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Hirji Madha Vs. Nagji Kurji and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtGujarat High Court
Decided On
Judge
Reported in(1964)5GLR289
AppellantHirji Madha
RespondentNagji Kurji and ors.
Cases ReferredIn Allen v. Seckham
Excerpt:
.....that the learned judge was in error when he held that he had failed to prove that he was a bona fide purchaser for value without notice. i may as well state that the finding that the sale was really in the nature of a mortgage was not challenged before me nor was any point argued except section 25. 7. section 24 of the bombay agricultural debtors relief act 1947 (hereinafter referred to asthe act) provides as under: 24. (1) notwithstanding anything to the contrary contained in any law customor contract whenever it is alleged during the course of the hearing of an application made under section 4 that any transfer of land by a person whose debts are being adjusted under this act or any other person through whom he inherited it was a transfer in the nature of a mortgage the court..........was in the nature of a mortgage. on the other hand the petitioner contended that whatever be the real nature of the transaction that section did not apply to him inasmuch as he was a bona fide transferee for value without notice of the real nature of such transfer and since he as such transferee held lands in question under a registered deed executed on or before january 1, 1948 (being the date applicable to the district of amreli) within the meaning of section 25(ii) of the act the respondents nos. 1 and 2 were not entitled to re-open the prior dealings in respect of the said property purchased by him.4. on december 14, 1959 the learned civil judge (junior division)dhari made his award. he held that the transaction was in the nature of a mort gage and not a sale. on the question.....
Judgment:

M.R. Mody, J.

1. This civil revision application raises an interesting question regarding the interpretation of Section 25(H) of the Bombay Agricultural Debtors Relief Act 1947 which is hereinafter referred to asthe Act.

2. This matter relates to two pieces of land bearing survey Nos. 232 and 2 3/2 2 situate in the village Sarasia in Dhari Taluka of the Amreli District. This land belonged to one Purji the father of respondents I and 2 in this petition. On March 2, 1933 Purji executed a sale-deed in favour of one Dawood Vora the father of the third respondents in this petition whereby he conveyed these lands to the father of respondent No. 3. This sale deed was duly registered under the Indian Registration Act. Respondent No. 1 who gave evidence in this case deposed that till the year 1939 possession of the land sold to the father of the third respondent was not given to him and I am informed that this position as it obtained till that year has not been disputed by the parties.

3. On May 8, 1943 the petitioner purchased these lands from the father of the third respondent by a sale deed of that date. This sale deed was also duly registered under the Indian Registration Act. In pursuance of this sale the father of the third respondent put the petitioner in possession of these lands. On January 11 1950 the respondent No. 1 made an application to the Civil Judge (Junior Division) Dhariunder Section 4 of the Act. In this application the second respondent was added as a party-applicant subsequently. In this application amongst the creditors was impleaded the third respondent. Subsequently the petitioner was also added as a party thereto. One of the allegations in the application of the respondents Nos. 1 and 2 was that the first transaction with respect to the said lands was though on the face of it a transaction of sale was really in the nature of a mortgage. The impugned transaction was the transaction of sale entered into by the father of respondent Nos. 1 and 2 on March 2 1933 The respondents Nos. 1 and 2 contended that under Section 24 of the Act they were entitled to a declaration from the Court that the transfer was in the nature of a mortgage. The respondents Nos. 1 and 2 also claimed an account on the footing that this transaction was in the nature of a mortgage. On the other hand the petitioner contended that whatever be the real nature of the transaction that section did not apply to him inasmuch as he was a bona fide transferee for value without notice of the real nature of such transfer and since he as such transferee held lands in question under a registered deed executed on or before January 1, 1948 (being the date applicable to the District of Amreli) within the meaning of Section 25(ii) of the Act the respondents Nos. 1 and 2 were not entitled to re-open the prior dealings in respect of the said property purchased by him.

4. On December 14, 1959 the learned Civil Judge (Junior Division)Dhari made his award. He held that the transaction was in the nature of a mort gage and not a sale. On the question whether the purchaser from the mortgagee was a bona fide purchaser of the suit lands for value without notice of the alleged mortgage transaction he held that he was not. In discussing this issue he observed that the purchaser should have enquired about the ownership of the property before he purchased and that If any dispute arose in spite of his enquiry he could very well plead that he was a purchaser for value without notice. He relied on the evidence of the purchaser to the effect that he had not enquired at all about the suit lands before purchasing the same and he accordingly held that he was therefore not a bona fide purchaser for value without notice. He directed accounts to be taken of this transaction on the basis that it was a mortgage.

5. The purchaser and one other creditor were not satisfied with this award and they filed an appeal in the Court of District Judge at Amreli. The learned District Judge held that it was incumbent on the purchaser to prove that he was a bona fide purchaser for value without notice and that he had also to show that he made such enquiries as should have been made if one takes due care and caution in making such a transaction. He relied on his evidence stated above. He also held that the purchaser had not taken due care and caution as to how his seller had acquired the property which he was purporting to transfer out andaccording to him it was particularly incumbent on him to have made such inquiries since he belonged to the same community as the original owner. He accordingly dismissed the appeal with costs on August 8 1960.

6. Being aggrieved by this judgment the purchaser (the petitioner before us) has filed this civil revision application and has contended that the learned Judge was in error when he held that he had failed to prove that he was a bona fide purchaser for value without notice. I may as well state that the finding that the sale was really in the nature of a mortgage was not challenged before me nor was any point argued except Section 25.

7. Section 24 of the Bombay Agricultural Debtors Relief Act 1947 (hereinafter referred to asthe Act) provides as under:

24. (1) Notwithstanding anything to the contrary contained in any law customor contract whenever it is alleged during the course of the hearing of an application made under Section 4 that any transfer of land by a person whose debts are being adjusted under this Act or any other person through whom he inherited it was a transfer in the nature of a mortgage the Court shall declare the transfer to be a mortgage if the Court is satisfied that the circumstances connected with that transfer showed it to be in the nature of a mortgage

(2) Any agricultural labourer may make an application before the 1st August 1947 to the Court that any transfer of land by him or any other person through whom he inherited it was a transfer in the nature of a mortgage. On hearing the application the Court shall notwithstanding anything to the contrary contained in any law. custom or contract declare the transfer to be a mortgageif it is satisfied that the circumstances connected with the transfer showed it to be in the nature of a mortgage When the Court makes any such declarationthe applicant shall notwithstanding anything contained in the definition of debtorin Sub-section (5) of Section 2 be deemed to be a debtor for the purposes of this Act and the Court shall proceed as if an application under Section 4 had been made to it.

Section 25 which follows this section is in the nature of an exception to Section 24 and it provides as unden-

25 Nothing in Section 24 shall apply to-

(i) Any transfer which has been finally adjudged to be a transfer other than a mortgage by a decree of a court of competent jurisdiction or by a Board established under Section 4 of the repealed Act; and

(ii) any bona fide transferee for value without notice of the real nature of such transfer or his representative where such transferee or representative holds under a registered deed executed on or before the 15th day of February 1939.

As I have already stated there is no dispute regarding the finding that this is a transaction in the nature of a mortgage within the meaning of Section 24(1). But reliance is placed by the petitioner on Section 25(ii). The petitioner has therefore a to prove that (1) he is a bona fide transferee (2) that he has paid value (3) that he has had no notice of the real nature of the transaction and (4) that he holds the property under a registered deed executed before the relevant date the relevant date for Amreli being Jan. 1194

8. There is no dispute that he has paid value and that he holds the property under a registered sale-deed executed before the relevant date. There is however dispute (1) about his bona fides regarding the transfer and (2) about his being a transferee without notice of the real nature of the transaction. The only question that therefore remains to be determined by me is whether the petitioner can be said to be a bona fide transferee for value without notice of the real nature of the transfer. The wordbona fide is not defined in the Act. The Bombay General Clauses Act however does is its Section 3(20) setting out definitions state that A thing shall be deemed to be done in good faith where it is in fact done honestly whether it is done negligently or not. In Whartons Law Lexicon 14 Edition at page 136 it is stated that bona fide implies the absence of all fraud or unfair dealing or acting whether it consists in simulation or dissimulation. Burrows in his Words and Phrases Judicially Defined Vol. 1 page 329 rests content by stating that bona fide is opposite to fraud. In Strouds Judicial Dictionary 3 Edition Vol. 1 bona fide is described as an expression equivalent to honestly, following a dictum of Bramwell L.J. in R. v Holl 7 Q.B.D. 575 It goes on to say that The correct province of this phrase istherefore to qualify things or actions that have relations to the mind or motive of the individual and it has no meaning when joined to things or actions common to all mankind though sometimes it is thus used in a figurative but inaccurate sense.There may thus be a bona fide act belief intention claim objection or mistake or a persons conduct may be bona fide each of these is so to speak a mental fact having its origin in the individual. In Ramnath Iyars The Law Lexicon of British India at page 145 also bona fides is described as meaning in good faith openly sincerely without fraud or deception honestly as distinguished from bad faith. In (1858) 2 All E.R. 13 the idea of bona fide is taken as an idea of negation of fraud.

9. It is suggested on behalf of respondents Nos. 1 and 2 that the term bona fide meant not only a negation of fraud but negation of negligence and want of inquiry and according to the respondents the want of inquiry itself may be evidence of the absence of bona fides. In view of the preponderance of judicial opinion as mentioned above I am not prepared to accept the suggestion on behalf of respon dents Nos. 1 and 2 The notion of bona fides has nothing to do with the notion of negligence or want of due care. Bonu fides is a mental state negativing dishon esty and has no relation to negligence or want of care.

10. The expression bona fide purchaser has also come in for judicial interpretation. The word bona fide purchaser have been used in Real Property Limitation Act 1833 in England and these words have been interpreted to mean one who is really a purchaser and not merely a done taking gift under the form of a purchase. In the Law Lexicon of British India mentioned above bona fide purchaser is defined as one who at the time of the purchase advances a new consideration surrenders some security or does some other act which leaves him in a worst position if his purchase should be set aside and purchases in the honest belief that his vendor had a right to sell without notice of any adverse rights claims interests or equities of other in and to the properties sold. Considering therefore the meaning of the word bona fides or the expression bona fide purchaser it is clear that these phrases have no relation to the notion of negligence, these phrases only mean a negation of fraud or dishonesty and a real genuine transaction.

11. Nothing in this case is alleged-against the petitioner to point to any dishonesty or fraud on his part nor is there anything alleged to show that the transaction which he entered into was not a real transaction. In these circumstances there can be no hesitation in coming to the conclusion that the petitioner satisfies the requirement of Section 25 viz. that he is a bona fide transferee. The learned District Judge has held that he had to show that he made such inquiries as should have been made if one takes due care and caution in making such transaction. Then he went on to state that he had not made any such inquiries as to how his vendor had acquired his title and that therefore he should be deemed not to be bona fide. With the utmost respect to the learned Judge in my view he is apparently in error. The want of inquiry has nothing to do with the bona fides of a person. If at all want of inquiry forms part of the notion of a notice and that I shall presently consider when I am dealing with the question of notice. But that because he did not inquire he should be held to be devoid of bona Fides is an incorrect view of the law. I hold that it has been proved that the petitioner was A bona fide transferee for value.

12. Even if a transferee be bona fide and for value he has to establish that he is a transferee for value without notice of the real nature of such transfer. The interesting question that arises for determination is whether the notice contemplated in this section is express or actual notice only or whether it includes both an express or actual notice as well as a constructive notice. There are many a statute wherein protection is afforded to a transferee for value without notice. Questions have often arisen whether in all these statutes the word notice should mean both actual and constructive notice. In some of these statutes constructive notice is expressly included by the very definition of notice contained therein such as in the Transfer of Property Act. The difficulty arises in relation to statutes where the word notice is not defined nor is there any indication to show whether the word notice should include constructive notice. Dealing with these different kinds of statutes the Courts have taken divergent views. In England the view has sometimes been taken that the word notice would only mean actual notice whereas at others it has been taken that it would also include constructive notice. Kerr in hisLaw of Fraud and Mistake 7 edition (1952) page 250 states that Logically the better view is that in any other case (whereby he refers to statutes where constructive notice is not included in the term notice )notice means express or actual notice. But Kerr does however go on to mention that this view is not universally accepted and in particular refers to the Finance Act 1894 Section 8(18) and 9(1) Bankruptcy Act 1944 (Section 30 and 45) and exchange Control Act 1947 (Section 18) where interpreting these provisions in these Acts some textbook writers and some Courts in Scotland have taken the view that notice included constructive notice. One of such textbook writers is Greene who in his book on Death Duties (4th Edition) at page 297 commenting on the Finance Act 1894 says that the word notice in the expression a bona fide purchaser for valuable consideration for value without notice includes constructive notice. The other textbook writer is Dymond who in his book on the Death Duties (13th Edition) at page 652 states that notice need not be actual notice.

13. Notice of a fact means knowledge or cognizance or awareness of such fact. To give notice of a fact to a person is to bring that fact to his knowledge When the information conveyed is express and it brings home knowledge directly to a party the notice is said to be actual notice. Actual notice embraces all degrees and grades of evidence from the most direct and positive proof to the slightest evidence from which a Court would be warranted in inferring notice. It is a question of fact and it may be proved by evidence like any other fact. That is as regards actual notice. As regards constructive or imputed notice Were points out in his book on Fraud and Mistake mentioned above at page 242: There is no general rule of law that because a man has the means of knowledge he has the knowledge itself. The mere means of knowledge is not the same thing as knowledge. When there is no allegation or proof of direct knowledge in some cases law imputed notice to a person and that is called constructive notice. Constructive notice is a notice where knowledge of the fact is presumed from the circumstances of the case. This doctrine of constructive notice had its origin in equity. Subsequently the word notice was often defined in statutes and was defined to include constructive notice. There remained however a number of statutes where even though the word notice was used it was not defined. The question arose if in such cases notice included constructive or imputed notice. It remained in doubt as to how far this doctrine should be extended. Kerr has noted a series of cases in which such eminent Lord Justices as Lords Cotton ham Lyndhurst and Cranworth Turner L.J. Jessel M.R. and Esher M.R. have said that the doctrine ought not to be extended one bit further. In Allen v. Seckham (1879) 11 Ch.D. 790 Lord Esher observed thatThe doctrine is a dangerous one. It is contrary to the truth. It is wholly founded on the doctrine that a man does not know the facts and yet it is said that constructively he does know them.

14. In view of the above weighty observations I do not think that in India where the Legislatures have defined notice where they intended to make the definition more comprehensive there should be any warrant for the application of the doctrine at all. I have no doubt that the word notice when used in this Act only means actual notice and does not include constructive or imputed notice. This is an Act which deals with the relief of agricultural debtors in the then province of Bombay and the Chapter in which the present section is found is a Chapter headed Procedure for Adjustment of Debts. Section 24 provides for the relief to agricultural debtors in connection with certain sales which are in their real nature mortgages. Section 25 carves out an exception from Section 24 and protects certain transferees without notice of the real nature of such transfer. In other words a transferee so that he may claim the protection of this exception has to prove his want of notice in connection with the real nature of the transaction. The real nature of the transaction which can be found out is whether it is a mortgage and not a sale. It only protects transferees whose conveyances are registered such conveyances are of a date prior to February 15 1939 (January 1 1948 in so far as it relates to Amreli Districts. This is an Act of 1947 which is a date long after the relevant dates provided in Section 22. How could then the transferee have been expected if his transfer is to be of a date prior to February 15 1939 (or in Amreli District January 1 1948 to have made any inquiries in relation to the real nature of a prior transaction? How could he then have been expected to inquire into the history of each and every prior transaction? It may be that some one or the other of the transactions may have taken place 25 30 or even 40 or 50 years before. If the transferee actually had knowledge in other words if he had direct knowledge (and not the possible knowledge through inquiry) then in that event he cannot be said to be a transferee without notice of the real nature of the transaction. In view of the caveats pronounced by eminent Judges mentioned above I do not think I would be justified in extending the doctrine of constructive notice particularly in the interpretation of this sub-clause of this section in this Act. There is no justification in the interpretation of the present section to import the concept of constructive notice peculiar to equity jurisdiction in England. In India wherever it was intended to include constructive notice notice was defined as including constructive notice such as in the Transfer of Property Act. In the Act before me constructive notice is not so included. It not having been so included notice could only mean actual or express notice of the real nature of the prior transaction.

15. Mr. Thakkar addressed an alternative argument on the question of notice. It ran this way: Assuming that notice included constructive notice in the present circumstances the petitioner could not have been imputed with the knowledge of the real nature of the transaction even in the absense of inquiries on his part. According to him he could not have been expected to inquire into the real nature of the transaction at all. He posed the question how could the purchaser have found out the secret nature of the transaction between the predecessors-in title of his vendor? Now what the section requires is a want of notice in connection with the real nature of the transaction. If notice is to include constructive notice then in that event it would be incumbent on a person to make inquiries in regard to the real nature of every previous transaction in connection with the property which he is purchasing. The law would really then expect the transferee to probe into the real nature of the prior transactions and into their secrecy if so necessary. Mr. Thakkars argument that he could not be expected to find out the real nature of the transaction begs the issue. That is really the direction in which he would be supposed to direct his inquiries. Mr. Thakkar drew my attention to a passage in Kerr at page 256 wherein it is stated that the doctrine of constructive notice must not be carried to such an extent as to defeat honest purchasers. He also drew my attention to a passage on page 255 where it is stated that The means of knowledge by which a man will be affected with notice must be means of knowledge which are practically within reach and of which a reasonable man or a man of ordinary prudence might have been expected to avail himself. If the Legislature expected him to inquire into the real nature of the transaction the Legislature would have reasonably expected him to inquire into the real nature of the transactions within his reach in other words within a reasonable period of time there to before of which knowledge could have been made available to him had he tried. In the present case the transaction is a transaction of 1933 and the petitioners purchase is in the year 1943. The parties belong to the same community. If notice were construed to include constructive notice on the facts of this case it appears to me that knowledge regarding the real nature of the transaction by inquiries was not beyond the reach of the petitioner. The possession was admittedly with the father of respondents Nos. 1 and 2 till 1939 and the parties belonged to the same community. In these circumstancesl do not think that had I taken a different view on the interpretation of this section I would have accepted Mr. Thakkars alternative contention.

16. Mr. Vakharia for respondents 1 and 2 had a grievance that the petitioner had not made any inquiry about the title-deeds of his vendor nor had he inquired to whom the property belonged and whether the Act was in force or not he should have inquired about the title and the real nature of the transaction which his vendor had entered into with his own vendor. The question that arises here is not in relation to the title deeds of his immediate vendor nor does it arise in connection with challenging the title of his vendor. Whether he inquired or not the petitioners vendor had a clear title and the title on documents is not challenged. But I fail to see the obligation which Mr. Vakharia wants to put on the petitioner to have inquired about the real nature of the transaction in vendors favour. I cannot find any such obligation on him under the Act. He sought to rely on a judgment in Zungabai Bhawani v Bhawani Appaji 9 B.L.R. 388 where a Division Bench of the Bombay High Court held that no purchaser could protect himself against the claim of the real owner merely by saying that he had no notice of the real owners title It was further held that a purchaser was not justified in shutting his eyes and buying recklessly from a vendor without any inquiry and resisting the real owner on the ground that the real owner did not come forward but that he should make reasonable inquiries into the title before he can take advantage of the doctrine of purchaser for value without notice. That case can have no application to the case before me. That was a case directly under Section 41 of the Transfer of Property Act in which notice is defined as including constructive notice Moreover the question that there arose was also regarding the very title of the vendor. In this case on documents there is no question of title of the vendor. The vendor certainly had a clear title which he got from the respondent Nos. 1 and 2 predecessor-in-title. That case does not lay down that it is incumbent on the purchaser to inquire into the real nature of the transaction in other words to find out whether Q particular transaction though on the face of it is sale is in really a mortgage.

17. Then Mr. Vakharia argued that the definition given in the Transfer of Property Act of notice should apply to the wordnotice in this Act because this particular section deals with transfer of property. But there is no warrant for importing the definition of notice from the Transfer of Property Act which is a Central Act and not a Provincial Act as the Act is. If the Legislature intended to include by incorporation the definition of notice in the Transfer of Property Act it might have shown its intention by incorporating the relevant provisions of the Transfer of Property Act which is not done. In these circumstances I feel myself unable to accede to Mr. Vakharias contention that the word notice in this subsection should include constructive notice as defined in the Transfer of Property Act.

18. Mr. Vakharias next argument was that the onus of proving the exception was on the petitioner as the transferee He submitted that the petitioner had failed to discharge this onus inasmuch as he had led no evidence regarding the document and this had betrayed an absence of bona fides. I fail to appreciate the force of this argument. The fact that be has not led any evidence regarding the document does not show the absence of bona fides. As I indicated above bona fides is absence of dishonesty. The very fact of there being an absence of dishonesty would be Sufficient proof of bona fides on the part of the petitioner. It is irrelevant whether any evidence of the document is led or not.

19. Mr. Vakharia lastly contended that even if I was inclined to set aside the learneoShidges order in so far as it related to the transaction in favour of the petitioner the declaration that the transaction was in reality in the nature of a mortgage should not be affected. In other words he wanted to make it plain that there should be no impediment in the way of his clients to pursue their remedy for adjustments of their debts against their original creditors. I have no doubt that that declaration will remain unaffected. I therefore hold that the petitioner Hirji Madha is a bone fide transferee for value without notice of the real nature of the transaction between the father of the respondents 1 and 2 and the father of respondent No. 3 and that he holds under a registered deed executed on or before January 1st 1948. I am of the view that even though the transaction was in the nature of a mortgage the petitioner is protected by reason of the provision in Section 25 of the Act and that the petitioner is not affected by the declaration under Section 24. I accordingly set aside the order of the trial Judge confirmed by the appellate Court that the petitioner is not entitled to the benefit of protection under Section 25 of the Act and that he is also bound by the declaration of the real nature of the transfer in favour of respondent No 2. In these circumstances there will be nothing to proceed in connection with the petitioners transaction and even though the case may proceed in regard to the other matters the same will not affect the rights of the petitioner 21, I therefore make this rule absolute with costs throughout.


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