TaxTMI 
TaxTMI 
1942 (12) TMI 16
X X X X Extracts X X X X
X X X X Extracts X X X X
....nicipal Board made this claim against the defendant was that they had a charge on the property in his hands under Section 177, Municipalities Act, 1916. That section says: All sums due on account of a tax imposed on the annual value of building or lands or of both shall subject to the prior payment of the land revenue (if any) due to His Majesty thereupon, be a first charge upon such buildings or lands. 2. It was that charge which the municipality sought in this suit to enforce against the property in the hands of the defendant. The defendant's defence was that this was a case to which the proviso to Section 100, T.P. Act, 1882, applied and, accordingly, that the charge was one which could not be enforced against the property in his hands, inasmuch as it had been transferred to him for consideration and without notice of the charge. The actual words of the proviso, so far as they are material to this matter, are these: and, save as otherwise expressly provided by any law for the time being in force, no charge shall be enforced against any property in the hands of a person to whom such property has been transferred for consideration....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n 100, T. P. Act, applied to property in the hands of a purchaser of that property at a court auction sale, and, accordingly, that such property was not taken out of the operation of Section 100 of the Act, provided, of course, that the transfer took place without notice of the charge. In view of this obvious collision between two Benches of this Court, I think I have no alternative but to refrain from expressing a view of my own and. to ask the learned Acting Chief Justice to refer the disputed question to a Full Bench. 5. That does not quite exhaust the matter, because, if it should be held that there is no distinction between an ordinary purchaser and a purchaser at a court auction sale for the purpose of the saving clause in Section 100, T. P. Act, it will still remain to be considered whether, in the circumstances of the present case, the defendant can be held to have been a transferee "without notice of the charge." This, to my mind, raises by far the more interesting question of the two. It raises in an interesting form the whole question of the doctrine of constructive notice as applied to the conditions obtaining in these provinces. As I have observed before, no one has....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Municipalities Act, amounts to such neglect or carelessness as, according to the meaning of constructive notice in this country, to deprive him of the right of saying that he was not aware of that which by inquiry he might have found out. I should, I think, have been capable of deciding this question for myself, had I not met with some further difficulty in the authorities as between this Court and the Oudh Chief Court. In Municipal Board, Cawnpore v. Roop Chand Jain ('40) 27 A. I. R. 1940 All. 456 this question was considered in this Court in circumstances which are difficult to distinguish from the present circumstances. The learned Judges held that notice could not be imputed by construction to the purchaser. If I understand the judgment, they based that upon two grounds. First they said that an intending purchaser was not bound to presume that taxes on the property had not been paid. And, secondly, they said that, because the municipality itself had, or might have been, negligent in not enforcing payment of the arrears, that was a circumstance precluding the application of the doctrine of constructive notice. I confess, with the greatest respect, that I find some difficulty....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cipality or from any other source, has prima facie been guilty of negligence and, if so, whether such negligence is in any way mitigated or lessened by the circumstance that the taxes ultimately found to be outstanding have been outstanding for a long period. 11. Though I have set out in general terms the two questions which appear to arise, I propose to refer the whole case generally to the Acting Chief Justice of the Court with a request that he will constitute a Full Bench to deal with it. The matter as I have said, is one of some difficulty and of considerable importance in view of the many other cases which I am told depend upon its decision. At present the authorities on these questions appear to me conflicting and unsatisfactory. Dar, J. 12. This is an appeal against a judgment and decree, dated 8th March 1938, of the District Judge of Agra by which he reversed a judgment and decree, dated 29th October 1937, of the Civil Judge of Agra in a suit for recovery of house-tax and water-rate. In execution of a decree which Nawal Kishore had obtained against two Hindu brothers Sujan Singh and Surendra Singh certain premises owned by the said two brothers and situated in moh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rd on the premises owned by the two Hindu brothers Sujan Singh and Surendra Singh and for the period 1925 to 1936 while the ownership of this property had remained vested in these brothers, the house-tax and water rate imposed on the said premises fell duo and was not paid and was in arrear on the date when the auction-sale in favour of Nawal Kishore, the defendant, took place. By virtue of Section 177 of the Act the tax as it fell due each year and remained unpaid and the entire arrears became and continued to be a first charge on the premises. By reason of the fact that the statute makes the amount of the tax as the first charge on the premises subject to the payment of the land revenue and it is admitted that the premises are not liable to payment of Government revenue, it follows that any other interest which arises in the premises by the act of parties or by operation of law or by succession or by transfer must be subject to the prior charge in regard to the tax, and on the plain language of the statute this prior charge can be recovered from the premises irrespective of the fact whether the property is in the hands of the original owner or in the hands of an heir, successor o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nheritance or by transfer could defeat it and to give effect to the plain meaning of the statute the charge should be enforced against the premises irrespective of the question who owns the premises at the moment. 16. But assuming that the charge cannot be enforced against a transferee for consideration without notice, the question arises whether a purchase in execution of a decree in a court sale can be regarded as a transfer for consideration within the meaning of Section 100, T. P. Act (4 of 1882). In sales by private party there is a warranty of title and there is a further warranty that the property sold is free from encumbrances and charges; in execution sales there is no warranty of title nor there is any warranty that the property sold is free from encumbrances and charge. In England the equitable rule that the charges which create no interest in land cannot be enforced against a purchase for consideration has not been applied to execution creditors. In Wickham v. The New Brunswick and Canada Railway Co. (1866) 1 P.C. 64 Lord Chelmsford in delivering the judgment of the Board observed as follows: There is no doubt upon principle, as well as on the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reated a fresh difficulty in the matter. The words used in Section 100 are no charge shall be enforced against any property in the hands of a person to whom such property has been transferred for consideration and the words "transferred for consideration" are wide enough to include an auction sale in execution of a decree. No doubt, the Preamble of the Transfer of Property Act states that the Act is meant to define and amend laws relating to the transfer of property by act of parties and Section 5, T. P. Act, which defines the expression "transfer of property" contemplates also a transfer by act of parties and the language used in Section 100 as "property transferred for consideration" also suggests that the basis of the transaction is a contract of which consideration is the essential element, but Section 2 (d), T.P. Act, lays down : But nothing herein contained shall be deemed to affect. . . (d) save as provided by Section 57 and Chap. 4 of this Act any transfer by operation of law or by, or in execution of, a decree or order of a Court of competent jurisdiction. 20. And chapter 4 deals with mortgages and charges and Section 100 w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t be regarded as a purchaser for value under English law, but these considerations do not apply in this country where real property is sold by Court in a public auction and is purchased very often by strangers who pay full value for the property. Property may be sold in this country under Section 57, T. P. Act, free from encumbrances or it may be sold by Court in enforcement of a simple or anomalous mortgage or it may be, foreclosed by a decree in a mortgage on conditional sale and the purchaser or the person in whose favour the property is foreclosed may be the mortgagee. It cannot be denied that prior to the court sale the mortgagee was a transferee for consideration who would not be affected with charges of which he had no notice and there seems to be no reason why he should be any the less a transferee for consideration simply because he has purchased the property in a court sale in enforcement of the mortgage. It is true that in a court sale there is no warranty of title or of the property being sold free from charges or encumbrances as it is in a sale by private treaty. But both as a matter of law and as a matter of practice a search is made in the Registry prior to the court....
X X X X Extracts X X X X
X X X X Extracts X X X X
....4 of the Act so as to include in it transfers for consideration and has not amended the saving clause in Section 2 so as to restrict the contents of chap. 4 in any way, notwithstanding that Sections 85 to 90 of the Act had long ceased to be part of the Act at the time when the amendment was made. And, in the face of the plain language of the statute, as it stands today, it is difficult to see how Section 100 can be excluded from the operation of the saving Clause (d) of Section 2, and, how the saving clause can be restricted to the repealed Sections 85 to 90 of the Act. We have, therefore, come to the conclusion that the authority of Municipal Board, Cawnpore v. Roop Chand Jain AIR1940All456 should be followed in preference to Indra Narain v. Mohammad Ismail AIR1939All687 and the expression 'transfer for consideration' used in para. 2 of Section 100, T. P. Act, should be taken to include an auction purchaser in a court sale. 23. But there still, remains the question whether the defendant can be regarded as a transferee without notice. That lands and premises at Agra are subject to a house-tax and water-rate is both a matter of statutory enactment and of common knowledge ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Ware v. Lord Egmont (1854) 4 D. M. & G. 460. I think that the knowledge that there were "charges" affecting the property of the Rollesons put the Messrs. Williams on inquiry what they were, and that they must be treated with having had the knowledge which would have resulted from such inquiries, if made. 24. In our opinion, the case of a transferee of property in a municipal area in these provinces which is subject to a statutory tax and a statutory charge in the circumstances mentioned above comes within the principles laid down by Sir John Romilly in Jones v. Williams (1857) 24 Beav. 47 and the constructive notice should be imputed to him. There is some conflict of authority on the question whether notice of arrears of municipal taxes should or should not be imputed to a transferee for consideration who purchases property without knowledge or without express notice of the arrears. In Akhoy Kumar Banerjeo v. Corporation of Calcutta ('15) 2 A.I.R 1915 Cal. 478, the purchaser was held to be subject to a constructive notice of arrears of taxes. In Ramji Lal v. Municipal Board, Lucknow ('37) 24 ('37) 24 A.I.R. 1937 Oudh. 31, Ziaul Hasan J. held that constructive notice....