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TMI Blog1966 (4) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... r the order of adjudication took charge of the estate of Haji Nurmahmad Haji Abdulmian and the suit property along with other properties belonging to Haji Nurmahmad Haji Abdulmian vested in the Receivers. Now it appears that the suit property was mortgaged in favour of a firm called Messrs. Hargovind Laxmichand and this firm obtained a mortgage decree for realisation of the mortgage and brought the suit property to sale in execution of the mortgage decree. At the auction sale the plaintiff was the highest bidder, his bid being for Rs. 22, 300/-and he was accordingly declared purchaser of the suit property on 28th November 1954. At the date when the plaintiff purchased the suit property there were municipal taxes in respect of the suit property in arrears for the years 1949-50 to 1953-54. The suit property was, therefore, attached by the Municipal Corporation by an attachment notice dated 20th July 1955 for the arrears of municipal taxes which amounted to Rs. 543-79 np. Since the Municipal Corporation threatened to sell the suit property in pursuance of the attachment levied by it, the plaintiff filed a suit for a declaration that he was the owner of the suit property and that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suit property was liable for the payment of arrears of municipal taxes and that the plaintiff was not entitled to a declaration that the municipal taxes were not recoverable from the suit property. So far as the question of legality of the warrant of attachment was concerned, the learned Assistant Judge held that the warrant of attachment was not legal and valid inasmuch as it was issued in the name of Haji Nurmahmad Haji Abdulmian. According to the learned Assistant Judge it was the plaintiff who was liable to pay the arrears of municipal taxes and the proceedings were, therefore, required to be taken against him and the warrant of attachment should also, therefore, have been issued in the name of the plaintiff. The Assistant Judge in the result held that the warrant of attachment issued by the Municipal Corporation was illegal and void and that the Municipal Corporation was lightly restrained from enforcing that warrant of attachment against the plaintiff in respect of the suit property. The learned Assistant Judge In accordance with this view, dismissed both the appeals. The plaintiff thereupon preferred a Second Appeal in this Court but the appeal was summarily rejected by Raj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without notice of the charge . The argument was that the plaintiff was a person to whom the suit property was transferred for consideration and since he had no notice of the charge, the charge was not enforceable against the suit property in his hands. The answer given by Mr. S.B. Vakil on behalf of the Municipal Corporation to this contention was a threefold one. The first answer was that since the plaintiff purchased the suit property at an auction sale held by the Court in execution of the mortgage decree, the plaintiff could not be said to be a person to whom the suit property was transferred for consideration within the meaning of the second paragraph of Section 100. The second answer given on behalf of the Municipal Corporation was that Section 141 expressly provided that the charge created under that section shall be enforceable against all transferees including transferees for value without notice of the charge and the applicability of the equitable rule contained in the second paragraph of Section 100 was, therefore, excluded by reason of the saving clause save as otherwise expressly provided by any law for the time being in force which qualified that Rule. The third an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s clear and this is how it is stated in Halsbury's Laws of England, Third Edition, Vol. 14 Paragraph 1008: Ordinarily, an assignee takes subject to all equities to which the assignor was subject; and this is the case where the assignee is a volunteer, and also where he is a purchaser for value if he has notice of the circumstances which raise the equity. But if he is a purchaser for value without notice, the equity cannot be asserted against him. In India, however, the question was one of some doubt and the law was not uniformly settled. The equitable rule that a charge cannot be enforced against a purchaser for value without notice of the charge was followed by the Calcutta High Court in Akhoy Kumar Bannerjee v. Corporation of Calcutta 42 Calcutta 625. Sir Asutosh Mookerjee delivering the judgment of the Court pointed out that the broad distinction between a mortgage and a charge is that whereas a mortgage is in essence a transfer of an interest in specific immovable property, the charge only gives right to payment out of a particular fund or particular property without transferring that fund or property and consequently while a mortgagee can follow the mortgaged propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned, there was at one time a conflict of decisions in the various High Courts in India as to whether an auction sale in execution of a decree could be regarded as a transfer within the meaning of the second paragraph of Section 100, but this conflict has now been laid at rest by the decision of the Supreme Court in Laxmi Devi v. Mukand Kanwar , where the Supreme Court has taken the view that the second paragraph of Section 100 must be deemed to include auction sales and that a purchaser at an auction sale held in execution of a decree would, therefore, be a transferee within the meaning of the second paragraph of Section 100. This decision of the Supreme Court provides the most complete refutation of the first contention urged on behalf of the Municipal Corporation. 4. We must then proceed to consider the second contention of the Municipal Corporation, namely, that Section 141 expressly provided that a charge created under that section shall be enforceable against all transferees whether with notice or without notice of the charge and that the applicability of the second paragraph of Section 100 was, therefore, clearly excluded by the words save as otherwise expressly provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the time being in force. The important words are otherwise and expressly . The law to be within the saving clause must expressly provide otherwise , that is, that the charge shall be enforceable against a transferee for value even without notice of the charge. Now there can be no dispute that to come within the saving clause the law need not expressly state in so many words that the charge shall be enforceable against a transferee for consideration without notice of the charge. It would be sufficient if the law contains an express provision the effect of which is to declare that the charge shall be enforceable against such a transferee. No particular form of words is necessary for the purpose: any words may be used by the Legislature, but the provision made must be an express provision to the effect that the charge shall be enforceable against a transferee for value without notice of the charge. The question which we must, therefore, ask ourselves is: does Section 141 enact such a provision? Does Section 141 expressly provide that the charge created under it shall be enforceable against a transferee for consideration without notice of the charge ? Now the only words of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even against a transferee for value without notice of the charge so as to exclude the applicability of the equitable rule contained in the second paragraph of Section 100. A test which may be safely applied for the purpose of determining whether Section 141 enacts an express provision that the charge shall be enforceable also against a transferee for value without notice is to put Section 141 and the second paragraph of Section 100 side by side and to see whether there is any conflict or repugnancy between them or whether they can be read harmoniously and together. It is axiomatic that if Section 141 is a law expressly providing otherwise , it must conflict with the equitable rule set out in the second paragraph of Section 100. But as pointed out above, we do not find any conflict or repugnancy between the two provisions. Each provision has a distinct object and purpose and operates in a distinct field of its own and in the field in which it operates, there is no interference by the other provision. Both the provisions can be read harmoniously and can be given full effect. It is, therefore, in our opinion quite impossible to reach the conclusion that Section 141 is a law which exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Corporation must, therefore, be rejected. 7. That takes us to the last contention of the Municipal Corporation, namely, whether the suit property was purchased by the plaintiff without notice of the charge in favour of the Municipal Corporation. Section 3 of the Transfer of Property Act contains a statutory definition as to when a person can be said to have notice of a fact and it provides that 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. The first part of this definition refers to actual notice while the second part refers to what is known as constructive notice. Now it was not the contention of the Municipal Corporation that the plaintiff had actual notice of the charge and in fact that could not be the contention, for the finding of fact arrived at by the first appellate Court was that the plaintiff had no actual notice of the charge and this finding of fact was binding on the Municipal Corporation in this Letters Patent Appeal. The Municipal Corporation relied on the second part of the definition and contend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n truth related to the subject in dispute without his knowledge that such was the case but that he had actual notice that it did so relate. The proposition of law, which the second class of cases proceeds, is not that the party charged had incautiously neglected to make inquiries, but that he had designedly abstained from such inquires for the purpose of avoiding knowledge-a purpose, which if proved, would clearly shew that he had a suspicion of the truth and a fraudulent determination not to learn it. If, in short, there is not actual notice that the property is in some way affected, and no fraudulent turning away from a knowledge of facts which the res gestae would suggest to a prudent mind; if mere want of caution as distinguished from fraudulent and wilful blindness is all that can be imputed to the purchaser-there the doctrine of constructive notice will not apply;.. The doctrine confined originally to cases of fraudulent turning away was subsequently extended to cases of gross negligence and in West v. Reid (1843) 2 Hare 249, the same learned Vice-Chancellor stated that there might be a degree of negligence so gross (crassa negligentia) that a Court of Justice might treat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itimately be drawn that either he has wilfully abstained from making inquiries for the purpose of avoiding notice of facts which he would have known had he made the inquiries or he is guilty of gross negligence. This principle was explained by Lord Selborne, in Agra Bank v. Barry (1874) L.R. 7 H.L. 135, where with reference to the duty of a purchaser to investigate title the learned Law Lord said: It has been said in argument that investigation of title and inquiry after deeds is 'the duty' of a purchaser or a mortgagee; and, no doubt, there are authorities which do use that language. But this, if it can properly be called a duty, 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. What is a suffi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with a view to his own title. It may be that in a given case having regard to the facts and circumstances an ordinarily prudent purchaser may not be expected to make a particular inquiry or to follow a particular course and in such an event omission to follow such course or make such inquiry would not be visited with constructive notice of facts which might have come to the knowledge of the purchaser if he had not so omitted. We must, therefore, examine the facts and circumstances of each case with reference to the standard of care and caution which should be expected from an ordinarily prudent man acting bona fide in the proper and usual manner for the protection of his own interest in the matter of purchase of property. 8. The standard of care of the reasonable man is, in one sense, an impersonal test. It eliminates the personal equation and is independent of the idiosyncrasies of the particular person whose conduct is in question. Some persons are by nature unduly suspicious and distrust every statement made by the person with whom they are dealing. Others more trusting rely implicitly on the good sense of the person with whom they are transacting business and fail to take e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to these provisions a proclamation of sale was drawn up in the present case and in the column headed Details of any encumbrances to which the property is liable no encumbrance was shown. Now if there were any arrears of tax due to the Municipal Corporation and the Municipal Corporation was consequently entitled to a first charge on the property, such charge would have been required to be shown in the proclamation of sale under Order 21 Rule 66. (Vide Shushamabala Dasee v. Pooranchandra De 63 Calcutta 621 at 624). But no such charge was shown in the proclamation of sale and the plaintiff as an ordinarily prudent man was, therefore, entitled to assume that no arrears of tax were due to the Municipal Corporation and the Municipal Corporation was accordingly not entitled to any charge on the suit property. The plaintiff was quite justified in telling himself: Here is a proclamation of sale drawn up after notice to the decree-holder and judgment-debtor under Order 21 Rule 66 Sub-rule (2); it is supported by a duly signed and verified statement made by the decree-holder under Order 21 Rule 66 Sub-rule (3) which requires the decree-holder to set out in the statement the encumbrances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the statement in the proclamation of sale may not be true, there is no reason why he should not accept it and proceed on the basis that it represents the truth particularly when the proclamation of sale is drawn up in the presence of the decreeholder and the judgment-debtor, it is supported by the statement of the decreeholder made under a provision of law which requires him to set out the encumbrances so far as they are known to him or can be ascertained by him, it is scrutinized by the executing Court which has power to summon witnesses, to examine them and to require them to produce documents for the purpose of ascertaining the encumbrances on the property and it is advertised for a period of thirty days in the prescribed manner and yet the Municipal Corporation has not come forward to say that the statement in the proclamation of sale is not correct and that the charge in favour of the Municipal Corporation should be shown in the proclamation of sale. The purchaser is supposed to have the wisdom only of an ordinarily prudent man and not, as pointed out by Sir Percy Winfield, the wisdom of Ulysses nor, we may add, is he expected to have the wisdom of a cynic who has no fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of properties situate within Municipal limits so that an intending purchaser can go to the Municipal Office and take inspection of such register or record. It cannot, therefore, be said that if the plaintiff had made inquiry of the Municipal Corporation, he would have necessarily known of the arrears of tax and the consequent charge of the Municipal Corporation on the property and it is extremely doubtful whether in such a case the omission to make such inquiry can attract the applicability of the doctrine of constructive notice. We are, therefore, of the view on the facts and circumstances of the present case, that the plaintiff was not guilty of wilful abstention or gross negligence in not making inquiry of the Municipal Corporation for the purpose of ascertaining whether any arrears of tax were due to the Municipal Corporation and the Municipal Corporation was consequently entitled to a first charge on the property. 11. Before we part with this point we must refer to two decisions which were strongly relied on by Mr. S.B. Vakil on behalf of the Municipal Corporation and they were Lucknow Municipality v. Ramji Lal A.I.R. 1941 Oudh 395 and Nawal Kishore v. Agra Municipality ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y on the part of the intending purchaser cannot visit him with the consequences of constructive notice. The question in each case must necessarily be a question of fact to be determined on the facts and circumstances of the case and we cannot subscribe to any absolute proposition of law such as appears to have been laid down in these two decisions. 12. We, therefore, reach the conclusion that the plaintiff was a bona fide purchaser of the suit property for consideration without notice of the charge in favour of the Municipal Corporation and the charge was, therefore, not enforceable against the suit property in the hands of the plain tiff. There will accordingly be a decree for the plaintiff declaring that he is the owner of the suit property and that the charge of the Municipal Corporation for arrears of municipal taxes is not enforceable against the suit property in his hands and granting a permanent injunction restraining the Municipal Corporation from proceeding to realise the charge from the suit property. There will also be a decree declaring the warrant of attachment dated 20th July 1955 illegal and void and restraining the Municipal Corporation from enforcing it against ..... X X X X Extracts X X X X X X X X Extracts X X X X
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