Ahmadabad Municipal Corporation of The
City of Ahmadabad Vs. Haji Abdulgafur Haji Hussenbhai  INSC 83 (18 March
CITATION: 1971 AIR 1201 1971 SCR 63
Transfer of Property Act (4 of 1882), s.
100--Applicability to auction sales--Whether s. 141(1) of the Bombay Provincial
Municipal Corporation Act, 1949, falls within the saving provision of s. 100,
T.P. Act--Constructive notice of existence of arrears of municipal taxes--If
and when can be imputed to auction purchaser.
In 1950, a building vested in the receivers
on its owner being adjudicated an insolvent. In 1951, the receivers secured
necessary orders from court for paying off municipal taxes then due, but the
receivers did not pay and the municipal corporation did not also pursue the
matter. In 1954, the property was brought to sale in execution of a mortgage
decree obtained by a mortgagee of the property and the respondent purchased it
at the court sale. Before the purchase he made enquiries from the receiver if
there were any dues against the property, but he was not informed about the
arrears of municipal taxes. In 1955, the municipal corporation attached the
property for arrears of municipal taxes due from 1949, and the purchaser filed
a suit for a declaration that the arrears were not recoverable by sale of the
On the questions: (1) whether under s. 141(1)
of the Bombay Provincial Municipal Corporation Act, 1949, read with s. 100 of
the Transfer of Property Act, 1882, the property could be sold for the arrears
in the hands of the respondent even if he was a transferee for consideration
without notice, and (2) whether the respondent, who was an auction purchaser at
a court sale, could be held liable to pay the arrears of taxes and the property
could be held subject to the liability on the ground that he had constructive
notice of the existence of the arrears.
HELD: (1) Section 100, Transfer of Property
Act, lays down that no charge is enforceable against any property in the hands
of a transferee for consideration without notice of the charge except when it
is otherwise expressly provided by any law for the time being in force. The
real core of the saving provision of law is not mere enforceability of the
charge against the property but enforceability of the charge against the
property in the hands of a transferee for consideration without notice of the
charge. S. 141 of the Bombay Municipal Act is not such a provision. It merely
creates a charge in express language, but apart from creating a statutory
charge, it does not further provide that the charge is enforceable against the
property in the hands of a transferee for consideration without notice of the
charge. [67A-B; 68E] (2) (a) There is no basis for the contentions that s. 100
of the Transfer of Property Act does not apply to auction sales and that
therefore the execution purchasers purchase the property subject to all the
charges and encumbrances which would bind the judgment debtor. This Court in
Laxmi Devi v. Mukand Kunwar,  1 S.C.R. 726 pointed out that a. 100
applies to proceedings by operation of law also.
[69A-B] 64 (b) According to s. 3, Transfer of
Property Act, a person is said to have notice of a fact when he actually knows
the fact or when but for wilful abstention from enquiry or search which he
ought to have made, or gross negligence, he would have known it. In the latter
case he is presumed to have constructive notice. For drawing the presumption in
the present case, therefore, the question is not whether the purchaser had the
means of obtaining, and might with prudent caution have obtained, knowledge of
the charge but whether in not doing so, he acted with wilful abstention or
gross negligence. There is no principle of law imputing, to all Intending
purchasers of property in municipal areas where municipal taxes are a charge on
the property, constructive knowledge of the existence of such municipal taxes
and of the reasonable possibility of those taxes being in arrears.
It is a question of fact or a mixed question
of fact and law depending on the facts and circumstances of the case. The
material in the present case does not justify that the respondent purchaser
should be fixed with any constructive notice of the existence of the arrears,
because (i) lie could not reasonably have thought the municipal corporation had
not cared to secure payment of the taxes due since 1949;
(ii) the municipal corporation was far more
negligent and blameworthy than the respondent in allowing the arrears to
accumulate; (iii) though he made enquiries from the receivers they did not give
any intimation about the arrears; and (iv) the building was in the occupation
of tenants and the rent was recovered by the receivers and the reasonable
assumption would be that the municipal tax, which was a charge on the property
and given priority under s. 61 of the Provincial Insolvency Act, 1920, had been
paid by the receivers. [71G-H ; 72H 73D-G 74C-H; 75B-D] Nawal Kishore v.
Municipal Board, Agra, I.L.R.  All.
453, Municipal Board, Lucknow v. Ramjilal,
I.L.R.  16 Luck. 607, Chandu Ram v. Municipal Commissioner of Kurseong
Municipality, A.I.R. 19,51 Cal. 398 and Municipal Board, Lucknow v. Lala Ramji
Lal, A.I.R. 1941 Oudh 305, overruled.
Municipal Board, Cawnpore v. Roop Chand Jain,
I.L.R.  All. 669, approved.
Akhoy Kumar Banerjee v. Corporation of
Calcutta, I.L.R 42 Cal. 625, referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal No.
1161 of 1967.
Appeal from the judgment and order dated
April 28, 29, 1966 of the Gujarat High Court in Letters Patent Appeal No. 19 of
1961 S. T. Desai and I. N. Shroff, for the appellant.
The respondent did not appear.
The Judgment of the Court was delivered by
Dua, J.-In this appeal on certificate granted by the High Court of Gujarat
under Article 133(1)(c) of the Constitution of India the question raised relate
to the liability of auction purchaser of property at court sale for the arrears
of municipal taxes due on the date of sale to the municipal corporation of the
City of Ahmadabad which dues are a statutory charge on the property sold and of
which the purchaser had no actual notice. On the 65 question of constructive
notice there is a sharp conflict of judicial decisions in the various High
Courts and in the Allahabad High Court itself there have been conflicting
expression of opinion. In this Court there being no representation on behalf of
the respondent the appeal was heard ex parte.
The property which is the subject matter of
controversy in this litigation originally belonged to one Haji Nur-Mahammad
Haji Abdulmian. He apparently ran into financial difficulties in February,
1949, and insolvency proceedings were started against him in March, 1949. By an
interim order receivers took charge of his estate and finally on October 14,
1950 he was adjudicated insolvent. The property in question accordingly vested
in the receivers. This property had been mortgaged with a firm called Messrs.
Hargovind Laxmichand. In execution of a
mortgage decree obtained by the mortgagee this property was auctioned and
purchased at court sale by the plaintiff Haji Abdulgafur Haji Hussenbhai,
(respondent in this Court) for Rs. 22,300.
He was declared purchaser on November 28,
1954. At the time of this purchase there were municipal taxes in respect of
this property in arrear for the years 1949-50 to 1953-54, which means that the
receivers had not cared to pay the municipal taxes during all these years. The
property was attached by the municipal corporation by means of an attachment
notice datedJuly 20, 1955 for the arrears of the municipal taxes amounting to
Rs. 543.79 ps. As the municipal corporation threatened to sell the property
pursuant to the attachment proceedings the purchaser instituted the suit
(giving rise to this appeal) for a declaration that he was the owner of the
property and that the arrears of municipal taxes due from Haji Nurmohammad Haji
Abdulmian were not recoverable by attachment of the suit property in the
plaintiff's hands and that the warrant of attachment of the property issued by
the municipal corporation was illegal and ultra vires. Permanent injunction
restraining the municipal corporation from attaching the property for arrears
of municipal taxes was also sought.
The trial court declined the prayer for a
declaration that the property was not liable to be attached for recovery of the
arrears of municipal taxes. But the war-rant of attachment actually issued in
this case was held to be illegal and void with the result that an injunction
was issued restraining the municipal corporation from enforcing the impugned
warrant of attachment against the plaintiff in respect of the suit property.
Both parties feeling aggrieved appealed to the District Court. The Assistant
Judge who heard the appeals dismissed both of them. The plaintiff thereupon
presented a second appeal to the Gujarat High Court which was summarily
dismissed by a learned single Judge. Leave to appeal to a Division Bench under
cl. 15 of the Letters Patent was however granted. The Division Bench hearing
the Letters 5-1 S.C. India/71 66 Patent appeal in a fairly lengthy order
allowed the plaintiffs appeal and decreed his suit holding that the plaintiff
is the owner of the suit property and the charge of the municipal corporation
for arrears of municipal tax is not enforceable against his property and also
restraining the municipal corporation by a permanent injunction from proceeding
to realise from this property the charge in respect of the arrears of municipal
taxes. On appeal in this Court three main questions were raised by Shri S. T.
Desai, learned counsel for the appellant.
To begin with it was contended that there is
no warranty of title in an auction sale. This general contention seems to us to
be well-founded because it is axiomatic that the purchaser at auction sale
takes the property subject to all the defects of title and the doctrine caveat
emptor (let the purchaser beware) applies to such purchaser. The case of the
judgment debtor having no saleable interest at all in the property sold such as
is contemplated by 0. 21, R. 91, C. P. C. is, however, different and is not
covered by this doctrine. The second point canvassed was that there is an
express provision in Section 141(1) of the Bombay Provincial Municipal
Corporation Act, 1949 (hereinafter called the Bombay Municipal Act) for holding
the present property to be liable for the recovery of municipal taxes and,
therefore though the property was subject only to a charge not amounting to
mortgage and, therefore, involving no transfer of interest in the property, the
same could nevertheless be sold for realizing the amount charged, even in the
hands of a transferee for consideration without notice. Section 141 of the
Bombay Municipal Act is an express saving provision as contemplated by Section
100 of Transfer of Property Act, contended Shri Desai. This submission has no
merit as would be clear from a plain reading of Section 100 of the Transfer of
Property Act, 1882 and Section 141 of the Bombay Municipal Act, the only
relevant statutory provisions.
Section 100 of the Transfer of Property Act
dealing with 'charges' provides .
S. 100 "Where immoveable property of one
person is by act of parties or operation of law made security for the payment
of money to another, and the transaction does not amount to a mortgage, the
later person is said to have a charge on the property; and all the provisions
hereinbefore contained which apply 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, 67 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." 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. We now turn
to Section 141 of the Bombay Provincial Municipal Corporation Act, 1949 to see
if it answers the requirements of Section 100 of Transfer of Property Act. This
section reads :Section 141. "Property taxes to be a first charge on
premises on which they are assessed:
(1) Property taxes due under this Act in
respect of any building or land shall, subject to the prior payment of the land
revenue, if any, due to the State Government thereupon, be a first charge, in
the case of any building or land held immediately from the Government, upon the
interest in such building or land of the person liable for such taxes and upon
the movable property, if any, found within or upon such building or land and
belonging to such person ; and, in the case of any other building or land, upon
the said building or land and upon the moveable property, if any, found within
or upon such building or land and belonging to the person liable for such
Explanation.-The term "Property
taxes" in this section shall be seemed to include charges payable under
section 134 for water supplied to any premises and the costs of recovery of
property-taxes as specified in the rules.
(2) In any decree passed in a suit for the
enforcement of the charge created by subsection (1), the Court may order the
payment to the Corporation of interest on the sum found to be due at such rate
as the Court deems reasonable from the date of the institution of the suit
until realisation, and such interest and the cost of enforcing the said charge,
including the costs of the suit and the cost of bringing the premises or
moveable property in question to sale under the decree, shall, subject as
aforesaid, be a fresh charge on such premises and moveable property along with
the amount found to be due, and the Court may direct payment thereof to be made
to the Corporation out of the sale proceeds." 68 Sub-section (1). as is
obvious, merely creates a charge in express language. This charge is subject to
prior payment of land revenue due to the State Government on such building or
land. The section, apart from creating a statutory charge, does not further
provide that this charge is enforceable against the property charged in the
hands of a transferee for consideration without notice of the charge.
It was contended that the saving provision,
as contemplated by Section 100 of the Transfer of Property Act, may, without
using express words, in effect provide that the property is liable to sale in
enforcement of the charge and that if this liability is fixed by a provision
expressly dealing with the subject, then the charge would be enforceable
against the property even in the hands of a transferee for consideration
without notice of the charge. According to the submission it is not necessary
for the saving provision to expressly provide for the enforceability, of the
charge against the property in the hands of a transferee for consideration
without notice of the charge. This submission is unacceptable because, as
already observed, what is enacted in the second half of Section 100 of Transfer
of Property Act is the general prohibition that no charge shall be enforced against
any property in the hands of a transferee for consideration without notice of
the charge and the exception to this general rule must be expressly provided by
law. The real core of the saving provision of law must be not mere
enforceability of the charge against the property charged but enforceability of
the charge against the said property in the hands of a transferee for
consideration without notice of the charge. Section 141 of the Bombay Municipal
Act is clearly not such a provision. The second contention accordingly fails
and is repelled.
The third argument, and indeed this was the
principal argument which was vehemently pressed with considerable force by Shri
Desai. is that the plaintiff must be deemed to have constructive notice of the
arrears of municipal taxes and as an auction purchaser he must be held liable
to pay these taxes and the property purchased must also be held subject to this
liability in his hands. In support of this submission he cited some decisions
of our High Courts. The first decision relied upon by Shri Desai is reported as
Arumilli Suravya v. Pinisetti Venkataramanamma(1) in which relying on Creet v.
Ganga Ram Gool Rai(2) it was observed by Horwill J., that Section 100 of the Transfer
of Property Act does not apply to auction sales because the transfer within the
meaning of the Transfer of Property Act does not include an auction sale. It
was added that the position of a purchaser at an execution sale is the same as
that of the judgment-debtor and his position is somewhat different from that of
a (1) A.I.R. 1940 Mad. 701. (2) I.L.R.  1 Cal. 203.
69 purchaser at a private sale. Execution
according to this decision, purchase the
property subject to all the charges and encumbrances legal and equitable which
would bind the debtor$. We do not agree with the view taken in this decision.
We how,ever, do not consider it necessary to go into the matter at length
because we find that this decision was expressly overruled by this Court in
Laxmi Devi v. Mukand Kunwar(1) and the High Court, relying on this Court's
decision, had also repelled a similar contention pressed on behalf of the
Municipal Corporation there. This Court pointed out in Laxmi Devi's case(2)
that the provisions of Section 2(d) of the Transfer of Property Act prevail
over Section 5 with the result that the provisions of Section 57 and those
contained in Chapter IV of the Transfer of Property Act must apply to transfer,
by operation of law. Section 100, it may be pointed out, falls in Chapter IV.
Reliance was next placed on a Full Bench decision of the Allahabad High Court
in Nawal Kishore v. The Municipal Board, Agra (1). According to this ,decision
the question of constructive notice is a question of fact which falls to be determined
on the evidence and circumstances of each case. But that Court felt that there
was a principle on which question of constructive notice could rest, that
principle being that all intending purchasers of the property in municipal
areas where the property is subject to a municipal tax which has been made a
charge on the property by statute have a constructive knowledge of the tax and
of the possibility of some arrears being due with the result that it 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 such
failure amounts to a wilful abstention or gross negligence within the meaning
of Section 3 of the Transfer of Property Act and notice must be imputed to
them. The reference to the Full Bench in the reported case was necessitated
because of conflict of judicial opinion between that Court and Oudh Chief
Court. The earlier decision of a Division Bench in Municipal Board, Cawnpore v.
Roop Chand Jain (2) was overruled and the Bench decision of Oudh High Court in
Municipal Board, Lucknow v. Ramjilal (4) was approved. The next decision to
which reference was made by Shri Desai is reported as Akhoy Kumar Banerjee v.
Corporation of Calcutta (5). In this case, after distinguishing a mortgage from
a charge, it was observed-that the statutory charge in that case could not be
enforced against the property in the hands of bona fide purchaser for value
without notice. While dealing with the question whether the appellants in that
case were purchasers for value without notice, it was observed that they had
(1)  1 S.C.R. 726.
(2) I.L.R.  All. 453.
(3) I.L.R.  All. 669.
(4) I.L.R.  16 Lucknow 607.
(5) I.L.R. 42 Cal. 625.
70 not pleaded in their written statement
that they were Purchasers for value without notice. Having not pleaded this
defence they were held disentitled to avail of it.
Having so observed the Court dealt with the
case on the assumption that the defence though not expressly taken in the
pleadings was available to the defendants. The Court said :
"But even if we assume that the defence,
though not expressly taken in their written statement, is available to the
defendants, they are in a position of difficulty from which there is no escape.
The appellants are private purchasers of the property and if they had enquired
at the time of their purchase, they would have discovered that the rates were
in arrears; as a matter of fact, they would be personally liable under Section
223 for the arrears of the year immediately prior to the date of their
purchase, and they admit that they have satisfied such arrears, though they do
not disclose whether by enquiry they had ascertained the existence of the
arrears before they made the purchase.
The Court then, proceeded to deal with the
position of the vendor from whom the appellants had purchased the property in
order to see if he could raise the defence of being a purchaser for value
without notice. The appellant's vendor was a mortgagee who had acquired title
by foreclosure-an involuntary alienation by his mortgagor-and it was held that
to him constructive notice could not be imputed to the same extent as to a
purchaser at a private sale. But had he made enquiries from the municipal
authorities he could still have ascertained whether any arrears of consolidated
rates were due. When he had taken the mortgage ,be was aware that if the rates
were not paid the arrears would be fiat charge on the property with the result
that before becoming full owner by foreclosure he should have ascertained the
true state of affairs. On this reasoning he was held to have constructive
notice and the purchasers from him could not claim greater protection. These
circumstances clearly disclose that the reported case is not similar to the one
before us and is of little assistance.
Chandu Ram v. Municipal Commissioner of
Kurseong Municipality (1) was the next decision cited. The Bench in that case
followed the Full Bench decision of the Allahabad High Court in Nawal Kishores
case (supra). A Division Bench of the Oudb Chief Court in Municipal Board,
Lucknow v. Lala Ramji Lal (2) disagreeing with the Bench decision of the
Allahabad High Court in Roop Chand Jain's case (supra) observed that it must be
presumed that a person who buys house property situate in a municipality is
acquainted with the law by which a charge is imposed (1) A.I.R. 1951 Cal. 398.
(2) A.I.R. 1941 Oudh 305.
71 on that property for the payment of taxes.
The charge having been expressly imposed by the Municipal Act upon the property
for payment of municipal taxes the municipality was entitled to follow the
property in the hands of a transferee who had not cared to make any enquiry as
to whether the payment of taxes was in arrears. The Court approved the Calcutta
decision in Akhoy Kumar's case (supra). The next decision cited is reported as
Laxman Venkatesh Naik v. The Secretary of State for India (1) but being a case
of takkavi loans it is of no assistance in the present case.
We may now turn to the Bench decision of the
Allahabad High Court in Roop Chand Jain's case (supra). The reasoning for the
view adopted there may be reproduced :
"A bona fide purchaser takes property he
buys free of all charges of which he has no notice actual or constructive. He
is said to have constructive notice when ordinary prudence and care would have
impelled him to undertake an enquiry which would have disclosed the charge.
If for instance the charge is created by a
registered document then the purchaser would be held to have constructive
notice of that charge inasmuch as a prudent purchaser would in ordinary course
search the registers before effecting the purchase. There is no register, as
far as we know, of arrears of taxes or of charges in respect thereof. It has
not been shown that the municipality of Cawnpore intimate to the public in the
"Press" or by other publication a list of the properties which are
charged in respect of arrears of taxes. There is nothing upon the record to
justify the conclusion that the defendants could have demanded any information
from-the municipality in regard to charges on immovable property within the municipal
limits." The Court then noticed the fact that the Kanpur Corporation had
allowed II years' arrears of taxes to accumulate and it was observed that no
intending purchaser was bound to presume that taxes upon the property, he
contemplates purchasing had not been paid in the ordinary course, in the
absence of special intimation by the municipality. On this reasoning the
suggestion of constructive notice was negatived.
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 before wilful
abstention from an enquiry or search which he ought to have made or gross negligence
he would have known it. There (1) XLI B.I.R. 257.
72 are three explanations to this definition
dealing with three contingencies when a person acquiring immovable property is
to be deemed to have notice of certain facts. Those -explanations are:
"Explanation I.-Where any transaction
relating to immoveable property is required by law to be and has been affected
by a registered instrument, any person acquiring such property or any part of.
or share of such instrument as from the date of registration or, where the
property is not all situated in one sub district, or where the registered
instrument has been registered under subsection (2) of Section 30 of the Indian
Registration Act, 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, and the rules made
(2) the instrument 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." Now the circumstances which by a deeming fiction impute notice to
a party are based, on his wilful abstention to enquire or search, which a
person ought to make or, on his gross negligence. This presumption of notice is
commonly known as constructive notice.
73 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
consideration which normally regulate the conduct of human affairs would do or
doing something which a normally 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 straightjacket
covering all possible contingencies. The question one has to answer in
circumstances like the present is not whether the purchaser had the means of
obtaining and might with prudent caution have obtained knowledge of the charge
but whether in not doing so he acted with wilful abstention or gross
negligence. Being a question depending on the behaviour of a reasonably prudent
man, the Courts have to consider it in the background of Indian conditions.
Courts in India should, therefore, be careful and cautious in seeking
assistance from English precedents which should not be blindly or too readily
Adverting now to the case before us, as
already noticed. the property in question had vested in the receivers in
insolvency proceedings since March, 1949 by an interim order, and in ,October,
1950 the original owner was adjudicated as an insolvent and the property
finally vested in the receivers in insolvency. The plaintiff purchased the
property in November, 1954 and in our opinion it could not have reasonably been
expected by him that the receivers would not have paid to the municipal
corporation since 1949 the taxes and other dues which were charged on this
property by statute. According to Section 61 of the Provincial Insolvency Act,
1920 the debts due to a local authority are given priority, being bracketed along
with the debts due to the State. Merely because these taxes are charged on the
property could not constitute a valid ground for the official receiver not to
discharge this liability. In fact we find from the record that on January 15,
1951 the receivers had submitted a report to the insolvency court about their
having received bills for Rs. 6283-0 in respect of municipal taxes of the
insolvent's property and leave of the court was sought for transferring the
said property to the names of the receivers in the municipal and Government
records. The court recorded an order on February 8, 74 1951 that the municipal
taxes had to be paid. On the receivers stating that they did not possess
sufficient funds the court gave notice to the, counsel for the opposite party
and on February 24, 1951 made the following order :
"Mr. Pandya absent. The taxes have to be
paid. The Receivers state that they can pay only by sale of some properties of
the insolvent from which they want. Sanctioned.
The property in which the insolvent stays
should first be disposed of. The terms arc accordingly so authorised." It
is not known what happened thereafter. It is, however, difficult to appreciate
why after having secured the necessary order from the court municipal taxes
were not paid off by the receivers and why the municipal corporation did not
pursue the matter and secure payment of the taxes due.
May be that the municipal corporation thought
that since these dues were a charge on the property they need not pursue the
matter with the receivers and also need not approach the insolvency court. If
so, then this, in our opinion, was not a proper attitude to adopt. In any event
the plaintiff could not reasonably have thought that the municipal corporation
had not cared to secure payment of the taxes due since 1949. On the facts and
circumstances of this case, therefore, we cannot hold that the plaintiff as a
prudent and reasonable man was bound to enquire from the municipal corporation
about the existence of any arrears of taxes due from the receivers. It appears
from the record, however, that he did in fact make enquiries from the receivers
but they did not give any intimation. The plaintiff made a statement on oath
that when he purchased the building in question it was occupied by the tenants
and the rent used to be recovered by the receivers. There is no rebuttal to
this evidence. Now, if the receivers were receiving rent from the tenants, the
reasonable assumption would be that the municipal taxes which were a charge on
the property and which were also given priority under Section 61 of the Provincial
Insolvency Act, 1920, had been duly paid by the receivers out of the rental
income. The plaintiff could have no reasonable ground for assuming that they
were in arrears. From the plaintiff's testimony it is clear that he did
nevertheless make enquiries from the receivers if there were any dues against
the property though the enquiry was not made specifically about municipal dues.
Apparently he was not informed about the arrears of municipal taxes.
This seems to us explainable on the ground
that the receivers had, after securing appropriate orders, for some reasons not
clear on the record, omitted to pay the arrears of municipal taxes and they
were, therefore, reluctant to disclose this lapse on their part. On these facts
and circumstances we do not think that the plaintiff could reasonably be fixed
with any constructive notice of the arrears of municipal taxes 75 since 1949.
So far as the legal position is concerned we are inclined to agree with the
reasoning adopted by the Allahabad High Court in Roop Chand Jain's case (supra)
in preference to the reasoning of the Full Bench of that Court in Nawal
Kishore's case (supra) or of the Division Bench of Oudh Chief Court in Ramji
Lal's case (supra). We do not think there is any principle or firm rule of law
as suggested in Nawal Kishore's case (supra) imputing to all intending
purchasers of property in municipal area where municipal taxes are a charge on
the property, constructive knowledge of the existence of such municipal taxes
and of the reasonable possibility of those taxes being in affears.
The question of constructive knowledge or
notice has to be determined on the facts and circumstances of each case.
According to the Full Bench decision in Nawal
Kishore's case (supra) also the question of constructive notice is a question
of fact and we do not find that the material on the present record justifies
that the plaintiff should be fixed, with any constructive notice of the arrears
of municipal taxes.
We may add before concluding that as the
question of constructive notice has to be approached from equitable
considerations we feel that the municipal corporation in the present case was
far more negligent and blameworthy than the plaintiff. We have, therefore, no
hesitation in holding that the High Court took the correct view of the legal
position with the result that this appeal must fail and is dismissed. As there
is no representation on behalf of the respondent there will be no order as to
V.P.S. Appeal dismissed.