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Doctrine of Notice under Transfer of Property, Cheat Sheet of Property Law

Dr. Ram Manohar Lohia National Law UniversityProperty Law

Transfer of propery act Complete Dcotrine of Notice Cheat Sheet

Typology: Cheat Sheet

2023/2024

Available from 12/03/2024

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DOCTRINE OF NOTICE
- Notice means knowledge. Doctrine of notice in reference to TPA is used to
adjudicate the disputes regarding rights and claims of the parties, who are involved
in unconscionable transaction.
- E.g., a father makes a will in the favour of his son and imposes a condition that he
will par rs. 5000/ per month to his mother for her maintenance and till he makes an
alternative arrangement of an equivalent amount for her, he should not sell the
property.
- Here it would be unconscionable for the son to sell the property without making
such an arrangement. The son sells the property to X, without making the required
arrangement. Here his mother wants to proceed against X, who has paid the whole
price of the property.
- Here in this instance the mother and X are innocent but the son has taken up an
unconscionable stand. The mother and purchaser of the property are bound to go to
the court, and here the rights and duties of the mother and the purchaser shall be
determined on the basis of doctrine of notice.
- The Court in this case will examine that whether X, the purchaser, is a bonafide
purchaser and he had the ‘notice’ or knowledge of mother’s rights over the property
at the time of contract between him and son. In case, it is proved that he had notice
of this fact, it becomes his responsibility to honour the right of the mother,
otherwise, the mother would not be able to enforce her claim against the property in
hands of the purchaser.
Duties of Transferee
1. Transferee must satisfy himself respect to the competency of the transferor to
transfer the property; as the rule is, no one can pass a better title than what he has.
If the transferor is not competent to transfer the property, the transferee will not get
a good title.
2. Transferee must examine all the relevant documents relating to the property and the
transaction. Each and every relevant paper is to inspected, as the rule is ‘actual
notice to a deed is constructive notice of its contents.’ If the transferee has in his
possession a document relating to the property, he will be deemed to know about its
contents. If a liability on the property is ascertainable from a particular document,
he will be imputed with constructive notice of the same.
3. The transferee must satisfy himself, as to whether there is a charge due over the
property. he must inquire the fact regarding the ownership of property. If he had
purchased the property and that person is available, he can enquire from him abou
the possibility of a change. He can also inspect those documents with the help of
which the property was acquired. For example, if the transferee knows that the
transferor had acquired the property through a will; he must examine the will to find
out the possibility of existence of a charge.
Kinds of Notice
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DOCTRINE OF NOTICE

  • Notice means knowledge. Doctrine of notice in reference to TPA is used to adjudicate the disputes regarding rights and claims of the parties, who are involved in unconscionable transaction.
  • E.g., a father makes a will in the favour of his son and imposes a condition that he will par rs. 5000/ per month to his mother for her maintenance and till he makes an alternative arrangement of an equivalent amount for her, he should not sell the property.
  • Here it would be unconscionable for the son to sell the property without making such an arrangement. The son sells the property to X, without making the required arrangement. Here his mother wants to proceed against X, who has paid the whole price of the property.
  • Here in this instance the mother and X are innocent but the son has taken up an unconscionable stand. The mother and purchaser of the property are bound to go to the court, and here the rights and duties of the mother and the purchaser shall be determined on the basis of doctrine of notice.
  • The Court in this case will examine that whether X, the purchaser, is a bonafide purchaser and he had the ‘notice’ or knowledge of mother’s rights over the property at the time of contract between him and son. In case, it is proved that he had notice of this fact, it becomes his responsibility to honour the right of the mother, otherwise, the mother would not be able to enforce her claim against the property in hands of the purchaser. Duties of Transferee
  1. Transferee must satisfy himself respect to the competency of the transferor to transfer the property; as the rule is, no one can pass a better title than what he has. If the transferor is not competent to transfer the property, the transferee will not get a good title.
  2. Transferee must examine all the relevant documents relating to the property and the transaction. Each and every relevant paper is to inspected, as the rule is ‘actual notice to a deed is constructive notice of its contents.’ If the transferee has in his possession a document relating to the property, he will be deemed to know about its contents. If a liability on the property is ascertainable from a particular document, he will be imputed with constructive notice of the same.
  3. The transferee must satisfy himself, as to whether there is a charge due over the property. he must inquire the fact regarding the ownership of property. If he had purchased the property and that person is available, he can enquire from him abou the possibility of a change. He can also inspect those documents with the help of which the property was acquired. For example, if the transferee knows that the transferor had acquired the property through a will; he must examine the will to find out the possibility of existence of a charge. Kinds of Notice
  1. Actual notice
  2. Constructive or implied notice
  3. Notice to agent or imputed agent Actual Notice
  • It means actual knowledge. A person is said to have actual notice/ express notice of a fact if he actually knows it. To consider it as binding, one will have to look at the fact that whether that notice is definite and information given about the thing, in respect of which the notice is issued, Is correct. It must be definite information given to or attained in the course of negotiations by person interested in the property. A person is not bound to attend vague rumors.
  • A mere casual conversation in which knowledge of a certain thing is imparted does not mean notice of it, unless the mind of a person has, in some way been brought to an intelligent apprehension of the nature of 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 alleging 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.
  • Here a general claim would not be enough to aTect the status of a purchaser with notice of a deed of which he does not appear to have knowledge. If a person knows that another has claim or interest in the property for which he is negotiating, he is bound to inquire that what is the interest of that another person, and if he omits to do so, he will be bound to particulars of extent of such interest.
  • Also it is important that the notice should have been given in same transaction. A person is not bound by notice given in a previous transaction which he may have forgotten. Constructive Notice
  • It means ‘knowledge imputed by the Court on a person’. 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. In other words, a person may claim that he did not know a fact, but if the circumstances surrounding him are such, that as a reasonable prudent person, he ought to have known a fact, he will be deemed to know it.
  • Can be applied in the following cases;
  • There is wilful abstention from an enquiry or search.
  • Gross negligence
  • Registration of the Document
  • Actual possession
  1. Willful abstention from search which one ought to make

should be high degree of neglect. In Hudston v. Vincy , (1921) 1 Ch 98, Eve J. said, “Gross negligence does not mean mere carelessness, but means carelessness of so aggravated a nature as to indicate a attitude of mental indiTerence 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’.

  • Bank Ltd. v. P.E. Guzder and Co. Ltd.,
    • Respondent (A) deposited title deeds of his house in Calcutta with the claimant Bank (N) to secure the loan he had taken from the bank. Subsequently, A represented the Bank that intending purchases of the house wanted to see the title deeds. The bank returned the deeds to A who deposited the deeds with the plaintiT bank in order to secure a loan. It was held that the Bank N, on account of gross negligence in parting with the deed has lost its prior rights with respect of the house.
  • Alwar Chetty v. Jagannath 1928,
    • A sells his property to B, and delivers possession to him for a consideration of Rs. 10,00,000/-. B pays a sum of Rs. 5,00,000/- and promised to pay the balance after six months. The fact that a balance of five lakhs has to be paid to A by B, is written on the title deeds.
    • B fails to pay A, and mortgages this property by deposit of the title deeds in favour of C. C fails to read the noting that B has to pay Rs. 5,00,000/- to A and pays the loan amount of Rs. 5,00,000/- to B. B fails to repay the loan amount to C as well, and this property that is subject to the mortgage is brought up for sale.
    • In case, total amount recovered after sale of the property is 5,00,000/-. At this point, A puts up his claim of 5,00,000/- rupees.
    • The issue is – who would get this amount, A or C.
    • C can get this amount only subject to the condition, if he has entered the transaction as a bonafide transferee without notice of A’s claim over the property. If he proves the fact, that he had no actual or constructive notice of A’s claim over the property.
    • However, the title deed, on which a noting was made with respect to the balance of money to be paid by B to A, was in possession of C. IN fact, it was on the basis of the title deeds that he had advanced load to B. As a reasonable prudent person, he ought to have read or examined the title deeds carefully, and if he fails to do that, he would be guilty of gross negligence. Secondly, if he in fact examines the title deeds, and finds the noting, this is the starting point of inquiry, which needs further investigation. If he fails further probe into the matter, he would be guilty of willful abstention from making an enquiry. Here even if he is satisfied by making inquiries from only B and getting an incorrect answer from him, that would be insuTicient because as a reasonable prudent person, he should direct his

enquires against a person, who was to be paid that amount- A in this case, not B who is under the obligation to pay.

  • Here it is unconscionable on B’s part, not to disclose to C the fact that the balance amount was not paid, which omission led to the dispute between A and C. Here, C would be imputed with constructive notice of A’s claim over the property, as he is guilty of both gross negligence as well as willful abstention from making an inquiry, and A’s clam will be upheld.
  • Kshtranath v. Harsukhdas,
  • A who was the owner fo Ten bigas of land mortgages the land to B, by deposit of title deeds of the land and raises a loan of Rs. 20,00,000/-. Ten months later, he professes to sell two bigas of the mortgaged land to c; for a consideration of 10,00,000/- C asks him for the papers relating to the property, and A shows him a photocopy of the title deeds. C asks for the original papers, and A promises to show him by a week stating that they are kept in safe custody. C, satisfied with A’s answer, does not press for the originals, pays consideration and purchases the land. Later B whose loan amount remains unpaid, causes the property to be sold, including the two bigas that were in possession of C.
  • At this time, C raises an objection, stating that he is the owner of these two bigas, as he had purchased them after payment of full consideration, and therefore, they cannot be sold in execution proceedings. To decide the claims of B and C, it has to be seen whether it can be shown that C knew about B’s rights over the property. Can constructive knowledge or notice be imputed on him?
  • Here he has purchased the property on the strength of a photocopy of the title deeds, without even looking at the originals and therefore was guilty of gross negligence. Further, where even after his asking for the original title deeds, the transferor did not produce them, as a reasonable prudent man, he should have ascertained or verified, whether the title deeds were indeed with the transferor or not, and in not doing that, he was guilty of willful abstention from making an inquiry.
  • Therefore, had he probed further and insisted on entering transaction only on the strength of the complete original papers, he could have detected the truth. As he had failed to do that, he would be imputed with constructive notice of the rights of the mortgagee, B, and will take the property subject to his rights. B’s rights therefore will be upheld here. However, if A had procured the title deeds from B and C had purchased the property after inspecting the title deeds, the situation would have been diTerent.
  1. Registration as Notice
  • Explanation I to Section 3 provides that ‘where any transaction relating to immovable property is required by law to be and has been eTected 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
  • (1) Notice should have been received in his capacity as Agent on behalf of the Principal.
  • (2) Notice must have been received in the course of business of Agency.
  • (3) Notice must be of a fact which is material to the agency business.
  • (4) Fraud by Agent: In such like cases, where agent is guilty of fraud and has an interest in concealing the knowledge from the principal and does so conceal it, the general rule is that notice to agent is to principal does not apply. The principal cannot be imputed with notice of the fraud.