Report No. 70
12.31. Legislative formulation.-
The problem, then for the legislature was how to reconcile the desire of the law to discourage trafficking in litigation with its equally keen desire to recognise the existence as well as the transferability of things not in possession which could be the subject-matter of beneficial interest.
In India, the legislature has dealt with the matter by-(a) providing for the transfer of things not in possession-which are, really speaking 'claims'-provided the claims are recognised by law-'actionable' according to Indian legislative phraseology, and (b) disallowing the transfer of a "mere" right to sue. The two have been sought to be harmonised by using the word 'mere'. The use of this word takes note of the fact that in certain circumstances a transfer can be a transfer of a right to sue.
12.32. So much as regards the solution adopted by the legislature, which indicates that the whole matter hinges upon the word 'mere'. The legislature having done its job by using that word, it remains for the courts to apply the criterion in such a manner as to achieve both the objectives to which reference has been made above, namely, prevention of trafficking in litigation and, at the same time, leaving unaffected the right to transfer those claims which are not in the nature of things in possession but are in the nature of claims enforceable by law. Both the aspects are important.
12.33. Case law under section 6(e).-
What has been the attitude of the Courts? Judicial decisions applying this clause fall into three categories-
(a) cases where there could be no doubt that the matter related to actionable claims;
(b) cases where there could be no doubt that the matter related to mere right to sue;
(c) border line cases.
12.34. Madras cases.-
Thus,1 where a sale is set aside, the right of the purchaser to recover the purchase money is an actionable claim, assignable under section 130 and the assignment is not prohibited by section 6(e). It is on this principle, again, that rent which is due is assignable, unlike mesne profits, which is a claim in tort.2
1. Chinnappa Reddy v. Venkataramanappa, AIR 1942 Mad 209.
2. Chidambaram v. Doraiswamy, AIR 1916 Mad 974.
12.35. Calcutta cases.-
As an example of a case where due attention was paid to the two competing considerations which form the basis of the law, we may refer to a Calcutta case.1 Certain goods booked by A for carriage and delivered through railways were short delivered and a shortage certificate was issued by the railways to him. The goods had been insured by A, and having regard to the shortage certificate, the insurer paid the value of the goods short delivered.
A assigned to the insurer all his rights against the railway company arising by reason of the damage or loss and also granted to the insurer power to take any steps in the insurer's own name and to recover the damage or loss. It was held that such an assignment was not a transfer of mere right to sue for damages. The court construed the assignment as an assignment of the goods short delivered, together with the actionable claims relating thereto.2
It may also be noted that the contract of insurance is a contract of indemnity. On payment of the amount of the loss, the assured has an indemnity and the insurer has an equitable right of subrogation to the claims of the assured against the carrier or other person insuring his interest This equitable doctrine does not, however, give the insurer the right to sue third parties in his own name.3 In the absence of an assignment, the insurer though subrogated to the rights of the insured can sue only in the name of the insured.
But since the legal position is that any damages that might be recovered by the assured would be held by him as a trustee of the insurer to the extent of the payment received by the assured from the insurer, the court would compel the assured to permit the use of his name on the usual terms by the insurer. A subsequent Assignment of the right to sue would not, for these reasons, be hit by section 6(e) since it is not a transfer of a 'mere' right to sue. The matter depends primarily on the meaning of the word 'mere' which turns to be crucial in such circumstances. The assignment enables the assignee to sue in his own name and to enforce the claim which was already held for his benefit by the assignor.4
1. Union of India v. Alliance Insurance Company, AIR 1964 Cal 31 (R.S. Bachawat and A.K. Mukherjea, JJ.).
2. 66 Cal WN 419 approved.
3. K.M. Prinian Moryam v. Benyam & Co., AIR 1926 Mad 544 (550).
4. King v. Victoria Insurance Co., 1896 AC 250.
12.36. In a Calcutta case1 a certified guardian sold some immovable property of the ward to the defendant without the sanction of the District Judge. Subsequently, he sold the same property to the plaintiff with sanction of the District Judge. The plaintiff instituted a suit for recovery of possession on declaration that the previous sale to the defendant was not valid. It was held that what the plaintiff purchased was not a mere right to sue within section 6, T.P. Act but the entire right of the minor in the property.
In a Bombay case,2 plaintiff sold to defendant three sets of bales of yarn for three different vayadas at certain rates. Similarly the defendant sold to plaintiff an equal number of bales for the same vayadas. These were cross-transactions between plaintiff and defendant, and no delivery remained to be given and taken, but only adjustments of the rates were to be made. On such adjustments, a certain amount was found due to plaintiff in respect of the three transactions. Plaintiff assigned his right to recover this amount to another person. It was held that the subject of the assignment was a 'debt' and not a mere right to sue within the meaning of section 6(e).
Where a person purchases a tank and brings a suit by virtue of a covenant running with the land, it cannot be said that what was transferred was a mere right to sue.3
Where the pre-emptor made a gift of his property, including the right to continue the suit for pre-emption then pending, it was held that the gift, so far as the right of pre-emption was concerned, was not a transfer of a 'mere right to sue'.4
1. AIR 1931 Cal 131: 34 CWN 948: ILR 58 Cal 128.
2. 32 Born LR 894: AIR 1930 Born 409 (DB).
3. AIR 1929 Pat 245.
4. AIR 1922 Oudh 289.
12.37. Uncertain amount.-
Taking cases at the opposite extreme, the right to recover an uncertain amount cannot be transferred. On this principle, the right to damages accruing after a breach of contract is a mere right to sue for damages1. Similarly, a mere right to sue for the remainder of maintenance allowance that may fall due in future is not transferable.2
1. AIR 1937 All 642.
2. AIR 1929 All 281.
12.38. Border line cases.-
Difficulties, however, could arise in a border-line case. For example, the transfer of a right of action in tort could take place by the effect of a contract of insurance by which the insurer who has paid for the total or partial destruction of the insured goods is subrogated to the rights of the insured. The insurer must sue in the name of the assured, but if the right to sue has been properly assigned to the insurer,1 the insurer can sue in his own name and it would appear that in such circumstances the right to sue-even the right to sue for damages-has been property assigned to the insurer.
On the other hand, the right to sue for damages on account of fraud cannot be transferred. The right to complain of fraud is not a marketable commodity and if it appears that an agreement for purchase has been entered into for the purpose of acquiring such a right, the purchaser cannot call upon the court to enforce specific performance of the agreement. Such a transaction, if not in strictness amounting to maintenance, savours of it too much for the court to give its aid to the enforcement of the agreement.
1. King v. Victoria Insurance Company, 1896 AC 250 (256).
12.39. No change in section 6(e).-
The upshot of the above discussion is that the legislative formulation, though not capable of verbal improvement, requires to be applied with some care and after bearing in mind the historical and juristic background in which it was enacted. No changes, are, of course, recommended.
12.39A. Res extra commercium.-
Before we proceed to the next clause, we may mention that apart from the specific prohibitions contained in the clauses of section 6, there may arise, in effect a prohibition against transfer because the item sought to be transferred is res extra commercium. What can be transferred under the Act must be 'property'-section 6, opening sentence goes only to that length. It must be subject-matter in regard to which the law recognises proprietary rights. If a right is not recognised by law in its very existence, its transferability is out of question.
12.39B. Sacred Bulls.-
Let us draw an example from Hindu law. The ceremony of consecrating a Bull (vrishotsarga) forms a part of the sraddha ceremony of the Hindus. This ceremony forms the subject of separate treatises which give the fullest information upon all points. It will be sufficient for our present purposes to state that the ceremony seems to be a survival of the Vedic site of 'gomedha', where the bull is set free instead of being slaughtered.1
The rationale of this consecration is the use of the animal as a propagator of the breed. Manu2 declared "that no fine shall be paid for (damage done by) a cow within ten days after her calving by bulls (kept for impregnation) and by cattle sacred to the gods, whether they are attended by a herdsman or not." The following explanation occurs in Buhler's Notes:-
"Bulls, "i.e., 'those set at liberty (see VII. DOONI) are meant' (Nar., Kull)., which may be met with near many Indian villages and in many towns. 'Cattle sacred to the gods, i.e., either such are set apart for sacrifices," or 'such as are dedicated to temples' (Medh.). The other commentators prefer the second application."
The same text is quoted by Colebrooke,3 but he gives the further explanation by Kullukabhatta on the words "attended or unattended" of the text of manu:-
"Since even consecrated bulls are kept by herdsman among cows for the sake of impregnating them, it is possible they may be attended by a keeper."
The marking of the consecrated bulls is an ancient practice, as will be seen from a text of Usanas, quoted by4 Colebrook: "for elephants and horse, no fine is allowed nor for bulls marked with the token of consecration."
"Bulls marked" is explained by Ratnakara as "distinguished by the mark of a trident and the like."
1. See Ashwalayana Grihya Sutra, pp. 103, 108 and 109; also Colebrooke's Essays, Vol. I., pp. 206, 207. Also see 54.1-R-(1(.4 Ashwalayana Grihya Sutra, pp. 200, 201 and 209: Ashwalayana Grihya Sutra, p. 251. & c. dCWi in p. 260; TM:Pi: Ashwalayana Grihya Porisishtafi, pp. 331 to 333.
2. Manu VIII, 243; see Buhler, p. 297 and note.
3. Colebrooke's Digest, Vol. II, p. 104.
4. Colebrooke's Digest, Vol. II, p. 104.
12.40. Rules of Hindu law.-
It may be noted that in regard to religious offices and things dedicated to religious purposes, the rules of Hindu Law1 and Muslim Law2 agreed with that of the ancient Roman law in rigidly classifying public trusts and property and offices as extra commorcium. Such offices were not transferable like other property, and even where a transfer was allowed, that was within certain well defined limitations.
1. Narayan v. Chintamani, ILR 5 Born 393 (396, 397) (Westropp, C.J.).
2. Shama Charun Roy v. Abdul Kabeer, 3 Calcutta Notes 158.