Case Summary
| Citation | Md. Mustafa v. Haji Md. Isa AIR 1987 Pat 5 |
| Keywords | sec 3 TPA , notice , constructive notice, bonafide purchaser, tenant, sale deed , agreement to sell, earnest money |
| Facts | A was the owner of a building that comprised seven smaller more or less identical portions. Each one of them was occupied by a different tenant, one of whom was plaintiff. According to plaintiff, A had contracted to sell him his portion of the property in lieu of the loan that he had advanced to A. However, instead of selling it to plaintiff, A sold the entire building to Defendant and directed all the tenants, including plaintiff, to start paying rent to Defendant. Plaintiff claimed that as he was in actual occupation of his portion, Defendant a prospective purchaser was bound to make inquiries from him about his rights and a failure to do so would result in the imputation of constructive notice on him. Defendant claimed that the owner was in need of money and so wanted to sell the house. The sale deed between the parties, according to the defendant, was executed after the owner received full consideration from the defendant. |
| Issues | Whether defendants are bona fide purchasers for value without notice of the agreement between the plaintiff and Md. Isa. |
| Contentions | the defendant claimed that they were bona fide purchasers for value without any notice of alleged agreement between the plaintiff and the owner. |
| Law Points | The principle of constructive notice is incorporated in Illus. II of S. 3 of the T.P. Act which reads as follows: → ‘‘Any person acquiring any immovable property or any share or interest in any such property shall be deemed to have notice of the title, if any, of any person who is for the time being in actual possession thereof.’’ The court held that C, as a bona fide purchaser, after having made inquiries from the owner, was not duty bound to inquire from each and every tenant in occupation of a fraction of the property. The court held that since the claimant was in occupation of a small portion of the property, there was no duty on part of the transferee to inquire from him about his rights. Court cannot presume that the purchaser will have the notice of the title, if any, of any person who is for the time being in actual possession of only a small fraction of the property sold. Hence, no constructive notice can be imputed on him of his rights. The plaintiff is not entitled to a decree for specific performance of contract. |
| Judgement | The purchasers had no notice of prior agreement. As they were bona fide purchasers for value and without notice, they weren’t held to be bound by any pre-existing contract between the vendor and the plaintiff. Thus, no decree for specific performance was passed. |
| Ratio Decidendi & Case Authority | S.3 “a person is said to have notice” of a fact when he actually knows that fact, or when, but for wilful abstention from an enquiry or search which he ought to have made, or gross negligence, he would have known it. Bona Fide: The term “bona fide” comes from Latin and means “in good faith.” A bona fide person acts with honesty, sincerity, and a genuine intention. Purchaser for Value: A bona fide purchaser is someone who acquires property by paying for it or providing some form of consideration (such as money or property) in exchange. This distinguishes them from beneficiaries of gifts. Without Notice: The critical aspect is that the purchaser must not have any knowledge or notice of competing claims or defects in the property’s title. If they buy the property without such notice, they are considered bona fide purchasers. Thus, a bona fide purchaser for value is an innocent party who acquires property honestly, pays for it, and has no knowledge of any conflicting claims to the property’s title. This concept is essential in property law to protect the rights of innocent buyers. |
Full Case Details
BACHAWAT, J. – On February 23, 1953, the appellant instituted G. S, No. 56 of 1953 on the
Original Side of the Madras High Court under the summary procedure of Order 7 of the Original Side
Rules against Hajee Ahmed Batcha claiming a decree for Rs 40,556/1/2 and Rs 8,327/12/9 said to be
due under two promissory notes executed by Haji Ahmed Batcha. On March 9, 1953, Hajee Ahmed
Batcha obtained leave to defend the suit on condition of his furnishing the security for a sum of Rs
50,000/- to the satisfaction of the Registrar of the High Court. On March 26, 1953, Hajee Ahmed
Batcha executed a security bond in favour of the Registrar of the Madras High Court charging several
immovable properties for payment of Rs 50,000/-. The condition of the bond was that if he paid to the
appellant the amount of any decree that might be passed in the aforesaid suit the bond would be void
and of no effect and that otherwise it would remain in full force. The bond was attested by B.
Somnath Rao. It was also signed by K. S. Narayana lyer, advocate, who explained the document to
Hajee Ahmed Batcha and identified him. All the properties charged by the bond are outside the local
limits of the ordinary original jurisdiction of the Madras High Court. The document was presented for
registration on March 29, 1953 and was registered by D. W. Kittoo, the Sub-Registrar of MadrasChingleput District. Before the Sub-Registrar, Hajee Ahmed Batcha admitted execution of the
document and was identified by Sankaranarayan and Kaki Abdul Aziz. The identifying witnesses as
also the Sub-Registrar signed the document. Hajee Ahmed Batcha died on February 14, 1954 and his
legal representatives were substituted in his place in G. S. No. 56 of 1953. On March 19, 1954,
Ramaswami, J., passed a decree for Rs 49,891/13/- with interest and costs and directed payment of the
decretal amount on or before April 20, 1954. While passing the decree, he observed:
“It is stated that the defendant has executed a security bond in respect of their immovable
properties when they obtained leave to defend and this will stand ensured to the benefit of the
decree-holder as a charge for the decree amount.”
2. Clauses 3 and 4 of the formal decree provided:
“(3) that the security bond executed in respect of their immovable properties by
defendants 2 to 4 in pursuance of the order, dated 9th March, 1953, in application No. 797 of
1953, shall stand enured to the benefit of the plaintiff as a charge for the amounts mentioned
in Clause 1;
(4) that in default of defendants 2 to 4 paying the amount mentioned in Clause 1 supra on
or before the date mentioned in Clause 2 supra the plaintiff shall be at liberty to apply for the
appointment of Commissioners for sale of the aforesaid properties.”
3. The appellant filed an application for (a) making absolute the charge decree, dated March 31,
1954, and directing sale of the properties; and (6) appointment of Commissioners for selling them. On
April 23, 1954, the Court allowed the application, appointed Commissioners for selling of the
properties and directed that the relevant title deeds and security bond be handed over to the
Commissioners. The Commissioners sold the properties on May 29 and 30, 1954. The sales were
confirmed and the sale-proceeds were deposited in court on July 2, 1954.
4. All the three respondents are simple money creditors of Hajee Ahmed Batcha. The respondents
Venkata Sastri and Sons filed 0. S. No. 13 of 1953, in the Sub-Court, Vellore and obtained a decree
for Rs 5,500/- on March 27, 1953. Respondent H. R. Gowramma instituted 0. S. No. 14 of 1953, in
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the same Court and obtained a money decree on April 14, 1953. The two decree-holders filed
applications for execution of their respective decrees. One Rama Sastri predecessors of respondents
H. R. Chidambara Sastri and H. R. Gopal Krishna Sastri obtained a money decree against Hajee
Ahmed Batcha in 0. S. No. 364 of 1951/52, in the Court of the District Munsiff, Shimoga, got the
decree transferred for execution through the Court of the District Munsiff, Vellore and filed an
application for execution in that court. On June 7, 1954, the aforesaid respondents filed applications in
the Madras High Court for (t) transfer of their execution petitions pending in the Vellore courts to the
file of the High Court and (it) an order for rateable distribution of the assets realized in execution of
the decree passed in favour of the appellant in C. S. No. 56 of 1953. The appellant opposed the
applications and contended that as the properties were charged for the payment of his decretal amount,
the sale proceeds were not available for rateable distribution amongst simple money creditors. The
respondents contended that the security bond was invalid as it was not attested by two witnesses and
that the decree passed in C. S. No. 56 of 1953, did not create any charge. Balakrishna Ayyar, J.,
dismissed all the applications as also exemption petitions filed by the respondents. He held that the
decree in C. S. No. 56 of 1953, did not create a charge on the properties. But following the decision in
Veerappa Chettiar v. Sabramania [AIR 1929 Mad 1] he held that the security bond was sufficiently
attested by the Sub-Registrar and the identifying witnesses. The respondents filed appeals against the
orders. On March 28, 1958, the Divisional Bench hearing the appeals referred to a Full Bench the
following question:
“Whether the decision in Veerappa Chettiar v. Subramania lyyar [AIR 1929 Mad. 1],
requires reconsideration.”
The Full Bench held:
“In our opinion, such signatures of the registering officer and the identifying witnesses
endorsed on a mortgage document can be treated as those of attesting witnesses as if (1) the
signatories are those who have seen the execution or received a personal acknowledgment
from the executant of his having executed the document, (2) they sign their names in the
presence of the executant and (3) while so doing they had the aninus to attest. The mere
presence of the signatures of the registering officer or the identifying witnesses on the
registration endorsements would not by themselves be sufficient to satisfy the requirements of
a valid attestation; but it would be competent for the parties to show by evidence that any or
all of these persons did in fact intend to and did sign as attesting witness as well.”
5. The Full Bench held that the decision in Veerappa Chettiar case can be held to be correct to
this limited extent only and not otherwise. At the final hearing of the appeals, the Divisional Bench
held that (1) a charge by act of parties could be created only by a document registered and attested by
two witnesses; (2) the security bond was not attested by two witnesses and was therefore invalid; (3)
the decree in G. S. No. 56 of 1953, should be construed as containing nothing more than a recital of
the fact of there having been a security bond in favour of the plaintiff; and the sale in execution of the
decree must be regarded as a sale in execution of a money decree; and (4) the respondents were
entitled to an order for rateable distribution. Accordingly, the Divisional Bench allowed the appeals,
directed attachment of the sale-proceeds and declared that the respondents were entitled to rateable
distribution along with the appellant. The present appeals have been filed after obtaining special leave
from this court.
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6. The following questions arise in these appeals: (1) Is the security bond attested by two
witnesses; (2) if not, is it invalid? (3) does the decree in G. S. No. 56 of 1953, direct sale of the
properties for the discharge of a charge thereon, and (4) are the respondents entitled to rateable
distribution of the assets held by court? As to the first question, it is not the case of the appellant that
K. S. Narayana lyer is an attesting witness. The contention is that the Sub-Registrar D. W. Kittoo and
the identifying, witnesses Sankaranarayana and Kaki Abdul Aziz attested the document. In our
opinion, the High Court rightly rejected this contention.
7. It is to be noticed that the word “attested”, the thing to be defined, occurs as part of the
definition itself. To attest is to bear witness to a fact. Briefly put, the essential conditions of a valid
attestation under Section 3 are: (1) two or more witnesses have seen the executant sign the instrument
or have received from him a personal acknowledgment of his signature; (2) with a view to attest or to
bear witness to this fact each of them has signed the instrument in the presence of the executant. It is
essential that the witness should have put his signature animo attestandi, that is, for the purpose of
attesting that he has seen the executant sign or has received from him a personal acknowledgment of
his signature. If a person puts his signature on the document for some other purpose, e. g., to certify
that he is a scribe or an identifier or a registering officer, he is not an attesting witness.
8. “In every case the Court must be satisfied that the names were written animo attestandi”, see
Jarman on Wills, 8th ed., p. 137. Evidence is admissible to show whether the witness had the intention
to attest. “The attesting witnesses must subscribe with the intention that the subscription made should
be complete attestation of the will, and evidence is admissible to show whether such was the intention
or not,” see Theobald on Wills, 12th ed., p. 129. In Girja Datt v. Gangotri [AIR 1955 SC 346] the
Court held that the two persons who had identified the testator at the time of the registration of the
will and had appended their signatures at the foot of the endorsement by the sub-Registrar, were not
attesting witnesses as their signatures were not put “animo attestandi”. In Abinash Chandra
Bidvanidhi Bhattacharya v. Dasarath Malo [AIR 1929 Cal 123] it was held that a person who had
put his name under the word “scribe” was not an attesting witness as he had put his signature only for
the purpose of authenticating that he was a “scribe”. In Shiam Sunder Singh v. Jagannath Singh
[AIR 1927 PC 248] the Privy Council held that the legatees who had put their signatures on the will in
token of their consent to its execution were not attesting witnesses and were not disqualified from
taking as legatees.
9. The Indian Registration Act, 1908, lays down a detailed procedure for registration of
documents. The registering officer is under a duty to enquire whether the document is executed by the
person by whom it purports to have been executed and to satisfy himself as to the identity of the
executant, [Section 34(3)]. He can register the document if he is satisfied about the identity of the
person executing the document and if that person admits execution. [Section 35(1)]. The signatures of
the executant and of every person examined with reference to the document are endorsed on the
document (Section 58). The registering officer is required to affix the date and his signature to the
endorsements (Section 59). Prima facie, the registering officer puts his signature on the document in
discharge of his statutory duty under Section 59 and not for the purpose of attesting it or certifying
that he has received from the executant a personal acknowledgment of his signature.
10. The evidence does not show that the registering officer D. W. Kittoo put his signature on the
document with the intention of attesting it. Nor is it proved that he signed the document in the
presence of the executant. In these circumstances he cannot be regarded as an attesting witness, see
Sunder Bahadur Singh v. Thakur Behari Singh [AIR 1939 PC 117]. Likewise the identifying
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witnesses Sankaranarayana and Kaki Abdul Aziz put their signatures on the document to
authenticate the fact that they had identified the executant. It is not shown that they put their
signatures for the purpose of attesting the document. They cannot, therefore, be regarded as attesting
witnesses.
11. It is common case that B. Somnath Rao attested the document. It follows that the document
was attested by one witness only.
12. As to the second question, the argument on behalf of the respondents is that Section 100 of
the Transfer of Property Act attracts Section 59 and that a charge can be created only by a document
signed, registered and attested by two witnesses in accordance with Sec. 59 where the principal
money secured is Rs.100 or upwards. The High court accepted this contention following its earlier
decisions in Viswanadhan v. M.S. Menon [AIR 1939 Mad. 202] and Shiva Rao v.
Shanmughasundaraswami [AIR 1940 Mad 140] and held that the security bond was invalid, as it
was attested by one witness only. We are unable to agree with this opinion.
13. If a non-testamentary instrument creates a charge of the value of Rs. 100 or upwards, the
document must be registered under Section 17 (1)(b) of the Indian Registration Act. But there is no
provision of law which requires that an instrument creating the charge must be attested by witnesses.
14. Before Section 100 was amended by Act 20 of 1929 it was well settled that the section did not
prescribe any particular mode of creating a charge. The amendment substituted the words “all the
provisions hereinbefore contained which apply to a simple mortgage shall so far as may be, apply to
such charge,” for the words “all the provisions hereinbefore contained as to a mortgagor shall so far as
may be, apply to the owner or such property, and the provisions of Sections 81 and 82 shall, so far as
may be, apply to the person having such charge.” The object of the amendment was to make it clear
that the rights and liabilities of the parties in case of a charge shall, so far as may be, the same as the
rights and liabilities of the parties to a simple mortgage. The amendment was not intended to prescribe
any particular mode for the creation of a charge. We find that the Nagpur High court came to a similar
conclusion in Bapurao v. Narayan [AIR 1950 Nag 117]. It follows that the security bond was not
required to be attested by witnesses. It was duly registered and was valid and operative.
15. As to the third question, we find that the decree dated March 19, 1954 declared that the
security bond in respect of the immovable properties would enure for the benefit of the appellant as a
charge for the decretal amount. This relief was granted on the oral prayer of the plaintiffs. We are
unable to agree with the High Court that in view of the omission to amend the plaint by adding a
prayer for enforcement of the charge, the decree should be construed as containing merely a recital of
the fact that a security bond had been executed. In our opinion, the decree on its true construction
declared that the security bond created a charge over the properties in favour of the plaintiffs for
payment of the decretal amount and gave them the liberty to apply for sale of the properties for the
discharge of the incumbrance. Pursuant to the decree the properties were sold and the assets are now
held by the Court. The omission to ask for an amendment of the plaint was an irregularity, but that
does not affect the construction of the decree.
16. As to the 4th question we find that the immovable properties have been sold in execution of a
decree ordering sale for the discharge of the encumbrance thereon in favour of the appellant. Section
73 (1), proviso (c) therefore applies and the proceeds of sale after defraying the expenses of the sale
must be applied in the first instance in discharging the amount due to the appellant. Only the balance
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left after discharging this amount can be distributed amongst the respondents. It follows that the
High Court was in error in holding that the respondents were entitled to rateable distribution of the
assets along with the appellant.
17. In the result, the appeals are allowed, and the orders passed by the learned Single Judge are
restored.
