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of <h1>Supreme Court: Auction purchaser not liable for arrears of municipal taxes due to lack of constructive notice</h1> The Supreme Court upheld the High Court's decision in a case concerning the liability of an auction purchaser for arrears of municipal taxes. The Court ... Whether the appellants in that case were purchasers for value without notice? Whether the purchaser in not doing so he acted with wilful abstention or gross negligence? Held that:- Appeal dismissed. Question of constructive notice is a question of fact and it is 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. 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. 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 costs. Issues Involved:1. Liability of auction purchaser for arrears of municipal taxes.2. Applicability of Section 100 of the Transfer of Property Act.3. Constructive notice of arrears of municipal taxes to the auction purchaser.Detailed Analysis:1. Liability of Auction Purchaser for Arrears of Municipal Taxes:The primary issue in this case was whether the auction purchaser of a property at a court sale is liable for the arrears of municipal taxes that were due on the date of the sale. The property, originally owned by an insolvent, had municipal tax arrears from 1949-50 to 1953-54. The auction purchaser sought a declaration that these arrears were not recoverable from him and that the attachment notice issued by the municipal corporation was illegal and ultra vires. The trial court found the attachment notice to be illegal and void but did not declare the property free from liability for the arrears. Both parties appealed, and the Assistant Judge dismissed both appeals. The Gujarat High Court's Division Bench, however, decreed in favor of the plaintiff, stating that the municipal tax charge was not enforceable against the property in the hands of the auction purchaser.2. Applicability of Section 100 of the Transfer of Property Act:The appellant argued that Section 141(1) of the Bombay Provincial Municipal Corporation Act, 1949, created a statutory charge on the property for municipal taxes, making the property liable for these taxes even in the hands of a transferee for consideration without notice. However, the court found that Section 100 of the Transfer of Property Act, 1882, clearly states that a charge is not enforceable against a transferee for consideration without notice unless expressly provided by law. Section 141 of the Bombay Municipal Act only creates a charge but does not expressly provide for its enforceability against a transferee without notice. Therefore, the court concluded that the statutory charge under Section 141 did not meet the requirements of Section 100 of the Transfer of Property Act.3. Constructive Notice of Arrears of Municipal Taxes to the Auction Purchaser:The appellant contended that the auction purchaser should be deemed to have constructive notice of the arrears of municipal taxes. The court examined various judicial decisions on this matter, including conflicting views from different High Courts. The court ultimately agreed with the reasoning in Roop Chand Jain's case, which held that a bona fide purchaser takes property free of charges of which they have no notice, actual or constructive. Constructive notice requires wilful abstention from enquiry or gross negligence. The court found that in this case, the auction purchaser had no reason to believe that the municipal taxes had not been paid by the receivers, who were managing the property. The court noted that the receivers had even obtained court orders to pay these taxes but failed to do so. The auction purchaser had made reasonable enquiries, and there was no evidence of wilful abstention or gross negligence on his part. Therefore, the court concluded that the auction purchaser did not have constructive notice of the arrears.Conclusion:The Supreme Court dismissed the appeal, holding that the auction purchaser was not liable for the arrears of municipal taxes as he had no constructive notice of such arrears. The court emphasized that the question of constructive notice must be determined based on the facts and circumstances of each case, and in this instance, the municipal corporation was more negligent than the auction purchaser. Consequently, the High Court's decision was upheld, and the appeal was dismissed without any order as to costs.
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