1. This is a plaintiff's appeal arising out of a suit for the recovery of arrears of taxes. The plaintiff is the Municipal Board of Cawnpore. Defendants 2 and 3 are auction purchasers of certain property which was owned by defendant 1. It appears that defendant 1 has not paid his taxes to the Municipal Board for a period of eleven years. In this action the Corporation seek to recover the amount due in respect of arrears from the defendants by sale of the property purchased by defendants 2 and 3 in respect that it has a charge over that property in virtue of the terms of Section 177, Municipalities Act of 1916. Section 177 is in the following terms:
All sums due on account of a tax imposed on the annual value of building or lands or of both shall, subject to the prior payment of the land revenue (if any) due to His Majesty thereupon, be a first charge upon such buildings or lands.
2. In respect of arrears of taxes therefore there is conferred upon the Municipal Board by statute a charge upon the property on which the taxes are leviable. The suit has been dismissed against defendants 2 and 3 however for the reason that they have been held to be bona fide purchasers without notice of the charge. It was not disputed that defendants 2 and 3 are bona fide purchasers of the property over which the Municipality held a charge in respect of arrears of taxes. Further it is not disputed that in fact they had no notice of the said charge. It was contended for the plaintiff however that defendants 2 and 3 had constructive notice. It was alleged that it was clearly the duty of defendants 2 and 3 to have satisfied themselves that the Municipality had no charge over the property in respect of arrears of taxes before they proceeded to purchase it at the auction sale. It was further contended in support of this argument that the amendment to Section 100, T.P. Act, did not apply to an auction sale held in execution of a decree. The amendment referred to is as follows:.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.
3. The argument presented was that this amendment had no application to a transfer by auction sale held in execution of a decree in view of the provisions of Section 2, T.P. Act. This Section, inter alia, provides that nothing contained in the Act shall affect any transfer by operation of law or by, or in execution of, a decree or order of a Court of competent jurisdiction. The result of this provision, it was contended, was to remove transfer by auction sale held in execution of a decree from the ambit of the provisions of Section 100 of the Act. In support of this contention reference was made to a Bench decision of this Court in Indra Narain v. Mohammad Ismail : AIR1939All687 . In that case it was held that:
As Section 2(d) clearly provides that nothing in the Act shall apply to any transfer in execution of a decree other than so provided in chap. IV it is clear that Section 100 as amended does not refer to auction sales or auction purchasers.
4. In the course of their judgment Bennet and Verma JJ. observe in conclusion:
No ruling has been produced by learned Counsel for the appellant to support his claim that his client was protected by Section 100 as amended. The rulings cited are all previous to the amendment of Section 100 and it is not necessary to consider them.
5. It is clear that their Lordships have overlooked the fact that the amendment to Section 100 introduced no change in the law as it stood before the amendment. The amendment was intended merely to clarify the legal position. The law as it was before the amendment and before the Transfer of Property Act is not in doubt. It has been considered in a Pull Bench decision in Mt. Indrani v. Maharaj Narain . In the course of their judgment in that case the Bench observed:
So long ago as 1890 the late Mahmud J. in Kishan Lal v. Ganga Ram (1890) 13 All 28 quoted with approval Dr. Rashbehary Ghose's remarks in his Law of Mortgage as follows: 'A charge must be distinguished from a mortgage as defined in the Act, more specially from a simple mortgage. In every mortgage there must be a transfer of an interest in specific immovable property, while in the case of a mere charge, no interest is transferred nor is it necessary that the property to which it relates should be specific. A charge differs from a mortgage not only in form but also in substance. A plea of purchase for value without notice, for instance although it may be perfectly good against a charge will be wholly unavailing against a mortgage'.
6. Furthermore we would observe that in our judgment there is no warrant for confining the operation of the saving provision of Section 2(d), T.P. Act, to Sections 85 to 90. The saving provision is perfectly general in its terms and in virtue of it Sec. 100 as amended applies to transfers by auction sale in execution of decrees. The law in our judgment is plain. A bona fide purchaser takes property he buys free of all charges of which he has no notice actual or constructive. He is held to have constructive notice when ordinary prudence and care would have impelled him to undertake an enquiry which would have disclosed the charge. If for instance the charge is created by a registered document then the purchaser would be held to have constructive notice of that charge inasmuch as a prudent purchaser would in ordinary course search the registers before effecting the purchase. There is no register, so far as we know, of arrears of taxes or of charges in respect thereof. It has not been shown that the Municipality of Cawnpore intimated to the public in the 'Press' or by other publication a list of the properties which are charged in respect of arrears of taxes. There is nothing upon the record to justify the conclusion that the defendants could have demanded any information from the Municipality in regard to charges on immovable property within the municipal limits. As has already been indicated the Corporation of Cawnpore allowed eleven years arrears of taxes to accumulate in the present instance. No intending purchaser is bound to presume that the taxes upon the property which he contemplates purchasing have not been paid in the ordinary course in the absence of any special intimation by the Municipality. If there has been negligence in the present instance it has been on the part of the Corporation of Cawnpore. They should have taken steps long ago to recover the arrears of taxes from defendant 1 and they certainly should have taken steps to intimate and proclaim at the auction sale to intending purchasers that they held a charge over the property in respect of these arrears. Upon the whole matter we are satisfied that the decision of the lower Appellate Court is sound. In the result the appeal is dismissed with costs.