Behind every debt sale in India there is a long-established legal concept: the assignment of an actionable claim. Understanding it matters for both sellers and buyers of debt.
Definition and legal framework
An assignment of debt is the transaction by which the original creditor (assignor) transfers to a third party (assignee) the right to collect from the debtor. Under section 130 of the Transfer of Property Act, 1882, the transfer of an actionable claim must be made by an instrument in writing signed by the transferor, and it is complete on execution.
Does the debtor have to consent?
No. This is the most common question. A debt can be assigned without the debtor's consent, unless the underlying contract expressly bars assignment. However, written notice to the debtor is essential: until the debtor receives notice, any payment made to the original creditor validly discharges the debt.
The debtor keeps every defence intact: they can raise against the assignee the same objections and equities they had against the original creditor. The terms of the debt cannot be worsened by the assignment.
What passes with the debt?
Unless agreed otherwise, the assignment carries the principal plus its accessories: contractual interest, guarantees and enforcement rights. This is why debts backed by a decree, a DRT order or security tend to command higher prices.
Is the seller liable if the debtor does not pay?
As a rule the assignor warrants that the debt exists and is legitimate at the time of sale, but does not guarantee the debtor's solvency unless expressly agreed. The buyer takes the collection risk, which is exactly why they pay a discounted price.
Getting the assignment right
- Agree the price and the exact receivable being sold.
- Sign a written deed of assignment with the debt documents annexed.
- Serve a clear section 130 notice on the debtor.
- Update your books and the buyer takes over collection.
You can read the bare Act on India Code.
Assignment in practice
The process is simple, and Debtalia makes it simpler: our marketplace connects sellers directly with buyers so both sides negotiate and close the assignment themselves, with anonymous listings and no commission on the sale.
