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NOTICE IN TRANSFER OF PROPERTY ACT

Project Assignment

3rd Semester, 5 year B.A., LL.B.

Submitted

By

DAMODARAM SANJEEVAYYA NATIONAL LAW UNIVERSITY

NOVEMBER 2012
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TABLE OF CONTENTS

1. Table of Cases and Statutes .. 03

2. Introduction 04

3. Kinds of notice 04

4. Actual notice 04

5. Constructive notice . 05

6. Scope of the rule . 10

7. Imputed notice 10

8. Conditions .. 11

9. Conclusion . 12

10.Bibliography .. 13
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TABLE OF CASES AND STATUTES

CASES

1. BinaMuralidarHemdev and others vs. KanhaiyalalLokramHemdev and

others, (1999) 5 SCC 222
2. Kennedy vs. Green
3. KausalsiAmmal vs. Shankarmathiar, AIR 1941 Mad. 707
4. Bank of Bombay vs. Sulaiman, 33 Bom. 1 (PC)
5. Lloyds Bank Ltd. Vs. P.E. Guzder and Co., (1925) 56 Cal 868
6. Hirendranath vs. Rajendra Chandra ,1974 A.M. 43
7. Krishnamma vs. Suranna, 6 MLJ 54 (FB)
8. NaniBibi vs. Hafizullah, 10 Cal 1073
9. Sharfuddin vs. Govid, 27 Bom 452
10. Mohd. Mustaffa v. Haji Mohd. Hissa
11. Nawal Kishore v. The Municipal Board, Agra
12. ArumilliSurayya v. PinisettiVenkataramanamma

STATUTES

1. Transfer of Property Act, 1882

2. Registration Act
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INTRODUCTION

The equitable doctrine of notice which controls unconscionable transactions is

recognised in various sections of TP Act. For instance is s 39, if a transfer is made of
property out of which a person has a right to receive maintenance, the transferee takes
subject to that right if he had notice of it, but not otherwise.

Similarly in s 40, if A conveys to C property which he had by a previous contract

agreed to sell to B then B can enforce the contract against C, if C had notice of it, but not
otherwise. If C had notice of the prior contract, he purchases with knowledge that it was
unconscionable of A to sell to him, and it is, therefore, unconscionable of him to buy. To
the same effect is the second illustration to cl (b) of s 27 of the Specific Relief Act1872,
and s91 of the Trusts Act 1882.

Kinds of Notice:

The last paragraph of the section 3 states under what circumstances a person is
said to have notice of a fact. He may himself have actual notice or he may have
constructive notice may be imputed to him when information of the fact has been
obtained by his agent in the course of business transacted by the agent for him.

Notice is of two kinds, namely:

1. Actual or Express Notice;

2. Constructive Notice or Implied Notice; and
3. Notice to Agent or Imputed notice.

1. Actual or Express Notice:An express or actual notice of fact is a notice

whereby a person acquires actual knowledge of the fact. It must be definite
information given in the course of negotiations by a person interested in the
property. It is a notice, by which the person acquires actual or real information
about the fact and should not be a vague report or rumour.

Actual notice, to constitute a binding force, must be definite information given by a

person interested in the thing in respect of which the notice is issued. In other words, the
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party imputing notice must show that the other party had knowledge, which would
operate upon the mind reference to knowledge he has so acquired.

The notice must be given in the same transaction. A person is not by notice given in a
previous transaction which he may have forgotten. Notice to a purchase by his tittle
papers in one transaction will not be notice to him in an independent subsequent
transaction in which the instruments containing recitals are not necessary to his tittle, but
he is charged constructively with notice merely of that which effects the purchase of the
property in the chain of title of which the payer forms the necessary link.

BinaMuralidarHemdev and others vs. KanhaiyalalLokramHemdev and

1
others , therewere four partners of an unregistered partnership. Late
MuralidharLokramHemdev (husband of BinaMuralidharHemdev) was one of the
partners. The partnership firm purchased 31,075 sq.feet in Thane for construction of
apartments and to do business. Disputes arose and the partners partitioned the property.
The partition deed was registered. Thereafter a rectification deed was also registered.
MuralidharLokramHemdev died.

KanhaiyalalLokramHemdev and others, partners of a registered firm, purchased

the said site from the remaining three partners, and started construction. BinaMuralidhar
and her children filed a suit against them. And sought for injuction restraining their
construction. The defendants pleaded that they were bonafied purchasers and they did not
know about unregistered firm and Muralidhars share in it.

The Supreme Court Court gave judgement in favour of BinaMuralidharHemdev.

2. Constructive Notice:
It is a notice which treats a person who ought to have known a fact, as if he
actually does know it. In other words, a person has constructive notice of all facts of
which he would have acquired actual notice had he made those enquiries which he ought
reasonably to have made. The cases of constructive notice into two classes:

(i) Cases in which the party charged has had actual notice that the property in dispute was
in some way affected, and the Court has thereupon bound him with constructive notice of
facts and documents, to a knowledge of which he would have been led by an inquiry after
the circumstances affecting the property had come to his knowledge.

1
(1999) 5 SCC 222
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(ii) Cases in which the Court has been satisfied from the evidence before it that the party
charged has designedly abstained from inquiry for the very purpose of avoiding notice
A purpose which, if proved, would clearly show that he had a suspicion of the truth, and a
fraudulent determination not to learn it.

It is a notice, which treats a person who ought to have known a fact, as if he actually
knows it. It is a presumed or implied notice. The doctrine of constructive notice said Lord
Brougham in Kennedy vs. green, depends upon two considerations; first, that certain
things existing in relation or the conduct of parties, or in the case between them, begets a
presumption so strong of actual knowledge that the law holds the knowledge to exist,
because it is highly improbable it should not, and next, that policy and safety of the
public forbids a person to deny knowledge while he is so dealing as to keep himself
ignorant or so as that he may keep himself as ignorant, and yet all the while let his agent
know, and himself, perhaps profit by that knowledge. The legal presumption takes place
in the following case:

i. Willful abstention from an enquiry or search;

ii. Gross negligence;
iii. Registration as notice;
iv. Actual possession as notice;
v. Notice to Agent; and
vi. State of property amounts to notice.

i. Willful abstention from an enquiry or search:

If a person being aware of the fact did not make an enquiry which he ought to
have made, then, he is deemed to have notice of that fact.

KausalsiAmmal vs. Shankarmathiar2, it was held that the use of the word
willful in the definition shows that the abstention from inquiry should be designed
and due to a desire to avoid an inquiry which would lead him to ultimate knowledge.
It means such abstention from inquiry, as would show want of bonafides.

Bank of Bombay vs. Sulaiman3, Sulaiman left his house and land to his sons by
his first wife and appointed them the executors of his will. By the will he bequeathed
Rs.30,000 to the sons by his second wife charging it on the property given to the sons by

2
AIR 1941 Mad. 707
3
33 Bom. 1 (PC)
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the first wife. The first wifes sons borrowed from the bank depositing the tittle deeds of
the house and land as security. If the bank had made inquirtes as to how the mortgagee
derived and so of the charge in favour of the seconfwifes sons. They were, therefore,
fixed with constructive notice of the charge, which accordingly prevailed over the
mortgage to the bank.

(ii) Gross Negligence: Constructive notice applies, when a person, but for his gross
negligence would have known the fact.

Lloyds bank ltd. Vs. P.E.Guzder and Co.4- A deposited tittle deeds of his
property with the bank N to secure an overdraft. A then asked for a return of the deed
saying that he wished to sell property and clear the overdraft. The useful practice is for
the prospective purchaser to inspect the tittle deeds in the office of Ns Solicitors. But A
said that he would not get agood price if the purchaser came to know that N has deeds
where upon N returned the deeds to A. A then borrowed money from bank L on the
deposit of the same deeds, solely representing that there was no encumbrance. Bank N is
guilty of the gross negligence in surrendering tittle deeds to A, therefore, the mortgage to
L has priority over the mortgage to N.

In Nawal Kishore v. The Municipal Board, Agra, The court felt that there was a
principle on which question of constructive notice cold rest, that principle being that all
intending purchasers of the property in municipal areas where the property is subject to a
municipal tax which has been made a charge on the property by statute have a
constructive knowledge of the tax and of the possibility of some arrears being due with
the result that it becomes their duty before acquiring the property to make enquiries as to
the amount of tax which is due or which may be due and if they fail to make this enquiry
such failure amounts to a willful abstention or gross negligence within the meaning of
Section 3 of the Transfer of Property Act and notice must be imputed to them.

It is not necessary to show that the person has been guilty to fraud or negligence
amounting to fraud. Fraud is quite different from negligence. The former connotes active
dishonesty, the latter simply implies indolence. Gross negligence is a degree of
negligence so gross that a court of justice may treat it as evidence of fraud, impute a
fraudulent motive to it and visit it with the consequences of fraud, although, morally
speaking, the party charged may be perfectly innocent.

4
(1929) 56 CAL 868
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(iii) Registration as Notice:Constructive notice are applicable in cases where

documents are required to be registered. One can identify the tittle of a person by
observing the documents.

Registration of a document under the Registration Act is a constructive notice of

its contents. Where a document need not be registered compulsorily, its registration does
not amount to constructive notice.

Explination 1 of Notice to section 3 of the Transfer of Property Act has been

enacted incorporating the Registration of a Document as a Constructive Notice to the
subsequent transferees. Registration, Under Explination-1 will operate as notice, if the
following conditions are fulfilled:

1. Transaction relating to immovable property is required by the law to be

registered and has been affected by a registered and has been affected by a
registered instrument.
2. Such property or any part thereof or share or intrest in such property is
acquired by a person.

Hinrendranath vs. Rajendra Chandra5, A partition deed contained a clause of

pre-emption. One brother in breach of this clause sold the property allotted to him in
the partition to a third party without first offering to other brother. The Court held that
the third person is bound, if he had the notice of the partition deed. Here the question
was whether registration amounts to constructive notice. A Hindu partition is not
compulsorily registerable. So registration does not operate in this case as constructive
notice.

(iv) Actual possession as notice: Any person acquiring any immovable property shall be
deemed to have notice of title if any, of any person who is in actual possession therof..

Explanatin II was introduced in the Transfer of Property Act by the Amending Act 21 of
1929. It settles the law that actual possession is notice of such title as the person in actual
possession has. Before the insertion of Explanation II, there was difference of opinion as to how
far possession was to be regarded as notice. The High Courts of Allahabad, Bombay and Madras
had held that possession may have. The Calcutta High Court on the other hand had held that
possession is not conclusive but only cogent evidence of notice. This difference of judicial
opinion necessitated amendment in the Act.

5
(1974 A.M. 43)
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Krishnamma vs. Suranna6 and NaniBibi vs. Hafizullah7, it was held that
possession, though not conclusive, was very cogent evidence of the title of the person in
possession. The basis of this view was that whoever purchases an estate from an owner
knowing it to be in the possession of another was bound to make inquiry into the title of
the person in possession and if he did not do so, he must be taken to have constructive
notice of such tittle either on the ground of wilful abstention from an inquiry which he
ought to have made or of gross negligence(Sharfuddin vs. Govind). The principle is
found enacted also in Section 27 of The Specific Relief Act, One of the illustrations,
which run as follows:

A contracts to sell land to B for Rs.5000. B takes possession of the land.

Afterwards A sells it to C, for Rs.6000. C makes no inquiry to B relating to his interest in
the land. Bs possession is sufficient to affect C with notice of his interest, and he may
enforce specific performance of the contract against C.

The possession of a small part of a house will not put a purchaser on constructive
notice of that person's rights as to whole house.

In Mohd.Mustaffa v. Haji Mohd.Hissa, it was held that the principle of

constructive notice cannot be extended to a case where the person who claims on the
basis of prior agreement is in possession of only a small fraction of the property. In such
a case, it cannot be said that the person who purchases the property must make an enqiry
about the previous contract from the plaintiff or any other tenant in occupation of a
portion of the house.

(V) Notice to Agent: Notice through agency is defined in Explanation III to section 4 of
the Transfer of Property Act. The general rule is that notice to the agent is the notice to
the agent is the notice to the principal on the basis of vicarious liability. This rule also is
subject to certain limitations. Notice should have been received by agent.

(a) during the agency;

(b) in his capacity as an agent;

(c) in the course of the agency business; and

(d) in the manner material to the agency business.

Communication by agent to the principal is not necessary.

6
6 MLJ 54 (FB)
7
10 Cal 1073
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Scope of the Rule:

The general rule that the knowledge of the agent is the knowledge of the principal
has certain limitations. The notice should have been received by the agent:

(i) as an agent,
(ii) during the agency,
(iii) in the course of the agency business,
(iv) in a matter material to the agency business.

Exception: Fraudulent concealment of fact by agent. The knowledge of an agent will not
be imputed to his principal if the agent fraudulently conceals the facts. It is not sufficient
to show that the agent concealed the fact. It must be shown that the party charging the
principal with notice was party to the fraud or otherwise knew of the fraud.

In ArumilliSurayya v. PinisettiVenkataramanamma, it was held that Sec. 100

of the Transfer of Property Act does not apply to auction sales because the transfer within
the meaning of the Transfer of Property Act does not include an auction sale. It was
added that the position of a purchaser at an execution sale is the same as that of the
judgment -debtor and his position is somewhat different from that of a purchaser at the
private sale.

(vi) Stated of property amounts to notice:

Sometimes the situation and condition of a property speaks louder than the man. A
necessary inference, therefore, may be drawn about the probable users thereof, for
example situation of tombs in any field is notice of the fact that the land has been and
would be used for burial purposes. The Statute of Ravana in a ground points out the
holding of Ram Lila there; the marks left by egress and ingress may operate as notice of
right to way.

3. Imputed Notice:
The word impute literally means to attribute or to ascribe. A notice to an agent
is also called as Imputed Notice. The expression Imputed Notice was first coined by
Lord Chelmsford, who said: Constructive notice properly so called, is the
knowledge which the Courts impute to a person upon a presumption so strong of the
existence of the knowledge, that it cannot be allowed to be rebutted, either from his
knowing something whom ought to have put him upon further inquiry, or from his
willfully abstaining from inquiry, to avoid notice. I should, therefore, prefer calling the
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knowledge which a person has either by himself or through his agent, actual knowledge
or if it is necessary to make a distinction between the knowledge which a person
possessed himself, and that which is known to his agent, the latter might be called
Imputed Knowledge.

Explanation III to Section 3 of the Transfer of Property Act explains that a

person shall be deemed to have had notice of any fact if his agent acquires notice thereof
whilst acting on his behalf in the course of business to which the fact is material. If the
agent willfully and fraudulently conceals the fact, then the principal shall not be charged
with notice.

The Privy Council observed: It is a rule or law that imputes the knowledge of the
agent to the principal for the agency extends to receive a notice on behalf of the principal
of whatever is material.

Conditions: To constitute imputed notice, the following conditions are to be satisfied:

1. The agent should have received the notice during his agency.
2. The agent must act as an agent in his capacity as agent.
3. The notice must be received in the course of business.
4. It must relate materially to the agency business.
5. It should not have been fraudulently withheld from the principal.

The first four conditions are seen in the Explanation III to Section 3. The fifth
condition is seen in the proviso to the Explanation III
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Conclusion
From the project I can conclude that this Section is having a great importance
in TP Act because it based on equitable doctrine and provides Justice to the
Parties.
Notice under TP Act is used to determine the rights and claims of two or more
persons in relation each other, who are involved in an unconscionable transaction.
Unconscionable transactions is recognised in various sections of TP Act. For instance
is s 39, if a transfer is made of property out of which a person has a right to receive
maintenance, the transferee takes subject to that right if he had notice of it, but not
otherwise. Similarly in s 40, if A conveys to C property which he had by a previous
contract agreed to sell to B then B can enforce the contract against C, if C had notice
of it, but not otherwise. If C had notice of the prior contract, he purchases with
knowledge that it was unconscionable of A to sell to him, and it is, therefore,
unconscionable of him to buy.
So, notice in TP Act plays a vital role in determining whether the purchaser of a
property is bonafide purchaser or Not.

Hence this Section incorporates a rule of Justice, equity and good conscience and
helps in determining the rights and claims of two or more persons face to face each other,
who are involved in an unconscionable transaction.
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BIBLIOGRAPHY
BOOKS

1. Property Law by DrPoonamPradhanSaxena

2. Transfer of Property Act, 1882 by Sohoni

3. Transfer of Property Act, 1882 by Mulla

4. Transfer of Property Act, 1882 by Vepa P. Sarathi

5. Transfer of Property Act, 1882 by G.P. Tripathi

6. Transfer of Property Act, 1882 by H.N. Tiwari

7. Transfer of Property Act, 1882 by S.K. Sinha

Websites:-

1. www.indiankanoon.com

2. www.vakeelno.1.com

3. www.legallyindia.com

4. Lawyersclubindia.com