ASSIGNMENT - ALL YOU NEED TO KNOW
Effective for All Upcoming Bank Exams
Assignment is transfer of an actionable claim (such as life insurance policy), which may be existing or future, as a security for loan. The transferor of such claim is called the assignor and the transferee is called the assignee.
As per Section 3 of Transfer of Property Act, an 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 not in the possession, either actual or constructive, of the claimant, which the civil court recognize as affording grounds for relief, whether such debt or beneficial interest be existence, accruing, conditional or contingent. (A life policy is an actionable claim because it is a debt payable by LIC of India for which the policy holder does not have any security in the form of mortgage, pledge or hyphenation of assets of LIC of India).
- Transferee can sue or institute proceeding in his own name without obtaining the transferor’s consent to such suit or proceeding and without making him a party thereto. (Section 130-(2). For a loan obtained by a life insurance policy holder, the bank as assignee, is entitled to receive the amount of the policy and to sue on it without consent of the policy holder or his legal heirs in case of his death).
- Assignment must be writhing and signed by the assignor or his authorized attorney and witnessed. It would be effective upon execution of an instrument only (Section 130).
- No consideration is essential for validity of an assignment.
- Assignor cannot give a better title than that what he has, as the transferee shall take the actionable claim subject to all the liabilities and equities to which the transferor was subject in respect thereof at the date of the transfer (Section 132).
- No particular form is prescribed for assignment.
- Due notice for transfer of actionable claim is to be given to the debtor (LIC in the above example). For making the debtor liable to the assignee and his acknowledgement obtained. Such notice can be given by assignee of assignor refuses to give notice (Section 131).
Kinds of Assignment:
The assignment are of two kinds, that is Legal Assignment and Equitable Assignment.
Equitable Assignment –
An Equitable Assignment means handing over the possession of the document representing actionable claim without observing the above formalities. In an equitable assignment of a debt even through there may be no regular assignment, the debtor’s notified or made to understood that the debt has been made over by the creditor to some 3rd person (Corporation Bank Vs Lalith AIR 1994).
Legal Assignment –
A Legal Assignment means an absolute transfer of actionable claim and must be writing, signed by the assignor and should be informed to the debtor.