AHMEDABAD MUNICIPAL CORPORATION V. HAJI ABDUL GAFUR HAJI HUSSENBHAI, AIR 1971 SC 1201
FACTS
- A person A, who was the owner of certain properties ran into financial difficulties in 1949, and was adjudged insolvent in 1950. This property was subject to a mortgage, and was sold at a court auction to B, in 1954.
- At the time of the auction of the property, B, the purchaser, made inquiries from the Official Receiver about the charges due over the property, but was not given any information about the arrears of taxes.
- Soon after he purchased the property, he received a notice from the municipality for the arrears of taxes amounting to around R s. 540, and thereupon, this property was attached and municipal corporation threatened to sell the property.
- B filed a suit in the court for a declaration that he was the owner of the property, and that the arrears of municipal taxes due before he purchased the property, were not recoverable by attachment of the property in his hands.
CONTENTIONS
Plaintiff:
His main contention was that he was a bona fide purchaser without any notice, actual or constructive, of the fact of existence of tax arrears and therefore, could not be made liable to pay the same.
Defendant:
The municipality, on the other hand contended that the doctrine of caveat emptor applies to him and placed reliance on s. 14(1) of the Bombay Provincial Municipal Corporation Act, 1919, that the taxes constitute a charge over the property and are recoverable, if need be, from the sale of the property. However, a charge can be enforceable against a person only when he has actual or constructive notice of the same, therefore the municipality contended, that where a person purchases property in a municipal area, and knows that taxes are to be paid to the municipality he will be deemed to have constructive notice of the fact, that arrears might be due, and therefore it becomes his liability to pay them.
HELD
- In Roop Chand Jain case, the court held that “A bona fide purchaser takes property he buys free of all charges of which he has no notice actual or constructive.”
- He could have no reasonable ground for assuming that there might be arrears, as he had made general inquiries from the person (Official Receiver) who had charge of the property, but was not given any information about the same.
- Secondly, the property was in occupation of the tenants, and he could reasonably assume that dues if any might have been paid out of the rent.
- Thirdly, accordingly to the court, the conduct of the municipality itself was surprising. They did not pursue the matter after sending a notice to the official receiver. This case that took sixteen years, was decided in favor of B, with the court holding that he was not liable to pay the arrears of taxes amounting to Rs. 543.
- The court, comparing the conduct of both the parties before it, commented that the municipal corporation was far more negligent and blameworthy than the purchaser.
- Therefore, after analysing a bulk of conflicting judicial decisions of several high courts and the facts of this case, held that constructive notice could not be imputed on B.