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Debt Assignment: How They Work, Considerations and Benefits

Daniel Liberto is a journalist with over 10 years of experience working with publications such as the Financial Times, The Independent, and Investors Chronicle.

Charlene Rhinehart is a CPA , CFE, chair of an Illinois CPA Society committee, and has a degree in accounting and finance from DePaul University.

Katrina Ávila Munichiello is an experienced editor, writer, fact-checker, and proofreader with more than fourteen years of experience working with print and online publications.

Investopedia / Ryan Oakley

What Is Debt Assignment?

The term debt assignment refers to a transfer of debt , and all the associated rights and obligations, from a creditor to a third party. The assignment is a legal transfer to the other party, who then becomes the owner of the debt. In most cases, a debt assignment is issued to a debt collector who then assumes responsibility to collect the debt.

Key Takeaways

• Debt assignment is a transfer of debt, and all the associated rights and obligations, from a creditor to a third party (often a debt collector).
• The company assigning the debt may do so to improve its liquidity and/or to reduce its risk exposure.
• The debtor must be notified when a debt is assigned so they know who to make payments to and where to send them.
• Third-party debt collectors are subject to the Fair Debt Collection Practices Act (FDCPA), a federal law overseen by the Federal Trade Commission (FTC).

How Debt Assignments Work

When a creditor lends an individual or business money, it does so with the confidence that the capital it lends out—as well as the interest payments charged for the privilege—is repaid in a timely fashion. The lender , or the extender of credit , will wait to recoup all the money owed according to the conditions and timeframe laid out in the contract.

In certain circumstances, the lender may decide it no longer wants to be responsible for servicing the loan and opt to sell the debt to a third party instead. Should that happen, a Notice of Assignment (NOA) is sent out to the debtor , the recipient of the loan, informing them that somebody else is now responsible for collecting any outstanding amount. This is referred to as a debt assignment.

The debtor must be notified when a debt is assigned to a third party so that they know who to make payments to and where to send them. If the debtor sends payments to the old creditor after the debt has been assigned, it is likely that the payments will not be accepted. This could cause the debtor to unintentionally default.

When a debtor receives such a notice, it's also generally a good idea for them to verify that the new creditor has recorded the correct total balance and monthly payment for the debt owed. In some cases, the new owner of the debt might even want to propose changes to the original terms of the loan. Should this path be pursued, the creditor is obligated to immediately notify the debtor and give them adequate time to respond.

The debtor still maintains the same legal rights and protections held with the original creditor after a debt assignment.

Special Considerations

Third-party debt collectors are subject to the Fair Debt Collection Practices Act (FDCPA). The FDCPA, a federal law overseen by the Federal Trade Commission (FTC), restricts the means and methods by which third-party debt collectors can contact debtors, the time of day they can make contact, and the number of times they are allowed to call debtors.

If the FDCPA is violated, a debtor may be able to file suit against the debt collection company and the individual debt collector for damages and attorney fees within one year. The terms of the FDCPA are available for review on the FTC's website .

Benefits of Debt Assignment

There are several reasons why a creditor may decide to assign its debt to someone else. This option is often exercised to improve liquidity  and/or to reduce risk exposure. A lender may be urgently in need of a quick injection of capital. Alternatively, it might have accumulated lots of high-risk loans and be wary that many of them could default . In cases like these, creditors may be willing to get rid of them swiftly for pennies on the dollar if it means improving their financial outlook and appeasing worried investors. At other times, the creditor may decide the debt is too old to waste its resources on collections, or selling or assigning it to a third party to pick up the collection activity. In these instances, a company would not assign their debt to a third party.

Criticism of Debt Assignment

The process of assigning debt has drawn a fair bit of criticism, especially over the past few decades. Debt buyers have been accused of engaging in all kinds of unethical practices to get paid, including issuing threats and regularly harassing debtors. In some cases, they have also been charged with chasing up debts that have already been settled.

Federal Trade Commission. " Fair Debt Collection Practices Act ." Accessed June 29, 2021.

Federal Trade Commission. " Debt Collection FAQs ." Accessed June 29, 2021.

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Assignment of Debt – What You Need to Know

By aqila zulaiqha zulkifli ~ 23 june 2023.

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Aqila Zulaiqha Zulkifli

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Occasionally, to ensure liquidity and to reduce financial risk, a creditor may assign its rights to a debt repayment to another party. Such an arrangement is known as the assignment of debt.

An assignment generally means the transfer of contractual rights and liabilities to a third party without the concurrence of the other party to the contract. [1] The assigning party is known as the assignor, whereas the recipient party is known as the assignee.

Once an assignment occurs, the assignee stands in the exact position as the assignor and has the legal right to a debt, other remedies therein, and even the power to discharge the debt. The debtor must then, make all payments to the assignee, and not the assignor. In fact, if the debtor pays the assignor without the consent of the assignee, the debtor may risk having to pay the assignee all over again. [2]

An assignment of debt is governed by Section 4(3) of the Civil Law Act 1956 (the “Act”) (cited with approval in the Federal Court case of UMW Industries Sdn Bhd v Ah Fook [3] , in which, the elements of a statutory assignment of debt can be summarized as follows:

• the assignment must be in writing under the hand of the assignor (and not, i.e the agent of the assignor);
• the assignment must be absolute and not by way of charge only; and
• the express notice in writing must have been given to the person liable to the assignor (i.e the debtor).

The effect of a statutory assignment is that the assignee possesses the legal right to the debt and the right to sue the debtor in respect of the debt without needing to join the assignor. [4]

However, rest assured, an assignment that is not in compliance with Section 4(3) of the Act is not automatically invalid. A non-statutory assignment could still be valid in equity [5] , though the assignee would have to join the assignor in the proceeding, either as a plaintiff or defendant [6] . This is to ensure a just disposal of the action, by ensuring that all relevant parties are before the Court so that the assignor would not make a claim against the debtor in respect of the same debt.

As such, in conclusion, before accepting an assignment of debt, it is prudent for an assignee to ensure that the elements in Section 4(3) of the Act abovementioned are fulfilled. If the assignment is meant to be absolute, such terms should be clearly reflected in the deed of assignment, or the assignee runs the risk of being crippled in a legal proceeding to recover the debt in the absence of the assignor.

[1] United General Insurance Co Sdn Bhd v Progress Credit Sdn Bhd [1988] 2 MLJ 297

[2] malayawata steel berhad v government of malaysia & anor [1980] 2 mlj 103, [3] [1996] 1 mlj 365, [4] mbf factors sdn bhd v tay hing ju (t/a new general trading) [2002] 5 mlj 536, [5] khaw poh chhuan v ng gaik peng & ors [1996] 1 mlj 761 (fc), [6] chan min swee v melawangi sdn bhd [2000] 7 clj 1.

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Under-Stamping leads to Insolvency Rejection – By Adv.(CA.) Nipun Singhvi & Adv. Mayur Jugtawat

Under-Stamping leads to Insolvency Rejection

Introduction.

Insolvency and Bankruptcy Code, 2016 (“IB CODE”) has been developing day by day bringing developments and different interpretations to the provisions of the Code. Though the Code has been time and again held to be overriding legislation yet many issues have evolved over time.

Initially when the Code was enforced , Hon’ble Supreme Court in its landmark judgment of Innovative Industries v. ICICI Bank   [2017] ibclaw.in 02 SC , held  that the moment Adjudicating Authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete.

However, over the period of 4 years, the law has been amended via Ordinances to curb the loopholes and also to unleash the intention behind the enactment.  It has been amended so extensively by Ordinance followed by the amending Act. The Code has undergone changes like applicability of Limitation Act- which otherwise were allowed as not being time barred, inclusion of homebuyers as financial creditors, prohibiting the erring defaulters from re-purchasing the company, Settlement of parties pre and post-admission ; Liberalizing timelines which otherwise were very strict  to name a few.

The evolving interpretation of Stamp duty on instruments has become the emerging issue wherein fate of Section 7 application to get rejected or admitted is to be seen. 

As we experience Section 7 of the Code, which is enabling provision for Financial Creditor to initiate Corporate Insolvency Resolution Process (”CIRP”) against the Corporate Debtor, it is always tricky for Corporate Debtor to find defense as the Hon’ble Adjudicating Authority judges only two parameters one of debt-default and another of complete application in all respects.

This article attempts to analyse the legal issue of insufficiency in stamp duty impacting validity of the financial contract. One such interesting decision delivered by NCLT, Chandigarh in the matter of Edelweiss Asset Reconstruction Company Limited v. M/s Winsome Yarns Ltd (2020) ibclaw.in 147 NCLT (“Winsome”).  

Brief facts and Order given by Tribunal

Assignment agreement was entered into between Punjab National Bank (Assignor) and Edelweiss Asset Reconstruction Company Limited (Assignee) (EARCL) with respect to debt and securities of M/s Winsome Yarns Limited (Corporate Debtor). Through assignment agreement, EARCL acquired rights of Punjab National Bank over the Corporate Debtor.

During the course of hearing, one of the contentions taken by Corporate Debtor stated that the assignment deed was insufficiently stamped thereby does not bear any legal validity before the court of law. Stamp duty on various instruments is governed by The Indian Stamp Act, 1899. The objective of the legislation is to make the instrument legally valid and authentic.

In this specific case, office of the Joint Sub-registrar Cum Naib Tehsildar, Mullanpur Dhakkan (Ludhiana) confirmed that the stamp duty paid by EARCL was inadequately paid and ordered to pay Rs. 1,45,85,000/- as remaining amount of stamp duty. In view of the same restraint order was passed by the Chief Controlling Revenue Authority cum Financial Commissioner (Revenue) Chandigarh, Punjab stating that;

…That EARCL has wrongly placed reliance on the purported assignment deed dated 10.2.2015 to project the requisite locus-standi in order to prefer an insolvency petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 bearing C.P. No. (IB) 291 Chd/ CHD/2018 before the Hon’ble National Company law Tribunal, Chandigarh (“NCLT”) and is misrepresenting itself as the Financial Creditor of the Plaintiff.”…

The concerned authority was of the view that no party can take benefit of the document which is insufficiently stamped and therefore pronounced a restraint order which was duly considered by the Adjudicating Authority. The concerned revenue authority placed reliance on Section 35 of Indian Stamp Act, 1899 which produced here in below’

35. Instruments not duly stamped inadmissible in evidence, etc.—No instrument chargeable with duty shall be admitted in evidence for any purpose by any person having by law or consent of parties authority to receive evidence, or shall be acted upon, registered or authenticated by any such person or by any public officer, unless such instrument is duly stamped: Provided that—

(a) any such instrument 65 [shall], be admitted in evidence on payment of the duty with which the same is chargeable, or, in the case of an instrument insufficiently stamped, of the amount required to make up such duty, together with a penalty of five rupees, or, when ten times the amount of the proper duty or deficient portion thereof exceeds five rupees, of a sum equal to ten times such duty or portion;

Tribunal also placed reliance on SMS Tea Estates Private Limited Vs. Chandmari Tea Company Private Limited, (2011) 14 Supreme Court Cases 66 and Garware Wall Ropes Limited Vs. Coastal Marine Constructions and Engineering Limited, (2019) 4 Supreme Court Cases 2019 or in Chilakuri Gangulappa Vs. Revenue Divisional Officer, Madanpalle, Decided on 14.03.2001, Case No. Appeal (Civil) 1800 of 2001 and another , wherein Supreme Court of India while holding that an insufficiently stamped instrument cannot be relied upon for any purpose, however, observed that the concerned court has to follow the procedure provided under the Indian Stamp Act, 1899 for impounding the instrument before permitting a party to enforce the said insufficiently stamped instrument. This observation of the Apex court was not adopted by the Tribunal stating that Adjudicating Authority under the summary procedure provided under the Code cannot adopt such a procedure which is applicable to regular courts of law.     

Therefore, as per the provisions discussed above, the assignment deed becomes non-est in the eyes of law and therefore the application was rejected holding EARCL cannot be considered as Financial Creditor as per Section 5(8) of IB Code, 2016.

Contrary View by NCLT, Mumbai

A contrary order given by NCLT in the matter of L &T Infrastructure Finance Company Limited v. Maharashtra Vidyut Nigam Private Limited (CP (I&B) 593/NCLT/MB/2018) and Benett Property Holdings Company Limited v.  Brick Eagle Affordable Housing Advisory LLP .(CP (IB) – 1267/I&B/MB/2019) (“Mumbai Bench”)

The above matters deal with the common issue wherein stamp duty was already paid by the Corporate Debtor in Delhi and the contention taken by Corporate Debtor was such that since the execution took place in Maharashtra, stamp duty applicable in Maharashtra State must be paid as per Section 19 of Maharashtra Stamp Act. The challenge made by Corporate Debtor went in vain as the arguments were not considered to be viable as in both the cases variable nature of stamp duty did not stood before the tribunal as a ground for rejection Section 7 application.

Moreover, the tribunal was of the view that the stamp duty was purchased by Corporate Debtor as per Section 29 of Stamp Act and therefore Corporate Debtor has no right to raise the objection of insufficient stamp duty. Also, Maharashtra Stamp Act equally prescribes stamp duty of Rs. 100 as payable on letter of guarantee, hence no differential amount of chargeable duty to be collected. However, the law requires indulgence of appellate authorities to settle the law where the situation of different stamp duty arises and whether such situation amounts to insufficient stamp duty.

Though the above cases have different sets of facts and circumstances, the issue of stamp duty shall now be open for debate and put to rest by Apex court in times to come.

Analysis and Comparison

The above two orders have different sets of facts and circumstances. Winsome’s case involved an order by revenue authority which determined that EARCL cannot be considered as Financial Creditor. It appears that revenue authority acted beyond the jurisdiction to decide locus standi of EARCL before NCLT. The only job of revenue authority was to find out whether the deed has been insufficiently stamped. The observation made by the revenue authority created persuasive deduction which further led to dismissal of the case on the ground of non-maintainability. However, the root of the case went into decide stand of EARCL as financial creditor under Section 7 of the Code and due to unenforceable nature of the agreement, the petition was rejected by the tribunal. In such cases, the onus of proving documents as invalid is on the person who is challenging the said document.

The second set of case laws belong to Mumbai bench wherein circumstances differ. Here, it is pertinent to note that the Deed of Guarantee was executed at New Delhi and sufficient stamp duty of Rs.400/- has been paid on it as is also reflected on the said document. Also, the Deed of Guarantee was silent on whom the obligation lies to pay the stamp duty. Therefore, according to Section 29 of The Indian Stamp Act, 1899 wherein it is mentioned that it is for the one executing the instrument to pay the stamp duty, and here, in this matter, it was the Corporate Debtor who was to pay the Stamp Duty because he had executed the said Deed of Guarantee which was in question before this Bench.

In addition, in the cases where stamp duty is equally chargeable; in and outside the state, there will be no differential amount of chargeable duty to be collected. In such scenarios, the contention of Corporate Debtor shall remain vacant. Also, in all three cases, tribunals did not rely upon the judgment of Supreme Court stating the reasons for non-applicability. The issue with respect to insufficient stamp duty requires urgent attention of legislature else in the times to come it shall open “Pandora’s box”.

The above set of case laws represents two different perceptions for same ground of defense. It is rightly said that the proceedings before Adjudicating Authority are summary in nature however the Tribunal is granted power of Civil Court for proceedings under IB Code as per Section 424 of the Companies Act, 2013 via amendment of 15.11.2016. The issue of agreement being insufficiently stamped is a civil dispute and therefore it shall be interesting to see the debate over tribunal jurisdiction and scope. It shall again be matter of debate that the under stamping has been seen in most of the big ticket size cases. Another aspect is that Supreme Court in the matter of Chief Controlling Revenue Authority v. Coastal Gujarat Power Ltd (Civil Appeal No. 6054 of 2015 arising out of S.L.P. (C) No. 32319 of 2013) held that  in case of multiple lenders the stamp duty has to be paid as per transaction involved and not instrument wise. The lenders have been following the practice of paying stamp duty on instrument rather than on transactions with each lenders by making a trustee agreement , however the practice and law are different and therefore this burning issue of under-stamping may get coupled with evidence under IB Code to bane the financial creditors.

Disclaimer:  The Opinions expressed in this article are that of the author(s). The facts and opinions expressed here do not reflect the views of IBC Laws ( http://www.ibclaw.in ). The entire contents of this document have been prepared on the basis of the information existing at the time of the preparation. The author(s) and IBC Laws ( http://www.ibclaw.in ) do not take responsibility of the same. Postings on this blog are for informational purposes only. Nothing herein shall be deemed or construed to constitute legal or investment advice. Discussions on, or arising out of this, blog between contributors and other persons shall not create any attorney-client relationship.

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Stsm021070 - scope of stamp duty on shares: stamp duty: basics of a charge: chargeable consideration: debt.

Section 57 of the Stamp Act 1891 applies where a sale is in consideration of a debt or

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Home » Blog » Power of attorney executed with assignment deed under SARFAESI Act wasn’t liable for separate stamp duty: SC

Power of attorney executed with assignment deed under SARFAESI Act wasn’t liable for separate stamp duty: SC

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Judiciary and Counsel Details

• Hemant Gupta and V. Ramasubramaniam , JJ.

Facts of the Case

In the instant case, the Oriental Bank of Commerce (OBC) assigned a debt in favour of appellant – an Asset Reconstruction Company (ARC) registered u/s 3 of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).

Along with the assignment deed, the Bank had executed an irrevocable Power of Attorney (PoA) in favour of the company, empowering the assignee, as an agent of the Bank, to sell any immovable property. The assignment deed was registered with the Sub-Registrar and the stamp duty was paid on it.

However, an audit objection was raised by the Office of Accountant General on the ground that the assignment deed contained a reference to a Power of Attorney (PoA) and hence PoA was chargeable to stamp duty under the Bombay Stamp Act, 1958. Thereafter, the Stamp Duty Collector referred the matter to the Chief Controlling Revenue Authority, who in turn issued a notice to the appellant.

After considering the reply submitted by the appellant, the Chief Controlling Revenue Authority passed an order setting aside the order of adjudication and directed recovery of the deficit stamp duty.

Further, on the submission of the application, the Chief Controlling Revenue Authority referred to two questions for opinion of the Court:

(a) Whether the objection raised by the accountant general proper or not?

(b) Whether the appellant is liable to pay the stamp duty as per the Bombay Stamp Act or not?

Accordingly, a full Bench of the Gujarat High Court held that separate stamp duty has to be paid on the PoA as well. Further, the full Bench of HC relied on Article 45(f) of Schedule I to the Bombay Stamp Act, 1958 which makes a PoA given for a consideration and containing an authority to sell any immovable property chargeable to stamp duty. The ARC approached the SC against the full Bench verdict.

Supreme Court Held

On appeal, the Supreme Court held that the reasoning of the High Court cannot be accepted as for invoking Article 45(f) of Schedule I to the Bombay Stamp Act, 1958, two conditions have to be satisfied i.e. the PoA should have been given for a consideration and an authorization to sell any immovable property should flow out of the instrument. In the present case, the consideration was paid by the ARC to the bank for the purpose of acquisition of the financial assets. Further, the authorization to sell any immovable property didn’t flow out of the PoA instead flows out of the provisions of the SARFAESI Act.

In this regard, a bench observed that the HC overlooked the fact that there was no independent instrument of PoA and that the power of sale of a secured asset flowed out of the provisions of the SARFAESI Act, 2002 and not out of an independent instrument of PoA.

The Court noted that under Amendment Act 44 of 2016, subsection (1A) was inserted in section 5 of the SARFAESI Act, exempting from stamp duty, any document executed by any bank in favour of ARC. Though the amendment was not applicable to this particular case, the Court said that it has taken note of the amendment to show how far the Parliament has gone.

Further, the Court observed that once a single instrument has been charged under a correct charging provision of the Statute, the Revenue Authority cannot split the instrument into two, because of the reduction in the stamp duty facilitated by a notification issued by the Government.

Accordingly, the appeal was allowed and the demand of stamp duty on PoA was set aside.

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...Mandamus, to direct the respondent to consider the draft of the agreement Reaffirming Assignment Deed sent under their cover of letter dated 08.02.2016 and to adjudicate the Stamp Duty payable thereon and to direct...bearing the appropriate stamp duty as may be adjudicated to register the document.The Order of the Court was delivered byPushpa Sathyanarayana, J.:— This Writ Petition has been filed by the petitioner t...under their cover of letter dated 08.02.2016 and to adjudicate the Stamp Duty payable thereon and to direct the respondent to register the draft of the agreement reaffirming assignment deed...

...the 2nd respondent rejectingthe registration of the Assignment Agreement dated 28th September 2016 executed between the petitioner and Syndicate Bank (Ässignor) and quash the same and consequently direct the first respondent to regi... Assignment Agreement . When the petitioner presented the Assignment Agreement for registration, the 2nd respondent demanded stamp duty payable on the Assignment Agreement and refu...to be paid on the Assignment Agreement . Section 5(1)(A) of the SARFAESI Act reads as follows :- "Any document executed by any bank or financial institution under sub-section (1) in favour of the ...

...proceedings of the 1 respondent dated 24.01.2018, wherein and whereby, a sum of Rs. 20,30,000/- was ordered to be levied/collected from the petitioner towards deficit stamp duty in respect of the subject matter document viz., ...before the 2 respondent for registration.2. Heard both sides.3. The petitioner presented an Assignment Agreement dated 30.03.2012 entered between the Catholic Syrian Bank Limited for registration before...impugned proceeding, in view of Annexure of pro-forma power of attorney to the pending document, registration department is treating the said pending document with dual nature viz., assignment agreement as well as power of attorney ...

...register the assignment agreement and other similar assignment deeds executed by the petitioner in the light of stamp duty payable as suggested in Ext.P4 order.6. It is obvious that...there is no stamp duty separately fixed for an assignment in favour of the reconstruction company in terms of SARFAESI Act. It is for that reason, the Government has also decided to constitute a High...Power Committee to come out with the suggestion for fixing stamp duty payable.7. The Government also need necessary amendment under the Stamp Act to cover the transaction of assignment of...

....20,11,12,500/- and calculated stamp duty of Rs.1,00,55,625/-. The Respondents issued certificate under Section 32 (1)(b) of the Stamp Act. The Petitioner made the payment of amount of Rs.1,00,55,625/- on 5thJanu... assignment agreement , the Respondents issued a letter to the Petitioner demanding Rs.12,13,575/- being short levy of stamp duty on the aforesaid assignment agreement executed by the Petitioner. Th...area of 8780.04 and the stamp duty of 5% on said lease premium was worked out at Rs.3,29,300/- which was duly paid on 5thNovember 2008 by Shri Kor and others...

...of India and the transfer of debts from SBI by way of Assignment Agreement in favour of the petitioner. Therefore, the Assignment Agreement , dated 21.06.2016 executed by SBI in favour of the petitioner and the afor...This writ petition has been filed for issuance of Writ of Mandamus, directing the third respondent to register the Assignment Agreement dated 21.06.2016 (Pending...Document No.P2016 00177) submitted for registration before the third respondent without any further delay and to release the Registered Assignment Agreement to the petitioner at the earliest...

...(Annexure A-1), agreement for sale dated 21.03.2005 and Ex- P-2 (Annexure A-2), Assignment Agreement dated 08.03.2006 and c) Grant any other relief or reliefs as deemed fit by this... Agreement for Sale was executed on 21.03.2005 and thereafter, the Assignment Agreement was executed on 08.03.2006. Respondent No.2 by communications dated 19.12.2017, 28.02.2018 and 02.04.2018 requested...the impugned order dated 03.10.2018, has levied the duty under Section 39 of the Karnataka Stamp Act, 1957, without appreciating the fact that the possession under the...

...carried out by entering into an assignment agreement dated 28.02.20107. On execution of such assignment agreement , the petitioner had paid the stamp duty of Rs.1 lakh and also presented the said..., this Writ Petition is allowed and the 2nd respondent is directed to register the assignment agreement dated 28.02.2007(Pending document No.P59/2007), as it is admitted by the 2nd respondent in the counter affidavit that there is n...of Mandamus, directing the 2nd respondent to return the Assignment Agreement dated 28.02.2007 taken on file in Doc.P.No.59/2007 duly registered, to the petitioner within a time frame to be specified...

...Sub Registrar that in view of Section 5(1A) of the SARFAESI Act and 8F of the Indian Stamp Act,1899, no stamp duty is payable to assignment deeds. Respondent No.5 referred the matter to respondent No.3, the Distric... duty payable for the assignment deeds in question is under Article 55(c)(ii) of the Kerala Stamp 6 Act. Regarding the...to P11 are liable to be quashed, and respondent No.5 is bound to register the assignment deeds by capping the stamp duty at Rs.50/- and registration fee at Rs.210...

...to the insufficiency of stamp duty paid on assignment agreement , we find that the Applicant has paid stamp duty of Rs. 1,00,000/- + 15,000/- towards assignment of deed and it is immateria...trustee pays stamp duty or the trust. Nonetheless assignment document executed by Bank or Financial Institution under the provisions of SARFAESI Act, 2002 is specifically exempted from Stamp duty in... Agreement was executed by ECL Finance Limited in favour of the Applicant for Assignment of debt with respect to the Debentures along with all Securities or documents executed in respect thereof...

...assignor either to intimate the borrower/its guarantors or to make them a party to the assignment deed.19. The contention as to the insufficiency of stamp duty paid on assignment ...find that the Applicant has paid stamp duty of Rs. 1,00,000/- + 15,000/- towards assignment of deed and it is immaterial whether the trustee pays stamp duty or the trust. Nonetheless... assignment document executed by Bank or Financial Institution under the provisions of SARFAESI Act, 2002 is specifically exempted from Stamp duty in accordance with Section 8F of Indian Stamp Act, 1899...

...on the assignor either to intimate the borrower/its guarantors or to make them a party to the assignment deed.9. The contention as to the insufficiency of stamp duty paid on assignment ...find that the Applicant has paid stamp duty of Rs. 1,00,000/- + 15,000/- towards assignment of deed and it is immaterial whether the trustee pays stamp duty or the trust.... Nonetheless assignment document executed by Bank or Financial Institution under the provisions of SARFAESI Act, 2002 is specifically exempted from Stamp duty in accordance with Section 8F of Indian...

... duty paid on assignment agreement , we find that the Applicant has paid stamp duty of Rs. 1,00,000/- + 15,000/- towards assignment of deed and it is immaterial whether the trustee pays ...trust. Nonetheless assignment document executed by Bank or Financial Institution under the provisions of SARFAESI Act, 2002 is specifically exempted from Stamp duty in accordance with Section 8F of...secure repayment of the said Debentures in accordance with the terms of the Debenture Trust Deed.d) On 30.09.2019, an Assignment Agreement was executed by ECL Finance Limited...

...insufficiency of stamp duty paid on assignment agreement , we find that the Applicant has paid stamp duty of Rs. 1,00,000/- + 15,000/- towards assignment of deed and it is immaterial wheth...pays stamp duty or the trust. Nonetheless assignment document executed by Bank or Financial Institution under the provisions of SARFAESI Act, 2002 is specifically exempted from Stamp duty in accordance...26.07.2016 in order to secure repayment of the said Debentures in accordance with the terms of the Debenture Trust Deed.d) On 30.09.2019, an Assignment Agreement was...

...on the assignor either to intimate the borrower/its guarantors or to make them a party to the assignment deed.15. The contention as to the insufficiency of stamp duty paid on ...find that the Applicant has paid stamp duty of Rs. 1,00,000/- + 15,000/- towards assignment of deed and it is immaterial whether the trustee pays stamp duty or the trust.... Nonetheless assignment document executed by Bank or Financial Institution under the provisions of SARFAESI Act, 2002 is specifically exempted from Stamp duty in accordance with Section 8F of Indian...

...guarantors or to make them a party to the assignment deed.15. The contention as to the insufficiency of stamp duty paid on assignment agreement , we find that the Applicant has...paid stamp duty of Rs. 1,00,000/- + 15,000/- towards assignment of deed and it is immaterial whether the trustee pays stamp duty or the trust. Nonetheless assignment document executed by Bank or...repayment of the said Debentures in accordance with the terms of the Debenture Trust Deed.d) On 30.09.2019, an Assignment Agreement was executed by ECL Finance Limited in...

... duty paid on assignment agreement , we find that the Applicant has paid stamp duty of Rs. 1,00,000/- + 15,000/- towards assignment of deed and it is immaterial whether the trustee pays ...trust. Nonetheless assignment document executed by Bank or Financial Institution under the provisions of SARFAESI Act, 2002 is specifically exempted from Stamp duty in accordance with Section 8F of...secure repayment of the said Debentures in accordance with the terms of the Debenture Trust Deed. d) On 30.09.2019, an Assignment Agreement was executed by ECL Finance...

.... The contention as to the insufficiency of stamp duty paid on assignment agreement , we find that the Applicant has paid stamp duty of Rs. 1,00,000/- + 15,000/- towards assignment of deed...immaterial whether the trustee pays stamp duty or the trust. Nonetheless assignment document executed by Bank or Financial Institution under the provisions of SARFAESI Act, 2002 is specifically exempted...repayment of the said Debentures in accordance with the terms of the Debenture Trust Deed. d) On 30.09.2019, an Assignment Agreement was executed by ECL Finance Limited in...

...certified copy would constitute secondary evidence. The applicant has not led secondary evidence. The assignment /certified copy of the assignment does not become admissible until sufficient stamp duty is paid. Henc....2. The admissibility of the documents are considered as follows:1. Certified copy of the deed of assignment shown as an agreement dated 17th December, 1984 is shown to be...receipt of the amount paid under the assignment titled as an agreement dated 17 December, 1984 is not produced. A photocopy of a copy of the receipt is produced. Hence the receipt is marked “X-1” for...

...to the Collector, Jalpaiguri for assessment of Stamp Duty payable along with the penalty by the learned Commercial Court, Siliguri. Unfortunately, the Collector has refused to assess the stamp duty payable on unreg... 5- The respondent no.1/lessee/assignor appears to have filed WPA No. 2576 of 2021 challenging the assessment of Stamp Duty payable on unregistered agreement of ...on following three Grounds:- (i) That respondent no.1/lessee/assignor has no locus standi to challenge the assessment of Stamp Duty on impounded unregistered agreement for ...

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What is an Assignment of Debt?

By Vanessa Swain Senior Lawyer

Updated on February 22, 2023 Reading time: 5 minutes

This article meets our strict editorial principles. Our lawyers, experienced writers and legally trained editorial team put every effort into ensuring the information published on our website is accurate. We encourage you to seek independent legal advice. Learn more .

Perfecting Assignment

• Enforcing an Assigned Debt 

Recovery of an Assigned Debt

• Other Considerations 

Key Takeaways

Frequently asked questions.

I t is common for creditors, such as banks and other financiers, to assign their debt to a third party. Usually, an assig nment of debt is done in an effort to minimise the costs of recovery where a debtor has been delinquent for some time. This article looks at:

• what it means to ‘assign a debt’;
• the legal requirements to perfecting an assignment; and
• common problems with enforcing an assigned debt. 

Whether you’re a small business owner or the Chief Financial Officer of an ASX-listed company, one fact remains: your customers need to pay you.

This manual aims to help business owners, financial controllers and credit managers best manage and recover their debt.

An assignment of debt, in simple terms, is an agreement that transfers a debt owed to one entity, to another. A creditor does not need the consent of the debtor to assign a debt.

Once a debt is properly assigned, all rights and responsibilities of the original creditor (the assignor ) transfer to the new owner (the assignee ). Once an assignment of debt has been perfected, the assignee can collect the full amount of the debt owed . This includes interest recoverable under the original contract, as if they were the original creditor. A debtor is still responsible for paying the outstanding debt after an assignment. However, now, the debt or must pay the debt to the assignee rather than the original creditor.

Purchasing debt can be a lucrative business. Creditors will generally sell debt at a loss, for example, 20c for each dollar owed. Although, the amount paid will vary depending on factors such as the age of the debt and the likelihood of recovery. This can be a tax write off for the assignor, while the assignee can take steps to recover 100% of the debt owed. 

In New South Wales, the requirements for a legally binding assignment of debt are set out in the Conveyancing Act :

• the assignment must be in writing. You do this in the form of a deed (deed of assignment) and both the assignor and assignee sign it; and
• the assignor must provide notice to the debtor. The requirement for notice must be express and must be in writing. The assignor must notify the debtor advising them of the debt’ s assign ment and to who it has been assigned. The assignee will send a separate notice to the debtor, putting them on notice that the debt is due and payable. They will also provide them with the necessary information to make payment. 

The assignor must send the notices to the debtor’s last known address.  

Debtor as a Joined Party

In some circumstances, a debtor will be joined as a party to the deed of assignment . There can be a great benefit in this approach . This is because the debtor can provide warranties that the debt is owed and has clear notice of the assignment. However, it is not always practical to do so for a few reasons:

• a debtor may not be on speaking terms with the assignor; 
• a debtor may not be prepared to co-operate or provide appropriate warranties; and
• the assignor or the assignee may not want the debtor to be made aware of the sale price . This occurs particularly where the sale price is at a significant discount.

If the debtor is not a party to the deed of assignment, proper notice of the assignment must be provided.  

An assignment of debt that has not been properly perfected will not constitute a legal debt owing to the assignee. Rather, the legal right to recover the debt will remain with the assignor. Only an equitable interest in the debt will transfer to the assignee.  

Enforcing an Assigned Debt 

After validly assigning a debt (in writing and notice has been provided to the debtor’s last known place of residence), the assignee is entitled to take any legal steps available to them to recover the outstanding debt. These recovery options include:

• commencing court proceedings;
• obtaining a judgment; and 
• enforcement of that judgment.

Suppose court proceedings have been commenced or judgment already entered in favour of the assignor. In that case, the assignee must take steps to have the proceedings or judgment formally changed into the assignee’s name.  

In our experience, recovery of an assigned debt can be problematic because:  

• debtors often do not understand the concept of debt assignment and may not be aware that their credit contract contains an assignment of debt clause;
• disputes can arise as to whether a lawful assignment of debt has arisen. A debtor may claim that the assignor did not provide them with the requisite notice of the assignment, or in some cases, a contract will specifically exclude the creditor from legally assigning a debt;
• proper records of the notice of assignment provided to the debtor must be maintained. If proper records have not been kept, it may be difficult to prove that notice has been properly given, which may invalidate the legal assignment; and
• the debtor has the right to make an offsetting claim in defence to any recovery action taken by the assignee. A debtor may raise an offsetting claim which has arisen out of a previous arrangement with the assignor (which the assignee may not be aware of). For example, the debtor may have entered into an agreement with the assignor whereby the assignor agreed to accept a lesser amount of the debt owed by way of settlement. Because the assignee acquires the same rights and obligations of the assignor, the terms of that previous settlement agreement will bind the assignee. The court may find that there is no debt owing by the debtor. In this case, the assignee will have been assigned nothing of value. 

Other Considerations 

When assigning a debt, it is essential that the assignee, in particular, considers relevant statutory limitation periods for commencing proceedings or enforcing a judgment debt . In New South Wales, the time limit:

• to file legal proceedings to recover debts is six years from the date of last payment or when the debtor admitted in writing that they owed the debt; and
• for enforcing a judgment debt is 12 years from the date of judgment.

An assignment of a debt does not extend these limitation periods.  

While there can be benefits to both the assignor and the assignee, an assignment of debt will be unenforceable if done incorrectly. Therefore, if you are considering assigning or being assigned a debt, it is important to seek legal advice. If you need help with drafting or reviewing a deed of assignment or wish to recover a debt that has been assigned to you, contact LegalVision’s debt recovery lawyers on 1300 544 755 or fill out the form on this page.  

An assignment of debt is an agreement that transfers a debt owed to one entity, to another. A creditor does not need the consent of the debtor to assign a debt.

Once the assignee has validly assigned a debt, they are entitled to take any legal steps available to them to recover the outstanding debt. This includes commencing court proceedings, obtaining a judgment and enforcement of that judgment.

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Australia: Assignment of debts, statutory demands and offsetting claims

It is not uncommon for a creditor (assignor) to transfer their right to receive payment of a debt (assignment) to a third party (assignee). The assignee will then seek payment from the debtor.

The assignee of the debt can issue to the debtor company a statutory demand for the payment of the debt if the debt exceeds the statutory minimum, which is currently $2,500.

For the assignee issuing the statutory demand, there will be threshold issues as to whether notice of the assignment has been given to the debtor and whether appropriate details of the assignment are contained in the statutory demand.

Assignee has the same rights and obligations as the assignor

The assignee of the debt takes the assignment subject to the rights and obligations of the assignor.

This was demonstrated in the recent decision of Mascarene Pty Ltd v Slater [2016] VSC 395 relating to a building dispute.

In Mascarene a judgment debt was assigned and the assignee issued a statutory demand.

The Court held that the assignee was not prevented from seeking payment of interest as it had the same rights as the assignor, as if the assignment had not taken place.

However, the assignee also took the assignment subject to the obligations that would have applied to the assignor in respect of the debt.

In seeking to set aside the statutory demand the debtor company claimed it had an offsetting claim against the assignor for reinstatement costs relating to building works.

Although the assignee was not a party to the building contract and not personally liable for the reinstatement costs, the debtor company was successful in claiming the setoff and reducing the amount of the statutory demand by the amount of the reinstatement costs.

It is clear that an offsetting claim cannot be sidestepped by assigning the debt.

The assignee of a debt receives the benefit of the debt subject to the rights of the assignor but also subject to the assignor's obligations in respect of the debt.

A statutory demand can be issued in respect of an assigned debt however the assignment does not prevent the debtor company from disputing the existence or amount of the alleged debt or seeking to raise an offsetting claim.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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