9911796707
TMI Blog2020 (2) TMI 601X X X X Extracts X X X X X X X X Extracts X X X X ..... here was no material to show that the appellants had constructive notice of the charge and no submissions were made by the respondent on this issue. Under those circumstances, the Division Bench of this Court took a view that the property in the hands of the appellants for a value above consideration without notice of the sales tax arrears of the defaulting company or the subsequent charge created over the property was free in the hands of the appellant therein. Coming to the facts of the present case, it is noticed that the vendor of the property from whom the petitioner s vendor purchased the property was in arrears of sales tax to the 1st respondent. Though the property had been subject matter of encumbrance as early as 2011, at the behest of the 1st respondent Commercial Tax Department, it was not reflected in the encumbrance certificate obtained by the petitioner s vendor on 19.4.2012 or by the petitioner himself on 12.10.2012 and on 6.12.2012. Only in the encumbrance certificate issued by the second respondent through online portal dated 24.6.2016 the charge has been reflected in favour of the 1st respondent - it is incumbent on the petitioner as purchaser to have also mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was no charge was reflected as having created in favour of the Commercial Tax Department. On the other hand, the Respondents would submit that the charge had already been created as early as July 2011 and the same was reflected in the encumbrance certificate. 5. The learned counsel for the Respondents would refer to an encumbrance certificate which is printout of Online encumbrance certificate wherein the charge in favour of the Commercial Tax Department is reflected. 6. The learned counsel for the Petitioner would submit that in 2011 and 2012 when two encumbrance certificates were obtained by the Petitioner's vendor and thereafter by the Petitioner there was no Online facility and such facility of obtaining Encumbrance Certificate came to be introduced only with effect from 11.06.2014. The learned counsel for the Petitioner has enclosed a copy of a webpage from the Website of the Registration Department which indicates that only with effect from 11.06.2014 Online form for Encumbrance Certificate was in vogue. 7. The learned counsel for the Petitioner relies on the decision of the Hon'ble Supreme Court in the case of State of Karnataka and Another Vs Shrey ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he relief in the present writ petition. I have also considered the counter filed by the respondent No. 1. 11. The facts are not in dispute that the registered dealer was in arrears of tax and therefore by virtue of section 24 of the Tamil Nadu General Sales Tax Act, 1959 and Section 42 of the TNVAT Act, 2006, a charge over the property of such defaulting dealer stood created in favour of the 1st respondent Commercial Tax Department Further as per Section 100 of the Transfer of Property Act, 1882 also a charge is said to have been created in favour of the 1st respondent as if the dealer had created simple mortgage in favour of the 1st respondent. 12. The Honourable Supreme Court in Ahmedabad Municipal Corporation of the City of Ahmedabad versus Haji AbdulGafurHusseinbhai, AIR 1971 SC 12 concluded that the purchaser could not be fixed with any constructive notice of arrears of municipal tax. It further pointed out that a prudent and a reasonable man was bound to make enquiries regarding arrears of municipal tax and, the question of constructive knowledge or notice has got to be determined on the facts and circumstances of each case. On fact, the Hon ble Supreme Court held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a simple mortgage shall, so far as may be, apply to such charge. Nothing in this section applies to the charge of a trustee on the trust-property for expenses properly incurred in the execution of his trust, and, save as otherwise expressly provided by any law for the time being in force, no charge shall be enforced against any property in the hands of the person to whom such property has been transferred for consideration and without notice of the charge. 4. This section in unambiguous language lays down that no charge is enforceable against any property in the hands of a transferee for consideration without notice of the charge except where it is otherwise expressly provided by any law for the time being in force. The saving provision of law must expressly provide for enforcement of a charge against the property in the hands of a transferee for value without notice of the charge and not merely create a charge '' 10. According to Section 3 of the Transfer of Property Act which is described as interpretation clause, 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn as constructive notice. Though originating in equity this presumption of notice is now a part of our statute and we have to interpret it as such. Wilful abstention suggests conscious or deliberate abstention and gross negligence is indicative of a higher degree of neglect. Negligence is ordinarily understood as an omission to take such reasonable care as under the circumstances is the duty of a person of ordinary prudence to take. In other words it is an omission to do something which a reasonable man guided by considerations which normally regulate the conduct of human affairs would do or doing something which normally a prudent and reasonable man would not do. The question of wilful abstention or gross negligence and, therefore, of constructive notice considered from this point of view is generally a question of fact or at best mixed question of fact and law depending primarily on the facts and circumstances of each case and except for cases directly falling within the three explanations, no inflexible rule can be laid down to serve as a straight-jacket covering all possible contingencies. The question one has to answer in circumstances like the present is not whether the purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may not be enforced against transferee if he/she had no notice of the same unless, by law the requirement of such notice has been waived. There the properties were auctioned through bank in a bank recover proceedings. Under those circumstances, it was observed that the appellant therein had already paid entire sale consideration on 25/03/2003 and the sale was confirmed in their favour on 23/04/2003 and for the 1st time by letter dated 25/06/2004, the Commercial Tax Officer required the 2nd respondent to create a charge encumbrance with regard to the property and consequently to make an entry in the encumbrance register. 18. On facts it was concluded that the appellant had no notice prior to the transfer. It also held that there was no material to show that the appellants had constructive notice of the charge and no submissions were made by the respondent on this issue. Under those circumstances, the Division Bench of this Court took a view that the property in the hands of the appellants for a value above consideration without notice of the sales tax arrears of the defaulting company or the subsequent charge created over the property was free in the hands of the appellant there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bonafide, subsequent purchase by the petitioner from the said vendor may or may not be a bonafide. Therefore, it would require a proper trial and finding by a Civil Court. Further, mere reliance on the encumbrance certificate by itself is not sufficient to absolve a purchaser of his responsibility while purchasing the property. 25. In my view, it is incumbent on the petitioner as purchaser to have also made a physical search in the records before taking a final decision as to whether the property was free from any encumbrance or not. Encumbrance certificate, is merely one of the document which would aid a purchaser to take a decision as to whether to purchase the property or not. However, it is not a substitute for actual physical verification of the register at the Sub Registrar s Office. 26. Therefore, I am of the view that the present writ petition is liable to be dismissed as the decisions of the court referred to supra do not squarely apply to the facts of the present case. The fact that there was a pre-existing charge/encumbrance registered as early as July 2011 is the distinguishing factor and therefore the decisions relied by the petitioner cannot be applied to ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
