llb-property-law

Q. 5 : Explain the concept and types of notice under The Transfer of Property Act, 1882.

Ans. "The Transfer of Property Act contemplates three kinds of notice, namely:

(1) actual notice;

(2) constructive or implied notice (i.e., when but for wilful abstention from inquiry or search or for gross negligence he would have known); and

(3) notice to agent or imputed notice.

Actual notice.- 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, as it is settled rule that a person is not bound to attend to vague rumours or statements by mere strangers, and that a notice to be binding must proceed from some person interested in the thing. A mere casual conversation in which knowledge of a certain thing is imparted, is not notice of it, unless the mind of a person has, in some way been brought to an intelligent apprehension of the nature of the thing, so that a reasonable man or any normal man of business would act upon the information, and would regulate his conduct accordingly. 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. A vague or general report or the mere existence of suspicious circumstances is not in itself notice of the matter to which it relates.

A general claim is not sufficient to affect a purchaser with notice of a deed of which he does not appear to have knowledge. If a person knows that another has or claims an interest in property for which he is negotiating he is bound to inquire what his interest is, and if he omits to do so, he will be bound, although the notice was inaccurate as to the particulars to the extent of such interest.

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 payer forms the necessary link.

Constructive notice.- Constructive notice is the knowledge which the Courts impute to a party upon a presumption so strong that it cannot be allowed to be rebutted, that knowledge must have been communicated. "The doctrine of constructive notice" said Lord Brougham in Kennedy v. 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 broad principle underlying the doctrine of constructive notice is that a person who is bound to make an inquiry and fails to do it should be held to have notice of all facts which would have come to his knowledge had he made the inquiry. Where, on the other hand, a person is not bound to make an inquiry he cannot be charged with constructive notice of the facts that might have been ascertained on such inquiry. Again, where a fact, of which a person has notice, would not put him on inquiry as to the matters in question, it cannot be constructive notice of such matter.

The Courts in India should be very careful about applying the English decisions on constructive notice to this country, and should do so only when the circumstances are really similar. The cases of Daniels v. Davisons and Barnhart v. Greenshields, as well as other cases are freely quoted and applied by Indian Courts, and the result is that the doctrine of constructive notice is carried to great lengths. When the Indian Courts apply the principle that a man has notice because if he had made reasonable inquiries he would have ascertained the facts and if he has not ascertained the facts he has been guilty of gross negligence-the Court must carefully regard all the circumstances of the case and of the people to whom the Courts are going to apply the principle.

Classes of constructive notice

(1) Wilful abstention from inquiry or search.

(2) Gross negligence.

(3) Registration.

(4) Actual possession.

(5) Notice to agent.

(6) State of property amounts to notice

(1) Wilful abstention from search which one ought to make.- Even in the absence of actual notice a person may constructively and in the eye of law be affected with notice of fact when he has wilfully abstained from an inquiry or search which he ought to have made as a prudent person.

In Kausalsi Ammal v. Shankarmthiar; I 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.

Illustrations.- A proposes to sell his property to B who, at the same time knows that rents due in respect of the property are paid by the tenants to a third person C, whose receipt is inconsistent with the title of the vendor, B will be fixed with notice of the rights of C, and if B abstains from prosecuting his inquiries, his conduct will amount to wilful abstention.

(2) Gross negligence.- Negligence may be stated to be the omission to do some thing which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do or doing something which a prudent and reasonable man would not do. It means the absence of such care, skill and diligence, as it is the duty of the person to bring to the performance of the work which he is not to have performed. The distinction between wilful abstention and negligence is the existence of a mental advertence to the consequence of an act in the one case and the absence of such advertence in the other. A person who is a prudent and reasonable man to inquire into the contents of a document, cannot be said to be guilty of either wilful abstention from inquiry or gross negligence. But there may be circumstances in which a document is attested, which will raise presumption of notice of its contents. This presumption is a rebuttable one.

(3) Registration as a notice.- Explanation I supersedes the former case law as to whether registration of a document under Registration Act is constructive notice of its contents. The Bombay and Allahabad High Courts had held earlier that registration was notice. The Madras High Court held the registration was not notice on the ground that if the Legislature had so intended it would have said so. The Calcutta High Court in some cases took the same view as Madras; but the prevailing view in Calcutta was that whether registration operates as notice depends upon the circumstances of each case, i.e., whether or not the omission to search the register taken with facts of the case would amount to gross negligence so as to attract the consequences which result from notice. The Privy Council in Tilakdhari Lal v. Kundan Lal reviewed all the Indian decisions, and approve the decisions of Sir Lawrence Jenkins of Calcutta High Court in Mahindra v. Torylucko that the question was not one of law but of fact to be determined according to the circumstances of each case. Their Lordships held that they were impressed with the view that though registration had been held for two centuries not to operate as notice in England, yet the Indian Legislature when framing different Registration Acts and the definition of notice in the Transfer of Property Act had omitted to enact the principle that registration is notice. This omission has now been supplied. The definite rule now enacted, the effect of which is to oblige all purchasers to exercise diligence in examining titles recorded in the register, avoid the uncertainty and the risk of perjury involved in taking parole evidence as to whether the omission to search the register should in any particular case be attributed to gross negligence. It also fulfils the chief object of registration, which is to provide a record on which every person dealing with property can rely for a full and complete account of all transactions by which his title may be affected.

When does registration operate as notice?

(a) The instrument should be compulsorily registerable. (Section 17 of Registration Act). If it is not required by law to be registered (Section 18 of Registration Act) its registration does not amount to notice. So the registration of an agreement to mortgage or of a hypothecation of goods or of an agreement not lo alienate property is no notice.

(b) The instrument should be registered in the manner prescribed by the Indian Registration Act, 1908. It should be entered into the books kept under Section 51 of that Act and its particulars correctly entered in the indices under Section 55 of the Act.

A mistake of the Registration Department in entering a transaction in the wrong book does not invalidate the transfer. It is a mistake of procedure covered by Section 87 of the Registration Act and so the registration is not rendered invalid. An innocent third party, however, is not to be prejudiced by the negligence of the transferce in not getting the mistake rectified. Where the third party fails to make proper inquiries he would be deemed to have notice of the transfer notwithstanding the mistake in registration,

(c) The person affected with notice should have acquired his interest subscquent to the registration-The registration of a sub-mortgage is not notice of it to the mortgagor. By registration notice cannot be imputed to prior transferees?

(4) Possession as notice.- Before the insertion of Explanation II, in the section, there was a difference of opinion how far possession was to be regarded as notice.

It was generally held that it should be regarded as constructive notice of the rights of the person in possession. In National Bank of Australia v. Paul Hamilton, their Lordships of the Privy Council observed: "It has always been held that such possession is in itselt notice of the title under which such possession is retained which anyone dealing with the property cannot, without risk, ignore."

Notice of a deed is notice of the contents.- Actual notice of a deed is also a constructive notice of all the material facts affecting the property, which appear on the face of the deed or could be reasonably inferred from its contents. Notice must be given in the same transaction.

Moreover, actual notice of an instrument affecting one's title is constructive notice of all documents which are recited in the instrument and which on examination of the instrument would have brought to his knowledge, provided the documents relate to the title and form part of the chain of the title.

If a purchaser omits to inspect title-deeds he may be affected with constructive notice of all facts which he would have discovered had he chosen to make proper investigation of title. Where a property subject to a maintenance charge was sold and the purchaser, even though knowing that there were several maintenance allowances, did not make inquiries whether any allowance was made a charge on the property, and omitted to inspect title-deeds. Held, that the purchaser must be deemed to have constructive notice of the charge.

Attestation does not amount to notice.- The above rule applies only to the parties to an instrument, and not to the attesting witness. A witness subscribing to a deed need not know the contents of the deed, for a witness in practice is not privy to the contents of the deed. Therefore, attestation of document does not by itself import consent to or knowledge of the contents of the document, nor fix him with notice of its provisions. There may, however, be circumstances under which the witness may be deemed to have notice of the contents of the document he is attesting e.g., where attestator was present throughout the transaction and attested the deed after hearing its contents, he must be fixed with notice of its contents, and cannot afterwards challenge the right of the transferee.

(5) Notice to agent.- Notice through agency is defined in Explanation III to Section 4 of the Transfer of Property Act. For such notice to arise the following circumstances should be present:

(1) Notice should have been received in his capacity as agent.- i.e. while acting on behalf of the principal. In re David Payne and Co. a company borrowed within its borrowing powers but for a purpose not authorised by its memorandum of association. The security in the hands of the lending company in such a case would be invalid only if it had knowledge or notice of the fact that the money would be applied for an improper use. The question was whether lending company had knowledge of the fact before the borrowing company had applied for the loan. It was held that this knowledge could not be imputed to the company because the director did not then profess to act on behalf of the lending company.

(2) Notice must have been given in the course of agency business.- Notice should have been received in the course of the agency business. In Chabildas v. Dayal Mawzi, property was sold under a power of sale in an English mortgage. A depreciatory condition was introduced in the contract of sale. After the sale was completed, the purchaser instructed a solicitor to act for him in the preparation of the conveyance. The solicitor knew that the title was good and that the depreciatory condition was not justified. The Bombay High Court held that the purchaser was affected with constructive notice of the true state of title. Reversing the decision Sir Arthur Wilson delivered the judgement of the Privy Council observed:

"Till the contract of sale was signed, the attorney was not acting for the purchaser. The only thing in which he did so act was the subsequent preparation of the conveyance. The view of the Court of appeal imputes to the principal the knowledge of an agent not acquired in the matter for which he was agent and used it to upset a transaction of a date before the agency commenced. This is an extension of the doctrine of constructive notice in which their Lordships concur."

(3) Notice must be of a fact which is material to the Agency Business.- The notice should be of a matter material to the agency business. In Wyllis v. Polien, an assignment of a mortgage was effected through the mortgagee's solicitor. The solicitor knew that there was another encumbrance on the property. That fact not being material to the transaction of assignment, no notice could be imputed to the assignee of the mortgagee. Subsequent advances made by him to the mortgagor were, therefore, held to be unaffected by notice to the intermediate mortgage.

(4) Fraud by an agent.- In English law where an agent is guilty of fraud and has an interest in concealing the knowledge from the principal and does so conceal it, the general rule that notice to agent is notice to principal does not apply and the principal is not to be imputed with notice of the fraud. This exception will apply with greater force where the party seeking the benefit of the doctrine of constructive notice is a party to or is cognizant of the fraud. In Sharpe v. Foy, S, advanced moneys on a mortgage executed in his favour by F, the transaction being negotiated by C, a solicitor's clerk who acted for both parties. It appeared that there was a previous settlement affecting the land comprised in the mortgage and F had communicated that fact to C. C, however, told F that he would not communicate it to S, as it would make him nervous and cause him to hesitate about advancing money. It was held that when C refused to communicate the fact to S, it was the duty of F himself to communicate it to S, that by his failure to do so F must be considered to be a party to what amounted to a fraud committed by C upon his client S and that "If it were to be held that notice given under these circumstances was binding upon the principal, it would amount to robbing the person who advanced the money." A similar view was taken in Cave v. Cave.

In introducing the proviso to Explanation III, by the Amending Act XX of 1929, the Legislature seems to have departed to some extent from the English Law as stated above under the proviso, notice even to an agent who fraudulently conceals his knowledge from the principal, will be notice to the principal except against a person who is a party to or otherwise cognizant of the fraud.

State of property.- 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 cgress and ingress may operate as notice of right to way.

Lis pendens and decree as notice.- The pendency of a suit is very often spoken of as operating by way of notice to all the transferees of the property involved in the suit. That this view was incorrect was pointed out in Bellamy v. Sabine. In that case, the Lord Chancellor said: "Ii is scarcely accurate to speak of lis pendens affecting a purchaser upon the doctrine of notice, although undoubtedly the language of the Court often so describes its operation it affects him, not because it amounts to notice, but because the law does not allow to litigant partics, and give to them pending the litigation, rights in the property in dispute so as to prejudice the opposite party. A decree is not a notice to a purchaser with and purchases after the decree where it is merely declaratory and inexccutable.

Fraudulent party cannot plead constructive notice.- A person who is himself guilty of fraud in transactions with another cannot plead that the other had constructive notice of the facts which he was bound to disclose and which he actively concealed from him. Thus, where a person who had a registered mortgage in his favour obtained a decree against the mortgagor on another debt and sold the property in execution but fraudulently concealed the fact of his mortgage in execution proceedings, it was held that he was stopped from charging the execution purchaser with constructive notice of the registered document. Similarly, it was held, the doctrine of constructive notice by the omission of a purchaser to call for and examine the title-deeds of his vendor, would not cover a case where the vendor practised a fraud on the purchaser.


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