TMI Blog1971 (3) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... DGMENT 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 Ahmedabad which dues are a statutory charge on the property sold and of which the purchaser had no actual notice. On the 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever granted. The Division Bench hearing the Letters 5-1 S.C. India/71 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . "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 taxes. 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 sub-section (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 reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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(A.I.R. 1940 Mad. 701.) in which relying on Creet v. Ganga Ram Gool Rai (I.L.R. [1937] 1 Cal. 203) 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 purchaser at a private sale. Execution Purchasers. according to this decision, purchase the property subject to all the charges and encumbrances legal and equitable which would bind the debtors. We do not agree with the view ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arge, 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 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 satisfi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 nor- mally regulate the conduct of human affairs would do ordoing something which a normally pruden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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