Constructive Notice (T. P. Act)

In this article, we shall study the meaning of notice, actual notice, constructive notices, and instances where the Court presumes the knowledge of facts.

Notice:

A person is said to have a notice of a fact when he actually knows that fact, or when, but for wilful abstention from an inquiry or search which he ought to have made or gross negligence, he would have known it (Section 3).

Section 3 of Transfer of Property Act enumerates three kinds of notices—

• Actual or express notice
• Constructive or implies notice
• Imputed notice.

 Actual notice: 

A person is said to have actual notice/express notice of a fact if he actually knows it. It must be definite information given in the course of negotiations by a person interested in the property. A person is not bound to attend vague rumors.

Ingredients of Actual Notice:

• The person must actually know the definite information (facts) about the subject in the notice.
• It should neither be a rumour (vague report) nor mere suspicion.       
• The information should be related to the property under transfer.

A wants to purchase property X from B. A reads an advertisement in the newspaper that property X is under litigation and should not be dealt with. Now, this is definite information obtained by A. Then it is actual notice for A.

A wants to purchase property X from B. A hears gossip in a coffee shop that property X may is under litigation. This is not definite information to A. It may be a rumour or mere suspicion, then it is not an actual notice for A.

A wants to purchase property X from B. A comes to know that the adjacent property Y has heavy litigation on it. The information is not about property X, then it is not an actual notice for A.

Constructive Notice: 

It is a notice which treats a person who ought to have known a fact as if he actually knows it. A person has constructive notice of all the facts of which he would have acquired actual notice had he made those inquiries which he ought reasonably to have made. Constructive notice has roughly been defined as knowledge which the court imputes to a person upon a presumption so strong that it cannot be rebutted that the knowledge must be obtained. Not having knowledge of such things cannot be taken as defence in the Court. In short, the doctrine of constructive knowledge is that a person who is bound to make an inquiry and fails to do it, should be held to have notice of all the facts, which would have come to his knowledge had he made the inquiry.

In Bepin v. Priyabrata, AIR 1921 Cal 730 case, the Court observed: “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 Court presumes that there was knowledge of the fact to the person before entering into a contract in the following cases.

Willful Abstention From an Inquiry or Search:

Willful abstention is a conscious abstention by an obligor from doing that which reasonably and under the terms of the obligation he should have done. The words “willful abstention” imply more than negligence or carelessness. The word willful means intentional and the word abstention means transgression. Thus it is intentional abstention on behalf of the obligor. It should be noted that the abstention from inquiry must be with some purpose or design and due to a desire to avoid an inquiry would lead to ultimate knowledge.

In Kausalsi Ammal v. Shankarmthiar, AIR 1941 Mad 707 case, the Court 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 bona fides.

In Jogendra v. Dwarkar, 15 Cal. 681 case, a person refusing a registered letter sent by post is deemed to have constructive notice of its contents, and he cannot afterward plead ignorance of its contents, because he had willfully abstained from receiving it and acquainting himself with its contents.

In Bank of Bombay v. Sulaiman, 33 Bom 1 (PC) case, 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 of his second wife. The sons of the first wife mortgaged the house and land with the Bank by depositing title deeds of the house and land.  Here Bank must have inquired with the sons of the first wife about the way of transfer of title to them from the original owner (Sulaiman). They would have obtained the information of the will and thus the charge in favour of the sons of the second wife. The Court held it to be constructive notice and the charge prevailed over the mortgage to the Bank.

In Alwar Chetty v. Jagannatha, (54 Mad LJ 109 case, B borrowed money from C, and by way of an equitable mortgage, deposited with C, the Sale-Deed by which he had purchased his property from X. There was a recital in this deed that part of the purchase money had been retained by B to meet X’s debts, which B had not paid, and of which C made no inquiries. Upon these facts, the Court held that C had constructive notice of X’s linen for the unpaid purchase money and that the mortgage was subject to X’s linen.

In Hunt v. Lack, (1902) 1 Ch 429 case, A proposed to sell his property to B, who at the same time knew that rents due in respect of the property are paid by the tenants to a third person X. The Court fixed B with the constructive notice of the right of X.

In Ismail Khan’ v. Kali Krishna, (1901) 6 Cal WN 134 case, A refused a registered letter, which contains information relating to property which A proposes to purchase. A will be deemed to have notice of the contents of the latter.

Gross Negligence: 

Negligence means carelessness or omission to do such an act which a man of ordinary prudence would do. The doctrine of constructive notice applies when a person, but his gross negligence would have known the fact. Mere negligence is not penalized.

In Blyth v. Birmingham Waterworks C., 11 Ex. P. 784 case, the Court observed: “Negligence may be stated to be the omission to do something 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.”

In Hudston v. Vincy, (1921) 1 Ch 98, Eve J. said, “Gross negligence does not mean mere carelessness, but means carelessness of so aggravated nature as to indicate an attitude of mental indifference to obvious risk.” It can be described as ‘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’.

In Lloyds Bank Ltd. v. P.E. Guzders and Co. Ltd., (1929) 56 Cal 868, a person A deposited title deeds of his house in Calcutta with Bank N to secure an overdraft from the bank. Subsequently, A, represented the Bank that intending purchaser of the house wanted to see the title deeds. Bank N said that the purchaser can inspect the deed in Bank’s solicitor’s office. A told bank that he would not get a good price for the house if the purchaser came to know that the Bank had the deeds. The bank returned the deeds to A, who deposited the deeds with another bank L in order to secure a loan. It was held that Bank N, on account of gross negligence in parting with the deed has lost its prior rights with respect to the house.

In Imperial Bank of India v. U. Raj Gyaw, (1923) 50 IA 283 case, a purchase was informed that the title deeds were in possession of a bank for safe custody and omitted to make any inquiry from the bank. It was held that he was guilty of gross negligence and was deemed to have notice of the rights of the bank which had the custody of the deeds.

In Nawal Kishore v. The Municipal Board, Agra, AIR 1943 All 115  case, the court felt that there was a principle on which question of constructive notice could 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.

In Ahmedabad Municipality v. Hazi Abdul, (1971) ASC 1201 case, the Supreme Court held that there is no such rule relating to knowledge of tax liability. There is no such duty. The duty to enquire shall depend on facts of each case.

Difference Between Wilful Abstention and Gross Negligence:

In willful abstention, there is intentional or conscious abstention by an obligor from doing that which reasonably and under the terms of the obligation he should have done. In the case of gross negligence, there is no intention of the obligor but as a prudent person, he must notice the things using alertness, common sense.

Registration as Notice:  

The doctrine of constructive notice applies also in case of documents which are required by law to be registered. 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, shall be deemed to have notice of such instrument from the date of registration.

Explanation I to Section 3 provides that ‘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, or share or interest in such property shall be deemed to have notice of such instrument as from the date of registration. After registration, the document becomes a public document and the title can be confirmed in the Registrar’s office.

Any person interested in the transaction which is registered under the provisions of the Indian Registration Act, 1908 cannot plead that he has no notice of the transfer made under the deed. In order that registration may be treated as constructive notice of its content, the following conditions must be satisfied:

1. The instrument must be compulsorily registrable.
2. All the formalities prescribed under the Registration Act are duly completed in the manner prescribed.
3. The instrument and particulars must be correctly entered in the registers and indices kept under Registration 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 under Section 87 of the Registration Act. If the instrument has been registered in the same registration sub-district as that in which the property is situated, it operates as notice from the date of registration. If, however, the property is situated in several sub-districts, or if the registration has been effected in another district, the registered deed will not operate as notice until a memorandum of such registration has been received and filed by the Sub-Registrar of sub-district in which the property is situated.

Actual Possession as Notice of Title: 

Explanation II of Section 3 provides that, “any person acquiring any immovable property or any share or interest in 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. “Thus in order to operate as constructive notice, possession must be actual, i.e., de facto possession. It amounts to the notice of title in another

In Deniels v. Davison, (1809) 16 Ves 240 case, A leased a house and garden to B who takes possession of the properties. A then sells the said properties to C. C is deemed to have constructive notice of B’s rights over these properties, i.e., C cannot plead that he had no knowledge (notice) of the fact of B’s possession on the properties. Whenever purchaser observes such possession, he is expected to carry out the necessary inquiry.

In order to operate as constructive notice possession must be an actual possession. Thus, if a tenant is not in the actual occupation of the land, his occupation is not constructive notice. Where a certain party is not in possession, the presumption under the explanation to Sec. 3, does not arise, that the person purchasing the property title shall be deemed to have notice of the title, if any, of any person who is not in actual possession.

In National Bank of Australia v. Paul Hamilton, AIR 1929 PC 274 case, the Court observed: “It has always been held that such possession is in itself notice of the title under which such possession is retained, which anyone dealing with property cannot, without risk, ignore.”

In Krishnamma v. Suranna, 6 MLJ 24 (FB) and Nani Bibi v. Hafizullah, 10 cal 1073 case, the Court held that the possession, though not conclusive, is very cogent evidence of the title of the person in possession.

Imputed notice to Principal or Notice to Agent:

This is based on the maxim Qui facit per alium facit per se, i.e., he who does by another, does by himself. Explanation III to Section 3 provides 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 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”

The general principle of the agency law is that an agent stands in the place of the principal for the purpose of the business in hand, his acts, and knowledge being considered as the acts and knowledge of the principal. 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:

• as an agent,
• during the agency,
• in the course of the agency business,
• in a matter material to the agency business.

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.

To apply this doctrine following conditions should be satisfied.

• The agent must have received the notice during the agency.
• The knowledge must come to him as agent
• It must be in the same transaction
• It must be material to the transaction
• It must not have been fraudulently withheld from principal.

In Mohori Bibee v. D. Gliosh, (1903) 30 Cal 539, the Court held that although the principal was absent from Calcutta and did not take part in the transaction personally, his agent in Calcutta  stood in his place for the purposes of the transaction and the acts and knowledge of the latter were the acts and knowledge of the principal.

In Raja Gokul das v. Eastern Mortgage & Agency Co., 10 C.W.N. 216 case, the Court held that knowledge or information obtained by a solicitor or Muktear, in any case, will bind his client.