PRESUMPTION OF CONSTRUCTIVE NOTICE CONCERNING THE TRANSFER OF PROPERTY ACT

Introduction

The cases of people not getting possession even after they have made payment for the properties are not uncommon. Clever people take advantage of the law and sell the same property twice and in some cases even thrice to different persons. Law also delegates some responsibility towards people and expects them to be diligent in their process of buying the properties and that is where the concept of Doctrine of Notice comes into the picture.

. The term “notice” refers to the recognition of reality. It has an impact on one’s legal rights and obligations.

Sec. 3 Of the T.P act 1882, defines notices-

Constructive Notice

It is the knowledge that a court ascribes to an individual.

In the following five situations, the legal presumption of knowledge may apply: (i)intentional refusal to conduct an investigation or search (ii) gross carelessness (iii) registration (iv) actual possession (v) notice to agent

Abstention from an investigation or search on purpose – This is defined as the omission of an inquiry or searches that would reveal a lack of bona fides in a particular transaction.

A prudent purchaser should not be satisfied only by verifying the land records. One should check whether the seller has got full proprietary rights. If he fails to do so, it indicates a lack of care or a deliberate refusal to inquire or search.

  1. ii) Gross Negligence- It implies a high degree of neglect. It denotes a mental attitude of indifference to clear risks.

Fraud is active dishonesty, while negligence implies indolence [inertia or laziness]. Gross Negligence is defined as ” an act of that nature which a court of justice may treat as proof of fraud, impute a fraudulent intent to it, even though the party charged is morally innocent.”

In Ahmedabad Municipal Corporation v Haji Abdul Gafoor (AIR 1971 SC 1201)

In this case, a person was declared bankrupt, and his assets were entrusted to the court-appointed official receiver. The municipality sent a charge to the receiver regarding taxes. He asked the court for permission to sell the land to pay the taxes, and the court granted it. After that, neither the Receiver nor the municipality pursued the situation in terms of tax payment. As a result of lapses on the part of the receiver, who was in control of the property, the municipal taxes for the previous five years remained unpaid. A buyer at an auction purchased the property without being aware of the municipal charge. The buyer inquired about the charges payable on the property with the receiver, but no information concerning the tax arrears was provided. The question arose as to whether someone can be regarded to be aware of past municipal tax arrears.

The municipality (seeking attachment of the property in question) argued that there is no warranty of title in auction purchases, and the purchaser accepts the property subject to all title problems. In this case, the caveat emptor principle applies. However, because this was a case involving a judgment debtor, this did not apply in here. The matter was taken to the Supreme Court on appeal.

The Supreme Court observed as follows:

1) Constructive notice is determined by the facts and circumstances of each case. In the case of municipal taxes, there is no presumption of constructive notice.

The court overturned the decision in Naval Kishore v Municipal Board of Agra[1] which held that all intending purchasers (in a municipal area where the property is subject to a municipal tax) must inquire about the amount of tax due (i.e., past arrears) and that if they fail to do so, constructive notice will be imputed to them.

The court referenced the ruling in Roop Chand Jain’s case, which found that in the lack of specific intimation from the municipality, no intending purchaser is obligated to conclude that taxes on the property were not paid in the ordinary course.

1) Willful abstention or severe carelessness are the situations under which a deeming fiction is attributed to a party.

2) The issue is whether there was a responsibility to find out under the specific circumstances.

Because the issue of constructive notice must be considered from an equitable standpoint, the municipality was significantly more irresponsible than the plaintiff in this case.

As a result, no constructive notice can be served on the plaintiff.

iii) Registration as a notice- Where any transaction involving immovable property is required by law to be affected by a registered document, any person acquiring immovable property is deemed to have notice of such instrument from the date of registration, according to Explanation I to Sec.3.

For an instrument’s registration to serve as a notice of its contents, the following three conditions must be met:

Registration of the instrument is required.

1) The document must be registered according to the Indian Registration Act.

2) The instrument, as well as the details of the transaction to which it relates, must be appropriately recorded in the registers and indices.

Anyone who gains ownership of the property should check the title. It is a public document that may be confirmed at the registrar’s office if it has been registered. Let’s say A  sells his house to B. Later, he agrees to sell the same house to C. By law, C must view the register at the Registrar’s office, and if he does, he will learn about the sale in B’s favor. C’s interests will be harmed if he fails to view the register since he would be considered to have constructive notice of the registered transaction.

Notice cannot be imputed to him if registration is done incorrectly or if the records are not properly maintained.

(iv)Actual Possession as a Notice – Actual possession, i.e., de facto possession, of property by another must alert the purchaser. As a result, possession equates to notice of title in another person. As a result, any person acquiring any immovable property (or any share/interest in such property) is presumed to have notice of the title (if any) of any person who is in actual possession of the property at the time (Explanation II to Sec.3).

  1. Mustafa v Haji Md, Isa AIR 1987 PAT.5– The concept of constructive notice does not apply when the person claiming the property based on a prior agreement is only in possession of a limited portion of the property.

H.N Narayanaswamy Naidu v Deveeramma AIR 1981 Kant.93–   The principles of notice and constructive notice apply when the plaintiff was in actual possession of the property and completed major repairs at his expense.

  1. v) Agent Notice: Imputed Notice- The maxim serves as the foundation for this rule’s principle. Qui Facit Per Alium Facit Per Se, that is, he who does by another, does for himself.

Notice is imputed to the principle regardless of whether or not his agent communicated to him.

It could be either actual or constructive. The principal, on the other hand, cannot be charged with notice if the agent fraudulently conceals the facts.

CONCLUSION

Lawmakers thought that no person should be wronged in property matters, they expected people to be diligent in examining the land records. Section 3 mentions the doctrine of constructive and implied notice.  It has been carefully interpreted by the courts to deliver justice and resolve conflicts and the Act serves the purpose satisfactorily.

Author(s) Name: Mukul Vats (Law Centre-II, Faculty of Law, Delhi University)

References:

[1] (1943) ALJ 53.

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