Question

In Kapilaben v. Ashok Kumar Jayantilal Sheth, (2020) 20 SCC 648, the Supreme Court has considered that the assignment of a contract might result in a transfer of either rights or obligations thereunder. The transfer of obligations is not possible without the consent of the other party. However, the transfer of rights is permissible, except in cases where the contract is of a personal nature. “It is well-settled that the term ‘representative-in-interest’ includes the assignee of a contractual interest. Though the provisions of the Contract Act do not particularly deal with the assignability of contracts, the court has opined time and again that a party to a contract cannot assign their obligations or liabilities without the consent of the other party. A Constitution Bench in Khardah Co. Ltd. v. Raymon & Co. (India) (P) Ltd. [AIR 1962 SC 1810], has laid out this principle as follows: “An assignment of a contract might result by transfer either of the rights or of the obligations thereunder. However, there is a well-recognised distinction between these two classes of assignments. As a rule, obligations under a contract cannot be assigned except with the consent of the promisee, and when such consent is given, it is really a novation resulting in substitution of liabilities. On the other hand, rights under a contract are assignable unless the contract is personal in its nature or the rights are incapable of assignment either under the law or under an agreement between the parties.”
[Extracted with edits from Indira Devi v. Veena Gupta, (2023) 8 SCC 124]