Case: Ahmedabad Municipal Corporation Of The City Of Ahmedabad Vs. Haji Abdulgafur Haji Hussenbhai

2. 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 1949 and insolvency proceedings were started against him in March, 1949. By an interim order receivers took charge of his estate and finally on October 14, 1950, he was adjudicated insolvent. The property in question accordingly vested in the receivers. Thus property had been mortgaged with a firm called Messrs. Hargovind Laxmichand. In execution of a mortgaged decree obtained by the mortgagee his property was auctioned and purchased at court sale by the plaintiff Haji Abdulgafur Haji Hussenbhai (respondent in this Court) for Rs. 22, 300/-. He was declared purchaser on November 28, 1954. At the time of this purchase there were municipal taxes in respect of this property in arrear for the years 1949-50 to 1953-54, which means that the receives had not cared to pay the municipal taxes during all these years. The property was attached by the municipal corporation by means of an attachment notice, dated July 20, 1955, for the arrears of the municipal taxes amounting to Rs. 543.79 P. As the municipal corporation threatened to sell the property pursuant to the attachment proceedings the purchaser instituted the suit (giving rise to this appeal) for a declaration that he was the owner of the property and that the arrears of municipal taxes due from Haji Nurmohammad Haji Abdulmian were not recoverable by attachment of the suit property in the plaintiffs hand and that the warrant of attachment of the property issued by the municipal corporation was illegal and ultra vires. Permanent injunction restraining the municipal corporation from attaching the property for arrears of municipal taxes was also sought. The Trial Court declined the prayer for a declaration that the property was not liable to be attached for recovery of the arrears of municipal taxes. But the warrant of attachment actually issued in this case was held to be illegal and void with the result that an injunction was issued restraining the municipal corporation from enforcing the impugned warrant of attachment against the plaintiff in respect of the suit property. Both parties feeling aggrieved appealed to the District Court. The Assistant Judge who heard the appeals dismissed both of them. The plaintiff thereupon presented a secondly appeal to the Gujarat High Court which was summarily dismissed by a learned single Judges. Leave to appeal to a Division Bench under Clause 15 of the Letters Patent was however granted. The Division Bench hearing the Letters 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.

Court's reasoning:
4. This section in unambiguous language lays down that no charge is enforceable against any property in the hands of a transferee for consideration without notice of the charge except where it is otherwise expressly provided by any law for the time being in force. The saving provision of law must expressly provide for enforcement of a charge against the property in the hands of a transferee for value without notice of the charge and not merely create a charge. We now turn to Section 141 ofthe Bombay Provincial Municipal Corporation Act, 1949, to see if it answers the requirements of Section 100 of Transfer of Property(1), as is obvious, merely creates a charge in express language. This charge is subject to prior payment of land revenue due to the State Government on such building or land. The section, apart from crating a statutory charge, does not further provide that this charge is enforceable against the property charged in the hands of a transferee for consideration without notice of the charge. It was contended that the saving provision, as contemplated by Section 100 of the Transfer of Property Act, may, without using express words, in effect provide that the property is liable to sale in enforcement of the charge and that if this liability is fixed by a provision expressly dealing with the subject, then the charge would be enforceable against the property even in the hands of a transferee for consideration without notice of the charge. According to the submission it is not necessary for the saving provision to expressly provide for the enforceability of the charge against the property in the hands of a transferee for consideration without notice of the charge. This submission in unacceptable because, as already observed what is enacted in the Second half of Section 100 of Transfer of Property Act is the general prohibition that on charge shall be enforced against any property in the hands of a transferee for consideration without notice of the charge and the exception to this general rule must be expressly provided by law. The real core of the saving provision of law must be not mere enforceability of the charge against the property changed but enforceability of the charge against the said property in the hands of a transferee for consideration without notice of the charge. Section 141 of the Bombay Municipal Act is clearly not such a provision. The second contention fails and is repelled.The Court then proceeded to deal with the position of the vendor from whom the appellants had purchased the property in order to see if he could raise the defence of being a purchaser for value without notice. The appellants vendor was a mortgagee who had acquired titled by foreclosure - an involuntary alienation by his mortgager - and it was held that to him constructive notice could not be imputed to the same extent as to a purchaser at a private sale. But had he made enquiries from the municipal authorities he could still have ascertained whether any arrears of consolidated rates were due. When he had taken the mortgage he was aware that if the rates were not paid the arrears would be first charge on the property with the result that before becoming full owner by foreclosure he should have ascertained the true state of affairs. On this reasoning he was held to have constructive notice and the purchasers from him could not claim grater protection. These circumstances clearly disclose that the reported case is not similar to the one before us and is of little assistance.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 considerations which normally regulate the conduct of human affairs would do or doing something which normally a prudent and reasonable man would not do. The question of wilful abstention or gross negligence and, therefore, of constructive notice considered from this point of view is generally a question of fact or at best mixed question of fact and law depending primarily on the facts and circumstances of each case and except for cases directly falling within the three explanations, no inflexible rule can be laid down to serve as a straight-jacket covering all possible contingencies. The question one has to answer in circumstances like the present is not whether the purchaser had the means of obtaining and might with prudent caution have obtained knowledge of the charge but whether in not doing so he acted with wilful abstention or gross negligence. Being a question depending on the behaviour of a reasonably prudent man, the Courts have to consider it in the background of Indian conditions. Courts in India should, therefore, be careful and cautious in seeking assistance from English precedents which should not be blindly or too readily followed.12. Adverting now to the case before us, as already noticed, the property in question had vested in the receivers in insolvency proceedings since March, 1949, by an interim order, and in October, 1950, the original owner was adjudicated as an insolvent and the property finally vested in the receivers in insolvency. The plaintiff purchased the property in November, 1954 and in our opinion it could not have reasonably been expected by him that the receivers would not have paid to the municipal corporation since 1949 the taxes and other dues which were charged on this property by statute. According to Section 61 ofthe Provincial Insolvency Act, 1920, the debts due to a local authority are given priority, being bracketed along with the debts due to the State. Merely because these taxes are charged on the property could not constitute a valid ground for the official receiver not to discharge this liability. In fact we find from the record that on January 15, 1951, the receivers had submitted a report to the insolvency Court about their having received bills for Rs. 628-3-0 in respect of municipal taxes of the insolvents property and leave of the Court was sought for transferring the said property to the names of the receivers in the municipal and Governmentis not known that 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 purse 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 though that the municipal corporation had not cared to secure payment of the taxes due since 1949. On the facts and circumstances of this case, therefore, we cannot hold that the plaintiff as a prudent and reasonable man was bound to enquiry from the municipal corporation about the existence of any arrears of taxes due from the receivers. It appears from the record, however, that he did in fact make enquiries from the receivers but they did not give any intimation. The plaintiff made a statement on oath that when he purchased the building in question it was occupied by the tenants and the rent used to be recovered by the receivers. There is no rebuttal to this evidence. Now, if the receivers were receiving rent from the tenants, the reasonable assumption would be that the municipal taxes which were a charge on the property and which were also given priority under Section 61 ofthe Provincial Insolvency Act, 1920, had been duly paid by the receivers out of the rental income. The plaintiff could have no reasonable ground for assuming that they were in arrears. From the plaintiffs testimony it is clear that he did nevertheless make enquiries from the receivers if there were any dues against the property though the enquiry was not made specficially about municipal dues. Apparently he was not informed about the arrears of municipal taxes. This seems to us explainable on the ground that the receivers had, after securing appropriate orders, for some reason not clear on the record, omitted to pay the arrears of municipal taxes and they were, therefore, reluctant to disclose the lapse on their part. On these facts and circumstances we do not think that the plaintiff could reasonably be fixed with any constructive notice of the arrears of municipal taxes since 1949. So far as the legal position is concerned we are inclined to agree with the reasoning adopted by the Allahabad High Court in Roop Chand Jains case (supra) in preference to the reasoning of the Full Bench of that Court in Nawal Kishores case (supra) or of the Division Bench of Oudh Chief Court in Ramji Lals case (supra). We do not think there is any principle or firm rule of law as suggested in Nawal Kishores case (supra) imputing to all intending purchasers of property in municipal area where municipal taxes are a charge on the property, constructive knowledge of the existence of such municipal taxes and of the reasonable possibility of those taxes being in arrears. The question of constructive knowledge or notice has to be determined on the facts and circumstances of each case. According to the Full Bench decision in Nawal Kishores case (supra) also the question of constructive notice is a question of fact and we do 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.13. We may add before concluding that 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.