1940 (7) TMI 21 - HC - Indian Laws

Summary

Issues:
1. Whether the Municipal Board has a charge over the property for arrears of taxes.
2. Whether the auction purchasers had notice of the charge.
3. Applicability of the amendment to Section 100 of the Transfer of Property Act to auction sales held in execution of a decree.

Analysis:
1. The Municipal Board of Cawnpore filed a suit to recover arrears of taxes from defendants 2 and 3, who were auction purchasers of property owned by defendant 1. The Board claimed a charge over the property as per Section 177 of the Municipalities Act of 1916, which states that taxes due on buildings or lands shall be a first charge on such properties. The court confirmed the Board's charge on the property for unpaid taxes.

2. The suit was dismissed against defendants 2 and 3 because they were deemed bona fide purchasers without notice of the charge. The plaintiff argued that the purchasers had constructive notice of the charge, but the court held that the amendment to Section 100 of the Transfer of Property Act did not apply to auction sales held in execution of a decree. The court referred to a previous decision stating that the Act does not apply to auction sales or purchasers in execution of decrees.

3. The court clarified that the amendment to Section 100 did not change the existing law but aimed to clarify it. The law, as established in previous cases, holds that a bona fide purchaser is not bound by charges of which they have no notice, whether actual or constructive. Constructive notice arises when ordinary prudence would require the purchaser to investigate and discover the charge. In this case, the court found that the Municipality had not taken adequate steps to inform the public or intending purchasers about the charges on properties. The court emphasized that the onus was on the Municipality to notify potential buyers of any outstanding charges on the property.

In conclusion, the court upheld the lower Appellate Court's decision to dismiss the appeal, stating that the auction purchasers were not obligated to assume that the property's taxes were unpaid unless informed otherwise by the Municipality. The court highlighted the negligence of the Municipality in not taking timely action to recover taxes and notify potential buyers of the charges.