Bona fide purchaser protection against statutory tax charges depends on actual or constructive notice, not mere operation of law.

A statutory tax charge cannot be enforced against a purchaser for value who took the property without actual or constructive notice, and constructive notice cannot be inferred merely because the charge arose by operation of law. Due diligence is ordinarily satisfied by enquiry with the vendor and verification of title and encumbrance records; failure to approach the tax department, by itself, does not amount to wilful abstention or gross negligence. The Court also indicated that the charge's reflection, or absence, in registration and encumbrance records is material to notice, and it preserved the revenue's civil remedy if fraud is alleged.

---

---

Issues: Whether a purchaser of property, who buys for valuable consideration without actual or constructive notice of a statutory tax charge, can invoke the protection of Section 100 of the Transfer of Property Act, 1882 against enforcement of the charge created under the sales tax statutes.

Analysis: The statutory charge under the sales tax enactments was examined alongside the saving provision in Section 100 of the Transfer of Property Act, 1882 and the concept of notice under Section 3 of that Act. The Court held that constructive notice cannot be presumed merely because the property is subject to a tax charge by operation of law. The concept of constructive notice depends on wilful abstention or gross negligence, which is ordinarily a question of fact or a mixed question of fact and law. The Court treated due enquiry with the vendor and verification of title through the usual registration records as the relevant diligence expected of a purchaser, and held that failure to enquire directly with the tax department does not, by itself, amount to wilful abstention. The Court also held that the statutory charge cannot be enforced against a transferee who purchased for consideration without notice of the charge.

Conclusion: The purchasers were entitled to the protection of Section 100 of the Transfer of Property Act, 1882, and the statutory tax charge was not enforceable against the properties in their hands.

Issues: Whether the revenue authorities were justified in enforcing the charge without first showing registration or reflection of the charge in the relevant encumbrance records, and whether the matters required limited reconsideration on that factual aspect.

Analysis: The Court noted that the normal mode of due diligence is verification of encumbrance records and that, if the charge had been communicated to the registering authorities, it could have been reflected in the records available to prospective purchasers. The Court therefore directed a limited reconsideration as to whether the statutory charge had been brought on record before the registering officers during the relevant period and whether the properties were free from such encumbrance at the time of purchase. The Court further preserved liberty for the department to pursue a civil remedy if it asserts that the transfer was fraudulent.

Conclusion: The impugned proceedings were set aside and the matters were remanded for limited verification of encumbrance records before the concerned authorities.

Final Conclusion: The decision protected bona fide purchasers against enforcement of unnotified tax charges, while leaving a limited factual enquiry open on the existence of reflected encumbrances and preserving the revenue's civil remedy in cases of alleged fraud.

Ratio Decidendi: A statutory charge created by law cannot be enforced against a purchaser for value without notice unless constructive notice is established on facts showing wilful abstention or gross negligence; absence of enquiry from the tax department alone does not establish constructive notice.

---