A borrower can assign rent he expects to receive as an actionable claim to a lender under the Transfer of Property Act, 1882, the Supreme Court has ruled.
“The provisions of the TPA and the discussion of the various authorities support the conclusion that there can be a transfer of debts, which are defined as actionable claims. In the present case, the rents payable by IL&FS tenants, lessees and licensees are debts, which stood transferred to the creditor, i.e. HDFC Bank. Therefore, the NCLAT’s conclusions are unexceptionable; the challenge to its correctness, therefore fails,” the two-judge Bench of Justice Justices S Ravindra Bhat and Justice Dipankar Datta said in its order dated October 19, 2023, while giving its order in a dispute between private lenders Infrastructure Leasing and Financial Services and HDFC Bank.
The dispute pertained to whether the documents executed by IL&FS by which its receivable rents were assigned to HDFC Bank fell outside the scope of an asset and security freeze order made by the National Company Law Appellate Tribunal.
“The true nature of the transaction in this case is an assignment and not a pledge. The reference to pledge, in some places in the documents, did not undermine the fact that the rents payable to and receivable by IL&FS stood absolutely assigned to HDFC. The provisions of the TPA and the discussion of the various authorities support the conclusion that there can be a transfer of debts, which are defined as actionable claims. In the present case, the rents payable by IL&FS tenants, lessees and licensees are debts, which stood transferred to the creditor, i.e. HDFC Bank. Therefore, the NCLAT’s conclusions are unexceptionable; the challenge to its correctness, therefore fails,” the apex court said while dismissing the appeal by IL&FS against the NCLAT order.
What is an actionable claim?
The Transfer of Property Act defines an actionable claim as a claim to any debt or beneficial interest in movable property that can be enforced by legal action. According to Section 3 of the TPA, an actionable claim means a claim to any debt that is not secured by any of the following:
- Mortgage of immovable property
- Pledge of movable property
- Mortgaging of movable or immovable property
- A beneficial interest in movable property that is not in the possession of the claimant, either actually or constructively
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An alumna of the Indian Institute of Mass Communication, Dhenkanal, Sunita Mishra brings over 16 years of expertise to the fields of legal matters, financial insights, and property market trends. Recognised for her ability to elucidate complex topics, her articles serve as a go-to resource for home buyers navigating intricate subjects. Through her extensive career, she has been associated with esteemed organisations like the Financial Express, Hindustan Times, Network18, All India Radio, and Business Standard.
In addition to her professional accomplishments, Sunita holds an MA degree in Sanskrit, with a specialisation in Indian Philosophy, from Delhi University. Outside of her work schedule, she likes to unwind by practising Yoga, and pursues her passion for travel.
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