| Introduction | jurisprudence |
| Sections | section 3 TPA |
| Relevant Case laws | Ahmedabad Mun. Corp. vs Haji Abdul Gafur Md. Mustafa vs Haji Md. Isa Narayanswami vs Deveeramma Ram Niwas vs Bano |
| Present problem | question related |
| Conclusion | decision as per our reasoning |
Notice means knowledge or information or cognizance or awareness of the fact. In other words, notice means that knowledge of a fact which is being provided by others.
Section 3 of TPA define “notice”
“a person is said to have notice” of fact when he actually knows that fact, or when, but for willful abstention from an enquiry or search which he ought to have made, or gross negligence he would have known it.
Explanation 1.–Where any transaction relating to immovable property is required by law to be and has been effected by a registered instrument, any person acquiring such property or any part of, or share or interest in, such property shall be deemed to have notice of such instrument as from the date of registration or, 7[where the property is not all situated in one sub-district, or where the registered instrument has been registered under sub-section (2) of section 30 of the Indian Registration Act, 1908 (16 of 1908), from the earliest date on which any memorandum of such registered instrument has been filed by any Sub-Registrar within whose sub-district any part of the property which is being acquired, or of the property wherein a share or interest is being acquired, is situated:]
Provided that–(1) the instrument has been registered and its registration completed in the manner prescribed by the Indian. Registration Act, 1908 (16 of 1908) and the rules made thereunder,(2) the instrument 8[or memorandum] has been duly entered or filed, as the case may be, in books kept under section 51 of that Act, and(3) the particulars regarding the transaction to which the instrument relates have been correctly entered in the indexes kept under section 55 of that Act.
Explanation II.–Any person acquiring any immoveable 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.
Explanation III.–A person shall be deemed to have had notice of any fact if his agent acquires notice thereof whilst acting on his behalf in the course of business to which that fact is material:Provided that, if the agent fraudulently conceals the fact, the principal shall not be charged with notice thereof as against any person who was a party to or otherwise cognizant of the fraud.
Types of notice:
- Actual notice
- Constructive notice Notice to agent
Actual notice: Actual notice means when a person actually knows about the existence of a fact. The fact must be definite information given in the course of negotiations by a person interested in the property. The information of fact should not be a rumour or hearsay and thus is not bound by such information. It is based on some conditions:
- knowledge or information must be definite, not any rumors or hearsay.
- only knowledge of the parties interested in the transaction is actual notice regarding that transaction.
- knowledge or information to person, who is stranger to transaction is no notice
- knowledge or information must relate to the transaction in question.
Constructive notice: Constructive notice also applies where the transferee ought to have known some fact, but because of gross negligence, he is unaware of it. Gross Negligence was explained in Hudston v. Viney as gross negligence “does not mean mere carelessness”. It means carelessness of such an “aggravated nature”, that indicates an attitude of “mental indifference to obvious risks”. A person may claim that he did not know a fact, but if the circumstances surrounding him are such, that as a reasonable prudent person, he ought to have known a fact, he will be deemed to know it.
Constructive notice can be applied by the court in five cases.
(i) when there is a willful abstention from making an inquiry.
(ii) gross negligence
(iii) registration of the document/ transaction
(iv) actual possession and
(v) notice to agent.
For wilful abstention, there has to be some starting point, some hint or suspicion which would require some investigation to reveal the truth about a transaction. If in such cases the transferee fails to investigate, with a fraudulent intention to not know the real truth, then the court will assume that the transferee had some idea of that fact.
Constructive notice also applies where the transferee ought to have known some fact, but because of gross negligence, he is unaware of it. Gross Negligence “does not mean mere carelessness”. It means carelessness of such an “aggravated nature”, that indicates an attitude of “mental indifference to obvious risks”. For instance, If the transferee fails to read a note on the paper that the property is subject to a charge, while the papers are in his possessions, then the court will not entertain the plea of no Notice and will impute knowledge or notice of charge.
If a transaction relating to the immovable property needs to be effected by a registered instrument, under law, then the registration of the document will be deemed as Constructive Notice. The notice of such instrument will be deemed from the date of registration of such instrument. It must be noted that registration amounts to notice only when it is required by law. If registration is not compulsory under law, then the fact of registration does not amount to notice under TPA.
Actual possession means that when a person, other than the transferor/owner, is in actual possession of the property, then it is necessary for a prospective buyer of that property, to ascertain all the rights, which the person in actual possession really has related to the property. Thus it is the duty of the subsequent purchaser to inquire, about the precise character of possession, from the person, who for the time being actually possesses the property.
Notice to Agent: notice of fact by the agent will be deemed to be noticed by principle as well. This is based on the legal maxim qui facit per alium facit per se i.e. He who does by another does by himself. If the agent fraudulently conceals the fact, the principal shall not be charged with notice thereof as against any person who was a party toor otherwise cognizant of the fraud. It is based on some conditions as well:
- The notice should have been obtained by the agent during the course of agency. Where the knowledge was acquired by him prior to his acting as an agent of another, such knowledge cannot be imputed on the principal.
- It must have been received by him in his capacity as an agent.
- Must be received in course of agency
- It should have been a matter that is material to the agency business
- It should not have been fraudulently concealed by the agency, from the principal.
Relevant Case Laws:
Ahmedabad Municipal corporation vs Haji Abdul Gafur
facts:
A person Haji Nur Mohd., who was the owner of certain properties ran into financial difficulties in 1949, and was adjudged insolvent in 1950, whereupon his property vested in the Office Receiver appointed by the court. This property was subject to a mortgage, and was sold at a court auction to Haji Abdul Gafur(plaintiff) , in 1954. Meanwhile in 1951, the Official Receiver received a bill for approximately Rs. 630 with pertaining to taxes, from the municipality. He sought the court’s permission to sell the property to pay the taxes, which was granted to him by the insolvency court. However, after that neither the Official Receiver took any action with respect to payment of taxes, nor did the municipality press for the same. At the time of the auction of the property, plaintiff, the purchaser, made inquiries from the Official Receiver about the charges due over the property, but was not given any information about the arrears of taxes. Soon after he purchased the property, he received a notice from the municipality for the arrears of taxes amounting to around R s. 540, and thereupon, this property was attached and municipal corporation threatened to sell the property. Plaintiff filed a suit in the court for a declaration that he was the owner of the property, and that the arrears of municipal taxes due before he purchased the property, were not recoverable by attachment of the property in his hands.
issue:
Will subsequent purchaser would be liable to pay past arrears of municipal taxes?
judgement:
The Supreme Court, after analysing a bulk of conflicting judicial decisions of several high courts and the facts of this case, held that constructive notice could not be imputed on plaintiff.Section 100 provides that no charge shall be enforced against any property in the hands of a person to whom such property has been transferred for consideration and without notice of the charge.The Supreme Court held that the question of constructive notice depends upon the facts and circumstances of each case. The question to be asked here is not whether the person had the means to find out, but whether in the given circumstances there was a duty to find out. Therefore, there is no presumption of constructive notice with regard to municipal taxes and each case has to be decided on its own facts.There has no reasonable ground for assuming that there might be arrears, as he had made general inquiries from the person (Official Receiver) who had charge of the property, but was not given any information about the same.Secondly, the property was in occupation of the tenants, and he could reasonably assume that dues if any might have been paid out of the rent.Thirdly, according to the court, the conduct of the municipality itself was surprising. They did not pursue the matter after sending a notice to the official receiver. The court, comparing the conduct of both the parties before it, commented that the municipal corporation was far more negligent and blameworthy than the purchaser.Plaintiff was a bona fide purchaser without any notice, actual or constructive, of the fact of existence of tax arrears and therefore, could not be made liable to pay the same.
On the question of the liability of a subsequent purchaser to pay past or arrears of municipal taxes, the judicial opinion was divided till it was settled by the apex court in Ahmedabad Municipal Corporation v. Haji Abdul Gafur Haji Hussenbhai.
Md. Mustafa vs Haji Md. Isa
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.
the defendant claimed that they were bona fide purchasers for value without any notice of alleged agreement between the plaintiff and the owner.
issue:
Whether defendants are bona fide purchasers for value without notice of the agreement between the plaintiff and Md. Isa?
judgement:
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.
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.
H. N. Narayanswami naidu vs Deveeramma
facts:
A son and his mother sold the house to B. It was a conditional sale, with a stipulation that if within a period of six and a half years, the seller would pay the entire consideration to B; B would reconvey the property back to them. A little later, however, for a consideration, the seller agreed to release this right of conveyance on favour of B, with the help of an unregistered agreement. B took possession of the properties and after the execution of release deed, carried major repairs at his costs. The sellers (mother and son) however, sold the right of reconveyance stipulated under the original sale deed to a person D, without disclosing to him, that it has already been released in favour of the buyer B. D, claiming to be a bona fide purchaser of the reconveyance rights without notice wanted to enforce the same.
issue:
Is the appellant(D) a bona fide purchaser for value?
judgement:
Definition of the term ‘Notice’ as defined in Section 3 of the T. P. Act, 1882, which reads: → (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. Explanation II to the said definition reads: → 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. It is obvious that for the wilful abstention from enquiry, D would have come to know the entire facts and, hence, he should be deemed to have the notice of the rights of the plaintiff B. Even under Explanation II to the definition of the term ‘Notice’ contained in Section 3 of the Transfer of Property Act, 1882, since the plaintiff was in actual possession, practically as owner but for the reconveyance deed, it was the duty of defendant 3 to enquire with the plaintiff about her rights. Even under the said provision, he should be deemed to have the notice of the right of the plaintiff. The trial Court says that defendant D had actual notice, appreciating the evidence on record, as he was residing very near to the suit premises – Within a furlong – and that in all probability, he was aware of all the dealings between the parties. Since B was in actual possession of the property, the court held that D had a duty to direct his inquiries to B with respect to B’s rights over the property and having failed to do that, he would be imputed with constructive notice of the release deed executed by the sellers in favour of B. Appeal dismissed.
Ram Niwas vs Bano
facts:
A person Plaintiff, took a shop on rent from defendant, and subsequently entered into a contract for the purchase of this shop for a consideration. He paid part of the consideration on the date of the agreement, and undertook to pay the remaining amount on the date of the execution of the sale deed. Six months later, however, defendant sold the shops to third party, for a sum of Rs. 20,000. Plaintiff filed a suit for specific performance of the contract, and third party resisted it on the ground that they were bona fide purchasers for value and without any notice of the claim of Plaintiff. Therefore, the registered sale deed in their favour cannot be cancelled and relief of specific performance could not be granted in favour of the tenant Plaintiff.
issue:
Whether the third party purchased the disputed shop after paying the full price and had they no knowledge of the alleged agreement to sell?
judgement:
The court observed that A, at the relevant time was in actual possession of the property, and therefore C should have made inquiries from A about his title over the property.The word “notice” in section 3 is of wider import than the word “knowledge”. A person may have actual knowledge of a fact but he may have notice of it having regard to the definition and Explanation II given in section 3.If the third party have relied upon the assertion of the vendor (Defendant) or on their own knowledge and abstained from making inquiry into the real nature of the possession of the tenant, they cannot escape from the consequences of the deemed notice under Explanation II of s. 3 of TP Act.
SC observed that, if a person is purchasing a property and he knows that a tenant is in possession of that property, then he ought to inquire about the terms of possession of that tenant.In the light of the above discussion, we hold that the purchasers will be deemed to have notice. Third party’s right over the property thus was subordinate to plaintiff ’s rights.
Present problem:
‘A’ borrows Rs. 5 lakh from ‘B’ on an equitable mortgage of his land and deposits the original title deeds with ‘B’. ‘A’ then sells the said land to ‘C’ for Rs. 5 lakh and gives a copy of title deed to ‘C’ for inspection. ‘C’ asked for the original deeds and ‘A’ said that the had not got them but promised to show them in few days. ‘A’ failed to do so and ‘C’ made no further inquiry. Decide in the light of ‘Notice’.
Answer: C asked about the original documents but A didn’t show him, so it can be said that C has no notice of previous agreement between A and B.(Ahmedabad mun. corp. case)
A person buying property in a Municipal area must be deemed to be aware that Municipal taxes are a charge on property, that there is a possibility of such taxes being arrears and it is duty of the buyer to inquire about such arrears; if he fails to do so he would be deemed to have notice of such taxes. (Naval Kishore v. Municipal Board of Agra, AIR 1943 All 115: ILR (1943) All 453.) Do you agree with the above Statement? Give reasons.
Anwer: Yes, I agree with the statement. The case of Naval Kishore v. Municipal Board of Agra, AIR 1943 All 115, establishes a legal precedent that a buyer must be aware of municipal taxes as a charge on the property. This decision has set a standard in property law that emphasizes the buyer’s responsibility to conduct due diligence.
Municipalities rely on property taxes for revenue. Recognizing the obligation of the buyer to check for arrears protects the municipality’s interests and ensures that these taxes are paid. This rule helps prevent fraudulent transactions where a seller might try to offload a property with unpaid taxes onto an unsuspecting buyer. It places the onus on the buyer to investigate and be aware of any potential issues.
