a party thereto. Exception.-- Nothing in this section applies to the transfer of a marine or fire policy of insurance 4[or affects the provisions of section 38 of the Insurance Act, 1938 (4 of 1938).] Illustrations
- (i)A owes money to B, who transfers the debt to C. B then demands the debt from A, who, not having received notice of the transfer, as prescribed in section 131, pays B. The payment is valid, and C cannot sue A for the debt.
- (ii)A effects a policy on his own life with an Insurance Company and assigns it to a Bank for securing the payment of an existing or, future debt. If A dies, the Bank is entitled to receive the amount of the policy and to sue on it without the concurrence of A's executor, subject to the proviso in sub-section (1) of section 130 and to the provisions of section 132.
Summary
- A transfer of an actionable claim, which is an unsecured debt or a claim to moveable property not in your possession, can only be done in writing signed by the transferor or their agent.
- The transfer is complete the moment the written document is signed, and all rights of the original creditor immediately pass to the new owner, even before the debtor is notified.
- Any payment made by the debtor to the original creditor remains valid if the debtor had no express written notice of the transfer.
- The new owner of the claim can sue the debtor in their own name without needing the consent of the original creditor or making them a party to the lawsuit.
- This section does not apply to the transfer of marine or fire insurance policies.
Practical examples
FAQ
1. Does a transfer of an actionable claim require a written document under the Transfer of Property Act 1882 Section 130?
Yes, Section 130 of the Transfer of Property Act, 1882 states that the transfer of an actionable claim must be effected only by executing a written instrument signed by the person transferring it or their authorized agent.
2. Can a debtor validly pay the original creditor after a transfer has occurred under the Transfer of Property Act 1882 Section 130?
Yes, under Section 130 of the Transfer of Property Act, 1882, any dealing or payment by the debtor to the original creditor is valid as against the transfer, unless the debtor was a party to the transfer or had received express notice of it.
3. Can the new owner of a debt sue the debtor in their own name under the Transfer of Property Act 1882 Section 130?
Yes, Section 130 of the Transfer of Property Act, 1882 allows the transferee to sue or start legal proceedings in their own name without obtaining the original creditor's consent or making them a party to the suit.
4. Does Section 130 of the Transfer of Property Act 1882 apply to fire insurance policies?
No, Section 130 of the Transfer of Property Act, 1882 has an express exception stating that nothing in this section applies to the transfer of a marine or fire policy of insurance.
Test yourself
Q1.Under Section 130 of the Transfer of Property Act, 1882, at what precise moment is the transfer of an actionable claim complete and effective?
Q2.Under Section 130 of the Transfer of Property Act, 1882, which of the following is true regarding a debtor's payment to the original creditor after a transfer has taken place?
Q3.Under Section 130 of the Transfer of Property Act, 1882, when the new owner of an actionable claim decides to sue the debtor, which of the following procedural steps is correct?
Q4.Which of the following transactions is expressly excluded from the provisions of Section 130 of the Transfer of Property Act, 1882?
Q5.Suppose B transfers an actionable claim to C under Section 130 of the Transfer of Property Act, 1882. B then refuses to sign the notice of transfer. According to Section 131 of the Act, how can this situation be resolved to give valid notice to the debtor?