In Lala Nawal Kishore v. Municipal Board Agra, AIR 1943 All 115, a Full Bench of the Allahabad High Court observed:
"The question of constructive notice is a question of fact which falls to be determined on the evidence and circumstances of each case and is so far as this matter can rest upon any principle, the principle is this that intending purchasers of the property in municipal areas where the property is subject to a municipal tax which has been made a first charge on the property by statute have a constructive knowledge of the tax and of the possibility of some arrear being due and it, therefore, becomes their duty before acquiring the property to make enquiries as to the amount of tax which is due or which may be due and if they fail to make this enquiry, this failure amounts to a wilful abstention or gross negligence within the meaning of Section 3, T. P. Act, and notice must be imputed to them."
Patna High Court
Radha Rai And Anr. vs Ram Rekha Rai And Anr. on 7 February, 1963
Equivalent citations: AIR 1964 Pat 144
1. This appeal by the heirs of the original plaintiff arises out of a suit for specific performance of contract for sale of certain landed property. The plaintiff had taken a usufructuary mortgage bond on the 20th May, 1940, from Badri Bind (defendant No. 1) for Rs. 300/- in respect of that property. On the same date, Badri Bind executed a kabuliyat in respect of the mortgaged land in favour of the plaintiff and costi-nued to remain in possession of the same as lessee on payment of a certain amount as annual rent. On the 3rd February, 1955, defendant No. 2 (respondent No. T) took a sale-deed in respect of the same property from Badri Bind, and out of the consideration money for the sale-deed Rs. 300./- was left with the vendee in deposit for redemption, of the specific mortgage bond in favour of the plaintiff and the balance was paid in cash to the vendor, that is, Badri Bind. Accordingly, Respondent No. 1 came into possession of the vended projiferty.
2. Then, the case of the plaintiff was that on the 15th January, 1955, Badri Bind had agreed to sell this property to him for Rs. 500/-, out of which Rs. 300/- was to be adjusted towards the dues of the mortgage bond, Rs. 100/- towards the arrears of rent and the balance amount of Its. 100/- was to be paid in cash, and, accordingly, an unregistered contract for sale was written and executed. But, subsequently, Badri Bind did not execute the promised sale-deed and the plaintiff came to know that he had executed the collusive sale-deed in favour of respondent No. 1. It was alleged by the plaintiff that respondent No. 1 was present at the time when the contract for sale was executed, and, therefore, he was not a bona fide purchaser for value without notice. Respondent No. 1 resisted the claim of the plaintiff mainly on the; ground that he was a bona fide purchaser for value without notice, and the contract for sale in favour of the plaintiff was not genuine.
3. The learned Munsif, who tried the suit, found that the contract for sale was a genuine document and respondent No. 1 was present when this contract was executed in favour of the plaintiff. It was further found that though the sale-deed of respondent No. 1 was for consideration, it could not affect the claim of the plaintiff as he had notice of the contract for sale. Accordingly, the suit was decreed by the learned Munsif. On appeal, the learned Additional Subordinate Judge of Chapra agreed with the learned Munsif that the contract was executed by defendant No. t in favour of the plaintiff; but he was further of the opinion that respondent No. 1 had no notice of the contract and that he was a purchaser for value without notice. Accordingly, he allowed the appeal, and dismissed the suit. Hence, the present appeal by the plaintiff.
4. Mr. Thakur Prasad, learned Advocate for the appellant, urged only one point in support of the appeal and submitted that defendant No. 2 had notice cf the contract of sale in favour of the plaintiff before he took his sale-deed from Badri Bind. He relied on the definition of 'notice' in Section 3 of the Transfer of Property Act. This definition and explanation II to the same which is also relevant are reproduced below :
" 'a person is said to have notice' of a fact when he actually knows that fact, or when, but for wilful abstention from an inquiry or search which he ought to have made, or gross negligence,' he would have known it.
x x x x x
Explanation II. 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."
5. At first, he referred to the explanation and relied on certain decisions. In Sharfudin v. Govind Bhikaji, ILR 27 Bom 452, it was held that possession amounts to notice of such title as
the person in possession may have, and any other person who takes a mortgage or other charge upon, or purchases immovable property without ascertaining the nature of the claim of the person in possession, does so at his own risk. This decision was referred to in Faki Ibrahhn v. Faki Gulam Mohidin, ILR 45 Bom 910 : (AIR 1921 Bom 459). In that case, the plaintiff was in possession of the property as a mortgagee from defendant No. 1. On the 4th March 1917, defendant No. I agreed to sell the property to the plaintiff but subsequently refused to execute a sale-deed in plaintiff's favour and sold the property to defendant No. 2 by a deed dated the 19th January, 1918. In a suit for specific performance of contract by the plaintiff, it was held by the Bombay High Court that the second defendant having had knowledge of the plaintiff being in possession and having made no inquiry why the plaintiff was in possession, must he taken to have had constructive notice of all the equities in favour of the plaintiff; and the suit was accordingly decreed.
6. In Ramdem Singh v. Gumani Rant, AIR 1929 Pat 300, it was held that where the plaintiff claiming under prior contract was admittedly in possession it was the bounden duty of the subsequent transferees to inquire from the plaintiff as regards the nature of his possession before they can be held to be bona fide purchasers for value. In answer to an argument advanced on behalf of the transferees that if the basis of the title under which the plaintiff was holding possession was known to them, it was incumbent upon them to make any further enquiry, their Lordships of this Court said that though defendant No. 2 was aware that the plaintiff had rehan from Defendant No. 1, he was not aware as regards the land which was given in rehan; in other words, he was not aware whether the land held in rehan by the plaintiff was the land he purchased.
7. In a recent decision of this Court in Noor Zahur Mian. v. Islam Mian, (Second Appeal No. 495 of 1952) decided on the 3rd March, 1958 (Pat), it was held that the effect of explanation II to Section 3 which was inserted by the amendment of 1929 was that the subsequent purchaser is deemed to have notice of the title of the person in actual possession, including all the equities in his favour.
8. These decisions would have supported the contention of Mr. Thakur Prasad if the appellant had been in possession of the suit land as a usufructuary mortgage on the date the sale-deed in favour of defendant No. 2 was executed in the instant case. But, it is admitted that the plaintiff-appellant did not come in possession of the suit land even for a day inasmuch as he allowed the mortgagor to continue in possession of the property on the basis of a Kabuliyat on payment of some rent. Mr. Thakur Prasad, therefore, conceded that explanation II to the definition did not assist the appellant, Therefore, he relied on the substantive portion of the definition. The Courts below have found that defendant No. 2, that is, the subsequent transferee had not actual-ly notice of the contract in favour of. the plaintiff. The question now is whether he had constructive notice thereof, in other words, according to the definition, he would have known of the contract but for wilful abstention from an enquiry or search which he ought to have made, or gross negligence. In the correspondent section of the English Law, the words used are:
"If such inquiries and inspection had been made as ought reasonably to have been made by him."
With, reference to the duty of a purchaser under the English Law to investigate title, Lord Selborne said in Agra Bank v. Barry, (1874) IR 7 HL 135:
"But this, if it can properly be called a duty, it is not a duty owing to the possible holder of a latent title or security. It is merely the course which a man dealing bona fide in the proper and usual manner for his own interest, ought, by himself or his solicitor, to follow with a view to his own title and his own security. If he does not follow that course, the omission of it may be a thing requiring to be accounted for or explained. It may be evidence, if it is not explained, of a design inconsistent with bona fide dealing, to avoid knowledge of the true state of the title,"
In Jones v. Smith, (1841) 1 Hare 43, one class of constructive notice was described by Wigram, V. C. as comprising those cases in which the Court is satisfied from the evidence that the party charged had designedly abstained from enquiry for the very purpose of avoiding notice. Following the decision in the case of Agra Bank, the Calcutta High Court in R. Joshua v. Alliance Bank of Simla, ILR 22 Cal 185, construed the words, "wilful abstention from an inquiry or search" to mean such abstention from inquiry or search as would show want of bona fides. This interpretation is supported substantially by other decisions. For instance, in Kausalai Ammal v. Sankaramuthiah Pillai, AIR 1941 Mad 707, the Madras High Court said that the word "wilful" indicates that the abstention from inquiry should be designed and due to desire to avoid an inquiry which would lead to ultimate knowledge. It is unnecessary to cite other decisions; and, if I may say so with respect. I am in complete agreement with the views of their Lordships of the Calcutta High Court in ILR 22 Cal 185. It is, therefore, obvious that "wilful abstention from inquiry" is different from mere want of contention in not making the inquiry.
9. Negligence is the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or doing something which a prudent and reasonable man would not do. (See Blyth v. Birmingham Water Works Co., (1856) 11 Ex 781 (784). It means the ab- . sence of such care, skill and diligence, as it is the duty of the person to bring to the performance of the work which he is said not to have performed. (See Grill v. General Iron Screw Collier Co., (1866) 35 LJCP 321 (330) ).
10. In Dharani Mohan Roy v. Pramatha Nath Roy, AIR 1936 Cal 283, a bench of the Calcutta High Court discussed several English and Indian decisions and, if I may say so with respect correctly explained the words 'negligence' and 'gross negligence' thus :
"A commonsense definition of negligence which has bean adopted in authorities too numerous to mention is that it consists in the omitting to do something which a reasonable person would do or the doing of something that a reasonable person would not do; in either case, causing unintentionally, some mischief to a third party. To use the well-known words of Rolfe, B., gross negligence is ordinary negligence with a vituperative epithet prefixed to it. Gross negligence is a relative term and means the absence of the care that was requisite under the circumstances. And as Montague Smith, J., said in (1866) 1 CP 600 affirmed on appeal in Grill v. General Iron Screw Collier Co., (1868) 3 CP 476, the use of the term is only one way of stating that less care is required in some cases than in others."
"Wilful and unjustifiable neglect is certainly something more than mere carelessness or want of prudence. In determining the degree which would satisfy the test of grossness a useful guide may be to adopt the test enunciated by Eve, J., in Hudston v. Viney, 1921-1 Ch .98, namely:
It must at least be carelessness of so aggravated a nature as to amount to neglect of precautions which the ordinarily reasonable man would have observed and to indicate an attitude of mental indifference to obvious rjsks."
No general definition of 'gross negligence' can, however, be laid down; and each case must depend upon the facts involved in it and a reasonable inference to be drawn from such facts. For instance, before the amendment of the definition of 'notice' in 1929 by which registration of a document amounts to notice, the Privy Council said in Tilakdhari Lal v. Khedan Lal, LR 47 Ind App 239 : (AIR 1921 PC 112) that omission to search the register kept under the Indian Registration Act may amount in certain circumstances to gross negligence so as to attract the consequences which result from notice. In this con-nection, their Lordships quoted with approval the following observations of Brett and Mitra, JJ. in Bunwari Jha v. Ramjee Thakur, 7 Cal WN 11 : "Whether registration is or is not notice itself depends, we think, upon the facts and circumstances of each case, upon the degree of care and caution which an ordinary prudent man would necessarily take for the protection of his own interest by search into the registers kept under the Registration Act."
In Lala Nawal Kishore v. Municipal Board Agra, AIR 1943 All 115, a Full Bench of the Allahabad High Court observed:
"The question of constructive notice is a question of fact which falls to be determined on the evidence and circumstances of each case and is so far as this matter can rest upon any principle, the principle is this that intending purchasers of the property in municipal areas where the property is subject to a municipal tax which has been made a first charge on the property by statute have a constructive knowledge of the tax and of the possibility of some arrear being due and it, therefore, becomes their duty before acquiring the property to make enquiries as to the amount of tax which is due or which may be due and if they fail to make this enquiry, this failure amounts to a wilful abstention or gross negligence within the meaning of Section 3, T. P. Act, and notice must be imputed to them."
Thus, the interpretations of the expressions 'wilful abstention' and 'gross negligence' are well settled; and in yiew of these interpretations, a transferee o an immovable property may be fastened with the constructive notice of any prior transaction affecting the title of the transferor, if he wilfully refrains from making any enquiry in order to avoid acquiring knowledge of the transferor's title or if he does not make any enquiry when the circumstances are such as would lead a prudent and reasonable person to embark on an enquiry regarding the title of the transferor. But a subsequent transferee cannot be fixed with constructive notice of the prior transaction, where the circumstances do not require him to make any enquiry. We have, therefore, to sec whether, in the circumstances of the present case defendant No. 2 ought to have made any enquiry from the plaintiff before his purchase. It is admitted that, though the plaintiff was a usufructuary mortgagee of the suit land, he never came into possession of the same, and defendant No. 1 (the mortgagor) continued to hold the same after the mortgage under a kabuliyat on payment of rent to the plaintiff. Defendant No. 2 has said in his evidence that ho was satisfied about the mortgage dues and the arrears of rent under the kabuliyat payable by defendant No. 1 to the plaintiff, ft is well to remember that the sale deed of defendant No. 2 was for Rs. 600/- out of which Rs, 300/- was left in deposit with him for redeeming the mortgage, Rs. 150/- which was due to defendant No. 2 from defendant No. 1 was set off and the balance of Rs. 150/- was paid in cash before the Sub-Registrar to defendant No. 1. The Court below has found that this sale deed was for consideration. It is admitted that at the time this sale deed was executed, a sum of Rs. 100/- was due to the plaintiff from defendant No. 1 on account of rent under the kabuliyat. Mr. Thakur Prasad, who appeared for the plaintiff-appellant submitted that as soon as defendant No. 2 learnt about the mortgage in favour of the plaintiff and the arrears of rent, he ought to have made enquiries from the plaintiff. But defendant No. 2 could know of all the relevant matters regarding the mortgage and the kabuliyat rent from defendant No. i, and it was not necessary for him to make any enquiry from the plaintiff who was not in possession of the property. The fact that a sum of Rs. 100/- was due to the plaintiff as rent also could not require defendant No. 2 to make an enquiry from the plaintiff, because it is nobody's case that the kabuliyat rent was a charge on the mortgaged property. The learned Munsif has drawn an inference against defendant No. 2 on account of the fact that he made no enquiry from the plaintiff, though he was knowing that the plaintiff was a usufructuary mortgagee, and defendant No. 1 was holding the land under a kabuliyat. But the learned Subordinate Judge has rightly refused to act on such an inference in view of the fact that the plaintiff was not in possession of the propeity. The learned Munsif has also observed that the statement of defendant No. 2 that he became satisfied about the dues of the kabuliyat rent on the oral testimony of defendant No. 1 was nothing but absurd, and, therefore, he has drawn an inference that defea-dant No. 2 must have made some enquiry from the plaintiff. The learned Subordinate judge has rightly rejected this inference too, because it was not the plaintiff's case that defendant No. 2 made an enquiry from him. The definite case of the plaintiff was that defendant No. 2 was present at the time the contract of sale was executed by defendant No. 1 in favour of the plaintiff, and this part of the plaintiff's case has been rejected by the learned Subordinate Judge. Of course, the onus was upon defendant No. 2 to prove that he had no notice of this contract between the plaintiff and defendant No. 1, but very little eyidencs was required to discharge this onus (see the cases of AIR 1929 Pat 300 and Lekh Singh v. Dwarka Nath, AIR 1929 Lah 249). In the instant case, there is a positive denial by defendant No. 2 of the allegation that he was present at the time of the execution of this contract or that he had knowledge of this contract. As stated earlier, the case of the plaintiff that defendant No. 2 had direct notice of his contract in as much as he was present at the time of the execution of the contract has been rejected by the learned Subordinate Judge. In the circumstances, it must be held that there was no gross negligence or wilful abstention, on the part of defendant No. 2, from any enquiry or search which he ought to have made, and, therefore, he was a bona fide purchaser for value without notice.
11. In the result, the appeal fails and is dismissed with cost.
Kanhaiya Singh, J.
12. I agree.
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