HAJI ABDUL GAFUR HAJI HUSSENBHAI Vs. AHMEDABAD MUNICIPAL CORPORATION
LAWS(GJH)-1966-4-8
HIGH COURT OF GUJARAT
Decided on April 29,1966

HAJI ABDUL GAFUR HAJI HUSSEINBHAI Appellant
VERSUS
AHMEDABAD MUNICIPAL CORPORATION Respondents

JUDGEMENT

P.N.BHAGWATI, M.U.SHAH - (1.) This appeal with leave under Clause 15 of the Letters Patent raises a very interesting question namely how far the doctrine of constructive notice affects an auction purchaser who purchases at a sale held by the Court in execution of a decree property which is subject to a charge in favour of the Municipal Corporation for arrears of municipal taxes. The property which forms the subject matter of dispute in the present appeal and to which for the sake of convenience we will refer as the suit property originally belonged to one Haji Nurmahmad Haji Abdulmian. Sometime towards the end of February 1949 Haji Nurmahmad Haji Abdulmian ran into financial difficulties and on 7th March 1949 a petition was presented for adjudicating him as an insolvent. On the petition interim Receivers were appointed to take charge of the estate of Haji Nurmahmad Haji Abdulmian and by an order dated 14th October 1950 he was adjudicated an insolvent. The Receivers appointed under the order of adjudication took charge of the estate of Haji Nurmahmad Haji Abdulmian and the suit property along with other properties belonging to Haji Nurmahmad Haji Abdulmian vested in the Receivers. Now it appears that the suit property was mortgaged in favour of a firm called Messrs. Hargovind Laxmichand and this firm obtained a mortgage decree for realisation of the mortgage and brought the suit property to sale in execution of the mortgage decree. At the auction sale the plaintiff was the highest bidder his bid being for Rs. 22 300.00and he was accordingly declared purchaser of the suit property on 28th November 1954. At the date when the plaintiff purchased the suit property there were municipal taxes in respect of the suit property in arrears for the years 1949-50 to 1953 The suit properly was therefore attached by the Municipal Corporation by an attachment notice dated 20th July 1955 for the arrears of municipal taxes which amounted to Rs. 543-79 np. Since the Municipal Corporation threatened to sell the suit property in pursuance of the attachment levied by it the plaintiff filed a suit for a declaration that he was the owner of the suit property and that the arrears of municipal taxes due from Haji Nurmahmad Haji Abdulmian were not recoverable by attachment of the suit property and that the warrant of attachment of the suit property issued by the Municipal Corporation was illegal and ultra vires. The plaintiff also sought a permanent injunction restraining the Municipal Corporation from taking the suit property in attachment for arrears of municipal taxes. The trial Court rejected the claim of the plaintiff for a declaration that the suit property was not liable to be attached for recovery of arrears of municipal taxes but held that the warrant of attachment actually issued by the Municipal Corporation was illegal and void and accordingly issued an injunction restraining the Municipal Corporation from enforcing that warrant of attachment against the plaintiff in respect of the suit property. The plaintiff was aggrieved by this decree passed by the trial Court and he therefore preferred Appeal No. 118 of 1959 in the District Court Ahmedabad. The Municipal Corporation was also dissatisfied with this decree and Appeal No. 116 of 1959 was accordingly preferred by the Municipal Corporation. Both the appeals came up for hearing before the Extra Assistant Judge Ahmedabad. The learned Assistant Judge held that by virtue of sec. 141 of the Bombay Provincial Municipal Corporations Act 1949 the suit property was subject to a first charge in favour of the Municipal Corporation for arrears of municipal taxes and that the Municipal Corporation was therefore entitled to recover arrears of municipal taxes by realising such charge. It was contended on behalf of the plaintiff before the learned Assistant Judge that even if the suit property was subject to a first charge in favour of the Municipal Corporation under sec. 141 the plaintiff must be held to have received the suit property free from the charge inasmuch as the plaintiff had no notice of the charge at the date when he purchased the suit property. This contention was negatived by the learned Assistant Judge by observing that though it was true that the plaintiff had no actual notice of the charge at the date when he purchased the suit property the plaintiff had certainly constructive notice of the charge and he could not therefore be said to have received the suit property free from the charge. The learned Assistant Judge accordingly took the view that the suit property was liable for the payment of arrears of municipal taxes and that the plaintiff was not entitled to a declaration that the municipal taxes were not recoverable from the suit property. So far as the question of legality of the warrant of attachment was concerned the learned Assistant Judge held that the warrant of attachment was not legal and valid inasmuch as it was issued in the name of Haji Nurmahmad Haji Abdulmian. According to the learned Assistant Judge it was the plaintiff who was liable to pay the arrears of municipal taxes and the proceedings were therefore required to be taken against him and the warrant of attachment should also therefore have been issued in the name of the plaintiff. The Assistant Judge in the result held that the warrant of attachment issued by the Municipal Corporation was illegal and void and that the Municipal Corporation was rightly restrained from enforcing that warrant of attachment against the plaintiff in respect of the suit property. The learned Assistant Judge in accordance with this view dismissed both the appeals. The plaintiff thereupon preferred a Second Appeal in this Court but the appeal was summarily rejected by Raju J. The learned Judge however granted leave under Clause 15 of the Letters Patent and that is how the present appeal comes before us.
(2.) This being a Letters Patent Appeal preferred from a decision given by a single Judge of this Court in Second Appeal it is elementary that the findings of fact arrived at by the first appellate Court must be accepted as valid and binding and the only questions which can be debated before us are questions of law arising on those findings of fact. Having regard to the findings of fact reached by the first appellate Court it is clear that municipal taxes in respect of the suit property were in arrears for the years 1949-50 to 1953-54 at the date when the suit property was purchased by the plaintiff. Now sec. 141 of the Bombay Provincial Municipal Corporations Act 1949 provides that the property-taxes due under the Act in respect of any building or land shall subject to the prior payment of the land revenue if any due to the State Government thereupon be a first charge in the case of any building or land held immediately from the Government upon the interest in such building or land of the person liable for such taxes and upon the movable property if any found within or upon such building or land and belonging to such person; and in the case of any other building or land upon the said building or land and upon the movable property if any found within or upon such building or land belonging to the person liable for such taxes. The arrears of municipal taxes in respect of the suit property were therefore a first charge on the suit property by reason of sec. 141 at the date when the suit property was sold by the Court by public auction. This position was not seriously disputed by Mo. Arun H. Mehta learned advocate appearing on behalf of the plaintiff but he contended that the plaintiff had no notice of the charge at the date when he purchased the suit property and that the suit charge was therefore not enforceable against the suit property in the hands of the plaintiff. This contention was based on the second paragraph of sec 100 of the Transfer of Property Act which provides that save as otherwise expressly provided by any law for the time being in force no charge shall be enforced against any property in the hands of a person to whom such property has been transferred for consideration and without notice of the charge. The argument was that the plaintiff was a person to whom the suit property was transferred for consideration and since he had no notice of the charge the charge was not enforceable against the suit property in his hands. The answer given by Mr. S. B. Vakil on behalf of the Municipal Corporation to this contention was a threefold one. The first answer was that since the plaintiff purchased the suit property at an auction sale held by the Court in execution of the mortgage decree the plaintiff could not be said to be a person to whom the suit property was transferred for consideration within the meaning of the second paragraph of sec. 100. The second answer given on behalf of the Municipal Corporation was that sec. 141 expressly provided that the charge created under that section shall be enforceable against all transferees including transferees for value without notice of the charge and the applicability of the equitable rule contained in the second paragraph of sec. 100 was therefore excluded by reason of the saving clause save as otherwise expressly provided by any law for the time being in force which qualified that Rule. The third answer which the Municipal Corporation made was that in any event the plaintiff had constructive notice of the charge and was therefore not entitled to take advantage of the provision enacted in the second paragraph of sec. 100. Now if any of these answers is a valid answer it is apparent that the plaintiff must fail for in that event he would not be entitled to place reliance on the second paragraph of sec. 100. Sec. 100 as originally enacted was in the following terms: 100 Where immovable property of one person is by act of parties or operation of law made security for the payment of money to another and the transaction does not amount to a mortgage the latter person is said to have a charge on the property; and all the provisions here in before contained as to a mortgagor shall so far as may be apply to the owner of such property and the provisions of secs. 81 and 82 shall so far as may be apply to the person having such charge. Nothing in this section applies to the charge of a trustee on the trust-property for expenses properly incurred in the execution of the trust. By Amending Act 20 of 1929 sec. 100 was amended and after the amendment it read as follows: 100 Where immovable property of one person is by act of parties or operation of law made security for the payment of money to another and the transaction does not amount to a mortgage the latter person is said to have a charge on the property; and all the provisions here in before contained which apply to a simple mortgage shall so far as may be apply to such charge. Nothing in this section applies to the charge of a trustee on the trust-property for expenses properly incurred in the execution of his trust and save as otherwise expressly provided by any law for the time being in force no charge shall be enforced against any property in the hands of a person to whom such property has been transferred for consideration and without notice of the charge. It was by the amendment that the provision on which reliance is placed on behalf of the plaintiff was introduced in the second paragraph of sec. 100. Prior to the introduction of this provision there was a conflict of decisions in India as to whether a charge was enforceable against a property in the hands of a transferee for consideration without notice of the charge. The law on the point in England was clear and this is how it is stated in Halsburys laws of England Third Edition Vol. 14 Paragraph 1008: Ordinarily an assignee takes subject to all equities to which the assignor was subject; and this is the case where the assignee is a volunteer and also where he is a purchaser for value if he has notice of the circumstances which raise the equity. But if he is a purchaser for value without notice the equity cannot be asserted against him.... In India however the question was one of some doubt and the law was not uniformly settled. The equitable rule that a charge cannot be enforced against a purchaser for value without notice of the charge was followed by the Calcutta High Court in Akhoy Kumar Banerjee v. Corporation of Calcutta 42 Calcutta 625. Sir Ashutosh Mukherjee delivering the judgment of the Court pointed out that the broad distinction between a mortgage and a charge is that whereas a mortgage is in essence a transfer of an interest in specific immovable property the charge only gives right to payment out of a particular fund or particular property without transferring that fund or property and consequently while a mortgagee can follow the mortgaged property in the hands of a transferee from the mortgagor a charge can be enforced against a transferee only if he has taken with notice of the charge. This was also the view taken by the Allahabad High Court in a number of decisions. However so far as the Bombay High Court was concerned it was clearly decided by that High Court as far back as 1913 in Bhoje v. Gangabai 15 Bom. L. R. 809 that even a transferee for consideration without notice of the charge takes the property subject to the charge. The equitable rule which prevailed in England was not applied by the Bombay High Court in a case where a property subject to a charge was transferred to a transferee for consideration who took it without notice of the charge. A similar view was also taken by the Madras High Court in Srinivasa Raghava Aiyangar v. K. R. Raganath Aiyangar (1919) 36 M. L. J. 618 and by the Chief Court of Oudh in Razia Begam v. Ishrat Ali A. I. R. 1929 Oudh 316. It was presumably to bring the law in India in line with the English rule of equity that the Legislature enacted the second paragraph of sec. 100 by providing that unless otherwise expressly provided by any law for the time being in force no charge shall be enforceable against any property in the hands of a person to whom such property has been transferred for consideration and without notice of the charge. But for the introduction of this provision according to the law as declared by the Bombay High Court the charge would be binding on the transferee of the property even though the transfer might be for consideration and the transferee might have no notice of the charge. It is therefore clear that unless the plaintiff can bring his case within this newly added provision introduced in the second paragraph of sec. 100 the charge must be held to be enforceable against the suit property in the hands of the plaintiff.
(3.) Turning now to the three contentions urged by Mr. S. B. Vakil on behalf of the Municipal Corporation in answer to the claim of the plaintiff to come within the second paragraph of sec. 100 the first contention was that the plaintiff could not be said to be a person to whom the suit property was transferred for consideration within the meaning of the second paragraph to sec. 100 since he was a purchaser at an auction sale held by the Court in the execution of a decree. So far as this contention is concerned there was at one time a conflict of decisions in the various High Courts in India as to whether an auction sale in execution of a decree could be regarded as a transfer within the meaning of the second paragraph of sec. 100 but this conflict has now been laid at rest by the decision of the Supreme Court in Laxmi Devi v. Mukand Kanwar A. I. R. 1965 S. C. 834 where the Supreme Court has taken the view that the second paragraph of sec. 100 must be deemed to include auction sales and that a purchaser at an auction sale held in execution of a decree would therefore be a transferee within the meaning of the second paragraph of sec. 100. This decision of the Supreme Court provides the most complete refutation of the first contention urged on behalf of the Municipal Corporation.;


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