NOTICE

Transfer of Property Act, 1882

TANMOY MUKHERJEE INSTITUTE OF JURIDICAL SCIENCE

Dr. Tanmoy Mukherjee

Advocate

NOTICE (Section 3 of the Transfer of Property Act, 1882)-

Tanmoy Mukherjee

Advocate

Notice literally means knowledge as to existence of certain facts. Section 3 of the T.P Act defines Notice. The last paragraph of Section 3 says that under what circumstances a person is said to have a notice of a fact or going to have the knowledge of the same.
It runs as follows-
A person is said to have notice of a fact when he actually knows that fact, or when, but for wilful abstention from an enquiry or search which he ought to have made, or gross negligence, he would have known it.

Explanation I –

Where any transaction relating to immovable property is required by law to be and has been effected by a registered instrument, any person acquiring such property or any part of, or share or interest in, such property shall be deemed to have notice of such instrument as from the date of registration or, where the property is not all situated in one sub-district, or where the registered instrument has been registered under sub-section (2) of section 30 of the Indian Registration Act, 1908 (16 of 1908), from the earliest date on which any memorandum of such registered instrument has been filed by any Sub Registrar within whose Sub District any part of the property which is being acquired, or of the property where in a share or interest is being acquired, is situated:

Provided that-

1. The instrument has been registered and its registration completed in the manner prescribed by the Indian Registration Act, 1908 (16 of 1908), and the rules made there under;

2.The instrument or memorandum has been duly entered or filed, as the case may be, in books kept under Section 51 of that Act; and

3. The particulars regarding the transaction to which the instrument relates have been correctly entered in the indexes kept under Section 55 of that Act.

Explanation II-

 Any person acquiring any immovable property or any share or interest in any such property shall be deemed to have notice of the title, if any, of any person who is for the time being in actual possession thereof.

Explanation III –

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 that fact is material.
Provided that, if the agent fraudulently conceals the fact, the principal shall not be charged with notice thereof as against any person who was a party to or otherwise cognizant of the fraud.

Kinds of Notice-

Notice is of two kinds, namely-

1. Actual or Express Notice;

2. Constructive or Implied Notice; and

3. Notice to Agent or Imputed Notice.

1. Actual or Express Notice-

- It is a notice, by which the person acquires actual knowledge of the fact. It requires 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 party imputing notice must show that the other party had knowledge, which would operate upon the mind of any rational man, or man of business, and make him act with reference to the knowledge, he has so acquired.

-The notice must be given in the same transaction. A person is not bound by notice given in a previous transaction which he may have forgotten. Notice to a purchaser by his title 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 title, but he is charged constructively with notice merely of that which affects the purchase of the property in the chain of title of which the paper forms the necessary link.

Case References-

Bina Muralidhar Hemdev and others vs. Kanhaiyalal Lokram Hemdev and others, (1999) 5, SCC 222 –

There were four partners of an unregistered partnership. Late Muralidhar Lokram Hemdev (husband of Bina Muralidhar Hemdev) 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. Muralidhar Lokram Hemdev died.

Kanhaiyalal Lokram, Hemdev, and others, partners of a registered firm, purchased the said site from the remaining three partners, and started construction. Bina Muralidhar and her children filed a suit against them and sought for injunction restraining their construction. The defendants pleaded that they were bonafide purchasers and they did not know about unregistered firm and Muralidhar's share in it.

The Supreme Court gave judgement in favour of Bina Muralidhar Hemdev.

2. Constructive Notice-

 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 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 cases-

i) Wilful 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) Wilful 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.

Case Rereference-

Kausalsi Ammal, Shankarmthian, AIR 1941, Mad. 707 -

 It was held that the use of the word ‘wilful’ 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 bona fides.

Bank of Bombay vs. Sulaiman, 33 Bom. 1. (PC) –

 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 the first wife. The first wife's sons borrowed from the Bank, depositing the title deeds of the house and, land as security. If the Bank had made inquiries as to how the mortgagee derived title from Sulaiman, they would have had cognizance of the well and so of the charge in favour of the second wife's 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.

Two blayds Bank Ltd. vs., P. E. Guzder and Co. (1929). 56 Cal 868 –

 A deposited title deeds of his property with 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 title deeds in the office of N's solicitors. But A said that he would not get a good price if the purchaser came to know that N has deeds whereupon 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 gross negligence in surrendering the title deeds to A, and therefore, the mortgage to L has priority over the mortgage to N.

iii) Registration as Notice-

 Constructive notices are applicable in cases where documents are required to be registered. One can identify the title of a person in property by observing the documents.
When 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.

Explanation 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 Explanation-1 will operate as notice, if the following conditions are fulfilled-

1. Transaction relating to immovable property is required by law to be registered and has been affected by a registered instrument.

2. Such property or any part thereof or share or interest in such property is acquired by a person.

Hirendranath vs. Rajendra Chandra (1974 A.M. 43) –

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 purchaser was unaware of the pre-emption clause. Then the other brother sued for specific performance of the pre-emption clause. 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 thereof.

Explanation 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 amounted to notice of such title as the person in actual 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.

Krishnamma vs. Suranna (6 MLJ 54 (FB) and Nani Bibi vs. Hafizullah (10 Cal 1073) –

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 title either on the ground of wilful abstention from an inquiry which he ought to have made or of gross negligence (Sharfuddin vs. Govind, 27 Bom 452). The principle is found enacted also in Section 27 of the Specific Relief Act, one of the illustrations, which runs 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. B's possession is sufficient to affect C with notice of his interest, and he may enforce specific performance of the contract against C."

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 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.
Exception-

 Fraudulent concealment of fact by agent does not amount to notice to the principal.

vi) State 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 Statue 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 wilfully abstaining from inquiry, to avoid notice. I should, therefore, prefer calling the 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 wilfully 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.