Doctrine_of_Notice_Section3.ppt

Section 3 TPA, 1882

1. Transfer of Property Act, 1882
Section 3
Doctrine of Notice

2. •Theliteralmeaningofterm‘notice’is
knowledge.Thedoctrineofnoticein
referencetoTransferofPropertyAct,1882is
usedtoadjudicatethedisputesregarding
rightsandclaimsoftheparties,whoare
involvedinunconscionabletransaction.
•Forexample,Afathermakesawillinthe
favourofhissonandimposesaconditionthat
hewillpayRs.5,000/-permonthtohis
motherforhermaintenanceandtillhemakes
analternativearrangementofanequivalent
amountforher,heshouldnotsellthe
property.

3. •Hereitwouldbeunconscionableforthesontosell
thepropertywithoutmakingsuchanarrangement.
ThesonsellsthepropertytoX,withoutmakingthe
requiredarrangement.Herehismotherwantsto
proceedagainstX,whohaspaidthewholepriceof
theproperty.
•HereinthisinstancethemotherandXareinnocent
butthesonhastakenupanunconscionablestand.
Themotherandpurchaserofthepropertyarebound
togotothecourt,andheretherightsanddutiesof
themotherandthepurchasershallbedetermined
onthebasisofdoctrineofnotice.
»Contd…

4. •TheCourtinthiscasewillexaminethatwhetherX,
thepurchaser,isabonafidepurchaserandhehad
the‘notice’orknowledgeofmother’srightsover
thepropertyatthetimeofcontractbetweenhim
andson.Incase,itisprovedthathehadnoticeof
thisfact,itbecomeshisresponsibilitytohonourthe
rightofthemother,otherwise,themotherwould
notbeabletoenforceherclaimagainsttheproperty
inhandsofthepurchaser.

5. Duties of Transferee
•1.Transfereemustsatisfyhimselfrespectto
thecompetencyofthetransferortotransfer
theproperty;astheruleis,noonecanpassa
bettertitlethanwhathehas.Ifthetransferor
isnotcompetenttotransfertheproperty,the
transfereewillnotgetagoodtitle.

6. Duties of Transferee..
•2.Transfereemustexaminealltherelevant
documentsrelatingtothepropertyandthe
transaction.Eachandeveryrelevantpaperisto
inspected,astheruleis‘actualnoticetoadeedis
constructivenoticeofitscontents’.Ifthetransferee
hasinhispossessionadocumentrelatingtothe
property,hewillbedeemedtoknowaboutits
contents.Ifaliabilityonthepropertyisascertainable
fromaparticulardocument,hewillbeimputedwith
constructivenoticeofthesame.

7. Duties of Transferee…
3.Thetransfereemustsatisfyhimself,astowhether
thereisachargedueovertheproperty.Hemust
inquirethefactregardingtheownershipof
property.Ifhehadpurchasedtheproperty,and
thatpersonisavailable,hecanenquirefromhim
aboutthepossibilityofachange.Hecanalso
inspectthosedocumentswiththehelpofwhich
thepropertywasacquired.Forexample,ifthe
transfereeknowsthatthetransferorhadacquired
thepropertythroughawill;hemustexaminethe
willtofindoutthepossibilityoftheexistenceofa
charge.

8. Kinds of Notice
•Notice is of three kinds:
(i)Actual notice
(ii)Constructive or Implied notice
(iii)Notice to agent or imputed notice

9. Actual Notice
•Itmeansactualknowledge.Apersonissaidtohave
actualnotice/expressnoticeofafactifheactually
knowsit.Toconsideritasbinding,onewillhaveto
lookatthefactthatwhetherthatnoticeisdefinite
andinformationgivenaboutthething,inrespectof
whichthenoticeisissued,iscorrect.Itmustbe
definiteinformationgiventoorattainedinthe
courseofnegotiationsbypersoninterestedinthe
property.Apersonisnotboundtoattendvague
rumors.

10. •Amerecasualconversationinwhichknowledgeofa
certainthingisimparteddoesnotmeannoticeofit,
unlessthemindofapersonhas,insomewaybeen
broughttoanintelligentapprehensionofthenature
ofthething,sothatareasonablemanoranynormal
manofbusinesswouldactupontheinformation,
andwouldregulatehisconductaccordingly.Inother
words,thepartyallegingnoticemustshowthatthe
otherpartyhadknowledgewhichwouldoperate
uponthemindofanyrationalman,ormanof
business,andmakehimactwithreferencetothe
knowledgehehassoacquired.

11. •Hereageneralclaimwouldnotbeenoughto
affectthestatusofapurchaserwithnoticeof
adeedofwhichhedoesnotappeartohave
knowledge.Ifapersonknowsthatanother
hasclaimorinterestinthepropertyforwhich
heisnegotiating,heisboundtoinquirethat
whatistheinterestofthatanotherperson,
andifheomitstodoso,hewillbeboundto
particularsofextentofsuchinterest.

12. •Alsoitisimportantthatthenoticeshould
havebeengiveninsametransaction.Aperson
isnotboundbynoticegiveninaprevious
transactionwhichhemayhaveforgotten.

13. Constructive Notice
•Itmeans‘knowledgeimputedbytheCourtona
person’.Itisanoticewhichtreatsapersonwho
oughttohaveknownafact,asifheactuallyknowsit.
Apersonhasconstructivenoticeofallthefactsof
whichhewouldhaveacquiredactualnoticehadhe
madethoseinquirieswhichheoughtreasonablyto
havemade.Inotherwords,apersonmayclaimthat
hedidnotknowafact,butifthecircumstances
surroundinghimaresuch,thatasareasonable
prudentperson,heoughttohaveknownafact,he
willbedeemedtoknowit.

14. Constructive notice can be applied by the
Court in following cases:
a)There is wilful abstention from an enquiry or
search.
b)Gross negligence
c)Registration of the Document
d)Actual possession

15. (a) Willful abstention from search which
one ought to make
•Incaseofabsenceofactualnotice,aperson
mayconstructivelyandintheeyeoflaw,be
affectedwithnoticeoffactwhenhehas
wilfullyordeliberatelyabstainedtotake
noticeofafactwhichareasonablemanwould
havetakeninthenormalcauseoflife.Itis
suchabstentionfromenquiryorsearchas
wouldshowwantofbonafidesinrespectofa
particulartransaction.

16. Rule of Presumption
•Thepresumptionofthecourtinsuchlike
caseswouldbethatthepersonimputedwith
noticeofthecourthaspurposelyabstained
frommakinganinquiryintothecontentsof
thedeedwiththeintentionofavoidingtaking
itsnotice.

17. •Soconstructivenoticeisimpliedonlyinsituations
whereapersonhasmeansofknowingaaparticular
fact,buthasfailedtoknowit.Thereexistcircumstances
whichoughttoputhimonaninquirywhich,if
prosecuted,wouldhaveledtoadiscoveryofit.
•However,ifapersonhasnoopportunitiestoobtain
informationaboutsomething,noticecannotbeimplied
onhimaboutthething.Thusincases,wherethe
purchasersdoesnothavetheslightestideaorsuspicion
aboutanyearlieragreemententeredinto,farawayfrom
theplacewherethepropertyissituated,itcannotbe
saidthattherewasanywillfulabstentiononthepartof
thepurchaser.

18. Bank of Bombay v. Suleman 33 Bom 1 (PC)
•Slefthishouseandlandtohissonsbyhisfirstwife
andappointedthemastheexecutorsofhiswill.He
bequeathedRs.30,000/-tothesonsbyhissecond
wifeasachargeuponthepropertygiventothesons
offirstwifebywill.
•Thefirstwife’ssonborrowedfromtheBank
depositingthetitledeedsofthehouseandlandas
security.IftheBankhadmadeinquiriesastohow
themortgageederivedthetitlefromS,theywould
havehadcognizanceofthewillandsoofthecharge
infavourofthesecondwife’ssons.Therefore,they
werefixedwithconstructivenoticeofthecharge
whichaccordinglyprevailedoverthemortgagetothe
Bank.

19. •Thereforeincaseofwilfulabstentionfrommakingan
inquiry,whenthereseemsanydoubtorsuspicion.Here
lawdemandsthecarefulandvigilantconductonthepart
ofthetransfereetoverifythecorrectnessofthetitleofthe
transferor,andthepossibilityofexistenceofchargeover
theproperty.Soifcircumstancesshowthattheremaybe
somethingwrongandsituationdemandssomeprobeor
investigationbythetransfereeregardingthetruetitle.Ifin
suchcases,transfereefailstoinvestigate,thelawwill
presumethathehandaninklingofthefact,thatsomething
waswrong,buthehadafraudulentdeterminationnotto
knowthetruth.Willfulabstentionthereforepointsoutat
lackofbonafideactasdistinguishedfrommereomissionto
makeinquiries.

20. •AsinMohd.YunusKhanv.CourtsofWards
AIR1937Oudh301,wherethepurchaseris
shownthetitledeedswhichmentionthatthe
propertyispartitionedpropertywithcertain
conditions,thepurchaserherewillbe
consideredashavingtheknowledgeofthe
factofthepartitionanditsconditions,herehe
cannotbeallowedtotakepleaofthe
ignoranceofsuchconditions.

21. (b) Gross Negligence
Negligencemeanscarelessnessoromissiontodosuchact
whichamanofordinaryprudencewoulddo.Doctrineof
constructivenoticeapplieswhenaperson,buthisgross
negligencewouldhaveknownthefact.Merenegligenceis
notpenalised.Itshouldbehighdegreeofneglect.In
Hudstonv.Vincy,(1921)1Ch98,EveJ.said,“Gross
negligencedoesnotmeanmerecarelessness,butmeans
carelessnessofsoaggravatedanatureastoindicatea
attitudeofmentalindifferencetoobviousrisk.”Itcanbe
describedas‘adegreeofnegligencesogrossthatacourtof
justicemaytreatitasevidenceoffraud,imputeafraudulent
motivetoitandvisititwiththeconsequencesoffraud’.

22. Bank Ltd. v. P.E. Guzderand Co. Ltd., (1929)
56 Cal 868
•Respondent(A)depositedtitledeedsofhishousein
CalcuttawiththeclaimantBank(N)tosecuretheloanhe
hadtakenfromthebank.Subsequently,Arepresentedthe
Bankthatintendingpurchasesofthehousewantedtosee
thetitledeeds.ThebankreturnedthedeedstoAwho
depositedthedeedswiththeplaintiffbankinorderto
securealoan.ItwasheldthattheBankN,onaccountof
grossnegligenceinpartingwiththedeedhaslostitsprior
rightswithrespectofthehouse.

23. Alwar Chetty v. Jagannath 1928, 54 Mad LJ
109
•AsellshispropertytoB,anddeliverspossessiontohimfor
aconsiderationofRs.10,00,000/-.BpaysasumofRs.
5,00,000/-andpromisedtopaythebalanceaftersix
months.Thefactthatabalanceoffivelakhshastobepaid
toAbyB,iswrittenonthetitledeeds.
•BfailstopayA,andmortgagesthispropertybydepositof
thetitledeedsinfavourofC.Cfailstoreadthenotingthat
BhastopayRs.5,00,000/-toAandpaystheloanamount
ofRs.5,00,000/-toB.BfailstorepaytheloanamounttoC
aswell,andthispropertythatissubjecttothemortgageis
broughtupforsale.

24. •Incase,totalamountrecoveredaftersaleof
thepropertyis5,00,000/-.Atthispoint,Aputs
uphisclaimof5,00,000/-rupees.
•Theissueis–whowouldgetthisamount,Aor
C.
•Ccangetthisamountonlysubjecttothe
condition,ifhehasenteredthetransactionas
abonafidetransfereewithoutnoticeofA’s
claimovertheproperty.Ifheprovesthefact,
thathehadnoactualorconstructivenoticeof
A’sclaimovertheproperty.

25. •However,thetitledeed,onwhichanotingwasmade
withrespecttothebalanceofmoneytobepaidbyB
toA,wasinpossessionofC.INfact,itwasonthebasis
ofthetitledeedsthathehadadvancedloadtoB.Asa
reasonableprudentperson,heoughttohavereador
examinedthetitledeedscarefully,andifhefailstodo
that,hewouldbeguiltyofgrossnegligence.Secondly,
ifheinfactexaminesthetitledeeds,andfindsthe
noting,thisisthestartingpointofinquiry,which
needsfurtherinvestigation.Ifhefailsfurtherprobe
intothematter,hewouldbeguiltyofwillful
abstentionfrommakinganenquiry.Hereevenifheis
satisfiedbymakinginquiriesfromonlyBandgetting
anincorrectanswerfromhim,thatwouldbe
insufficientbecauseasareasonableprudentperson,
heshoulddirecthisenquiresagainstaperson,who
wastobepaidthatamount-Ainthiscase,notBwho
isundertheobligationtopay.

26. •HereitisunconscionableonB’spart,notto
disclosetoCthefactthatthebalanceamount
wasnotpaid,whichomissionledtothe
disputebetweenAandC.Here,Cwouldbe
imputedwithconstructivenoticeofA’sclaim
overtheproperty,asheisguiltyofbothgross
negligenceaswellaswillfulabstentionfrom
makinganinquiry,andA’sclamwillbe
upheld.

27. Kshtranath v. Harsukhdas, AIR 1927 Cal.
538
AwhowastheownerfoTenbigasoflandmortgages
thelandtoB,bydepositoftitledeedsofthelandand
raisesaloanofRs.20,00,000/-.Tenmonthslater,he
professestoselltwobigasofthemortgagedlandtoc;
foraconsiderationof10,00,000/-Caskshimforthe
papersrelatingtotheproperty,andAshowshima
photocopyofthetitledeeds.Casksfortheoriginal
papers,andApromisestoshowhimbyaweekstating
thattheyarekeptinsafecustody.C,satisfiedwithA’s
answer,doesnotpressfortheoriginals,pays
considerationandpurchasestheland.LaterBwhose
loanamountremainsunpaid,causesthepropertytobe
sold,includingthetwobigasthatwereinpossessionof
C.

28. •Atthistime,Craisesanobjection,statingthat
heistheownerofthesetwobigas,ashehad
purchasedthemafterpaymentoffull
consideration,andtherefore,theycannotbe
soldinexecutionproceedings.Todecidethe
claimsofBandC,ithastobeseenwhetherit
canbeshownthatCknewaboutB’srights
overtheproperty.Canconstructive
knowledgeornoticebeimputedonhim?

29. •Herehehaspurchasedthepropertyonthestrength
ofaphotocopyofthetitledeeds,withouteven
lookingattheoriginalsandthereforewasguiltyof
grossnegligence.Further,whereevenafterhis
askingfortheoriginaltitledeeds,thetransferordid
notproducethem,asareasonableprudentman,he
shouldhaveascertainedorverified,whetherthetitle
deedswereindeedwiththetransferorornot,andin
notdoingthat,hewasguiltyofwillfulabstention
frommakinganinquiry.

30. •Therefore,hadheprobedfurtherandinsistedon
enteringtransactiononlyonthestrengthofthe
completeoriginalpapers,hecouldhavedetectedthe
truth.Ashehadfailedtodothat,hewouldbe
imputedwithconstructivenoticeoftherightsofthe
mortgagee,B,andwilltakethepropertysubjectto
hisrights.B’srightsthereforewillbeupheldhere.
However,ifAhadprocuredthetitledeedsfromB
andChadpurchasedthepropertyafterinspecting
thetitledeeds,thesituationwouldhavebeen
different.

31. (c) Registration as notice
•ExplanationItoSection3providesthat‘whereany
transactionrelatingtoimmovablepropertyisrequiredby
lawtobeandhasbeeneffectedbyaregisteredinstrument,
anypersonacquiringsuchpropertyoranypart,orshareor
interestinsuchpropertyshallbedeemedtohavenoticeof
suchinstrumentasfromthedateofregistration,‘Thusany
personinterestedinthetransactionwhichisregistered
undertheprovisionsoftheIndianRegistrationAct,1908
cannotpleadthathehasnonoticeofthetransfermade
underthedeed.
•Thismeansthatifaninstrumentisrequiredtobe
registered,thenitamountstonotice.Incaseadocument
doesnotrequiretoberegistered,itsregistrationdoesnot
amounttonotice.

32. •Section17&18,theRegistrationAct,1908-The
instrumentshouldberegisteredinthemanner
prescribedbytheActof1908.
•Inviewoftheaboveregistrationmaybetreatedas
constructivenoticeofitscontent,followingconditions
mustbesatisfied:
i.Theinstrumentmustbecompulsorilyregistrable.
ii.AlltheformalitiesprescribedundertheRegistration
Actaredulycompletedinthemannerprescribed.
iii.Theinstrumentandparticularsmustbecorrectly
enteredintheregisters.
•Afterregistration,documentbecomesapublic
documentandthetitlecanbeconfirmedinthe
Registrar’soffice.

33. (d) Actual Possession
•ExplanationIIofSection3providesthat,“anyperson
acquiringanyimmovablepropertyoranyshareorinterest
insuchpropertyshallbedeemedtohavenoticeofthe
title,ifany,ofanypersonwhoisforthetimebeingin
actualpossessionthereof.“Thusinordertooperateas
constructivenotice,possessionmustbeactual,i.e.,de
factopossession.Itamountstonoticeoftitleinanother.
•Denielsv.Davison,(1809)16Ves240-Aleasedahouse
andgardentoBwhotakespossessionoftheproperties.A
thensellsthesaidpropertiestoC.Cisdeemedtohave
constructivenoticeofB’srightsovertheseproperties,i.e.,
Ccannotpleadthathehadnoknowledge(notice)ofthe
factofB’spossessionontheproperties.

34. Imputed Notice /Notice to An Agent
•ExplanationIIItoSection3providesthat,“Apersonshall
bedeemedtohavehadnoticeofanyfactifhisagent
acquiresnoticethereofwhilstactingonhisbehalfinthe
courseofbusinesstoWhichthatfactismaterial:
•Providedthat,iftheagentfraudulentlyconcealsthefact,
theprincipalshallnotbechargedwithnoticethereofas
againstanypersonwhowasapartytoorotherwise
cognizantofthefraud”
•ThisisbasedonthemaximQuifacitperaliumfacitperse,
i.e.,hewhodoesbyanother,doesbyhimself.InMohori
Bibeev.D.Gliosh,(1903)30Cal539,heldthatalthough
theprinciplewasabsentfromCalcuttaanddidnottake
partinthetransactionpersonally,hisagentin
Calcuttastoodinhisplaceforthepurposesofthe
transactionandtheactsandknowledgeofthelatterwere
theactsandknowledgeoftheprincipal.

35. •NoticethroughAgencyhasbeendefinedu/s4,which
laiddownfollowingrequirementsfornoticetoan
Agent:
•(1)Noticeshouldhavebeenreceivedinhiscapacityas
AgentonbehalfofthePrincipal.
•(2)Noticemusthavebeenreceivedinthecourseof
businessofAgency.
•(3)Noticemustbeofafactwhichismaterialtothe
agencybusiness.
•(4)FraudbyAgent:Insuchlikecases,whereagentis
guiltyoffraudandhasaninterestinconcealingthe
knowledgefromtheprincipalanddoessoconcealit,
thegeneralruleisthatnoticetoagentistoprincipal
doesnotapply.Theprincipalcannotbeimputedwith
noticeofthefraud.