Dr.

RAM MANOHAR LOHIYA

NATIONAL LAW UNIVERSITY, LUCKNOW

PROJECT OF PROPERTY LAW

TOPIC: - Sec-3 of Transfer of property Act

A person is said to have the notice of fact when he actually

knows the fact

SUBMITTED TO: SUBMITTED BY:

Mrs Ankita Yadav Abhijeet Singh

Professor [law] Roll No.-04

RMLNLU 5th Semester

 ACKNOWLEDGEMENT

I would like to express my deep gratitude and regards to Mrs. Ankita Yadav Professor Property
Law, my research supervisor, for his patient guidance, constant encouragement and useful
critiques of this research work.

I would also like to extend my deepest regards to our Respected Dean of Academics
Prof.C.M. Jariwala for his valuable advice and immense support. I would also like to thank our
Honourable Vice Chancellor Sir Prof. Subir Bhatnagar or supporting us in our various pursuits
which ultimately helped us to freely conduct our researches in a conducive environment.

Lastly, I would like to express my deep sense of gratitude to the almighty, my friends and family
for their constant support and motivation throughout this project and for giving me their valuable
advice whenever it was needed.
 TABLE OF CONTENTS

1. Introduction
2. Ways under which a person is said to have the notice of fact
a. Actual Notice
b. Constructive notice
 When there is a willful abstention from making an inquiry;
 Gross negligence;
 Registration of the document/transaction;
 Actual possession; and
 Notice to agent.
3. Consequences of not making enquiry.
4. Conclusion
5. Bibliography
 INTRODUCTION

Notice in layman’s language is the knowledge or information of certain facts or of particular

state of affairs.This doctrine under TP Act is used to determine the rights and claims of two or
more person vis-à-vis each other, who are involved in an unconscionable transaction.

e.g. - The person responsible for creating such a condition is not a part of the situation any more,
and the other persons fighting with each other for a claim or a piece of property. In such a
scenario, the court determines their rights with the help of doctrine of notice.

The last paragraph of section 3 states the circumstances under which a person is said to have the
notice of fact as "a person is said to have notice1” of a fact when he actually knows that fact, or
when, but for willful abstention from an enquiry or search which he ought to have made, or gross
negligence, he would have known it.

Explanation I2: 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
of, or share or interest in, such property shall be deemed to have notice of such instrument as
from the date of registration or, where the property is not all situated in one sub-district, or where
the registered instrument has been registered under sub-section (2) of section 30 of the Indian
Registration Act, 1908 (16 of 1908), from the earliest date on which any memorandum of such
registered instrument has been filed by any Sub-Registrar within whose sub-district any part of
the property which is being acquired, or of the property wherein a share or interest is being
acquired, is situated.

The transferee may himself have actual notice or the constructive notice may be imputed to him
when information of fact has been obtained by his agent in the course of business transacted by
the agent for him.

1
Transfer of property Act 1882 s3.
2
Ibid.
Actual Notice- Actual Notice means actual knowledge where it can be shown that a person
actually knew about it. It is definite information given to, or obtained by person as against vague
rumors, statements or casual comments given by the strangers. An individual is deemed to have
been given express notice when he or she actually hears or reads it. An express or actual notice
of fact is a notice when whereby a person acquires actual knowledge of the fact. It must be
definite information given in the course of negotiations by a person interested in the property

Constructive Notice- It is a notice which treats a person who ought to have known a fact, as if he
actually does know it. In other words, a person has constructive notice of all facts of which he
would have acquired actual notice had he made those enquiries which he ought reasonably to
have made. Constructive notice can be applied by the court in five cases:

(a) When there is a willful abstention from making an inquiry;

(b) Gross negligence;
(c) Registration of the document/transaction;
(d) Actual possession; and
(e) Notice to agent.
 WAYS UNDER WHICH A PERSON IS SAID TO HAVE THE NOTICE OF
FACT

There are three ways under which a person is said to have the notice of fact which are as follows:

1. Actual notice

Actual Notice means actual knowledge where it can be shown that a person actually knew about
it. It is definite information given to, or obtained by person as against vague rumors, statements
or casual comments given by the strangers. An individual is deemed to have been given express
notice when he or she actually hears or reads it. An express or actual notice of fact is a notice
when whereby a person acquires actual knowledge of the fact. It must be definite information
given in the course of negotiations by a person interested in the property.

Implied notice is deduced or inferred from the circumstance rather than from direct or explicit
words. Courts will treat such information as though actual notice had been given. “Actual Notice
means actual knowledge” this definition was given in Ashiq Husain V. Chaturbhuj3, in the said
case, On 1st May 1909, Syed Nazar Hussain father of defendants executed a simple mortgage
in favour of the plaintiffs respondents for Rs. 3,000 with interest at 12 annas per cent per
mensem with half-yearly rests. The property mortgaged consisted of a 20 biswas zamindari share
in qasbaAmanpur mahal khewat No. 1, and a two and a half biswa share in mahal Nawazish Ali,
khewat No. 3, patti Ram Lal. By a clerical error the second item of property was described in the
mortgage-bond as a 2-biswa share in mahal, Nawazish Ali entered in khewat No. 2, patti Ram
Lal. The document was registered in the office of the Sub-Registrar of Tahsil Kasganj District
Etah, on 3rd May 1909. The mortgagor having died without discharging his liability in whole or
in part, the mortgagees brought the present suit against his heirs, defendants for recovery of Rs.
11,154-4-0.The plaintiffs' allegation that the cause of action accrued on 1st of May 1912 is
totally wrong. It was held by the court that that the Actual Notice means actual knowledge,
where it can be shown that a person actually knew about it, it is definite information given to, or
obtained by person as against vague rumours, statements or casual comments given by
strangers.Similarly in Lloyd vs Banks4, it was held by the Court that “the knowledge or notice

3
Ashiq Husain V. Chaturbhuj AIR 1928 All 159.
4
Lloyd vs Banks 1868 LR 3 Ch 488, 490.
must be definite, it should not be hearsay or rumors and should be of such nature that it would
be expected that a normal man would take it seriously. It was also held in this case that “only the
knowledge of the parties interested in the transaction is actual notice regarding the transaction,
and knowledge of strangers to the transaction is no notice of the transaction. Knowledge must be
in relation to the transfer in question and not general or irrelevant to the transaction.

2. Constructive or implied notice

Constructive Notice means knowledge that the court imputes on a person5. A person may claim
that he did not know a fact, but if the circumstances surrounding him are such that as reasonable
prudent person, he ought to have known a fact, he will be deemed to know it. Constructive notice
is knowledge by a purchaser of any document or fact which would have “come to his knowledge
if such inquiries and inspections had been made as ought reasonably to have been made”, which
may be personal or via his agent or solicitor. Constructive notice is an equity which treats a man
who ought to known the fact, as if he actually does know it. It presupposes that in property
transaction the transferee ought to ascertain facts for safeguarding his own interest.In Motilal
Jain Vs. Prakash Bhartiya6, it was held by the Supreme Court of India that a person is said to
have the notice of fact when he actually knows the fact, or, when but for the willful abstention
from an enquiry or search which he ought to have made, or gross negligence he would have
known it.

Constructive notice can be applied by the court in five cases:

 When there is a willful abstention from making an inquiry: in case of willful

abstention from making an enquiry, there should be some starting point of enquiry, some
hint, some suspicion that there is, or may be, something wrong somewhere and the
transaction or situation demands some probe or investigation that may reveal the truth. If
in any case the transferee fails to investigate, the law will presume that he had an inkling
of the facts, that something was wrong but he had a fraudulent determination not to know

5
Dr. poonampradhan Saxena, Property law, 2ndedn p.37.
6
AIR 2007 (NOC) 377 MP.
 the truth. Therefore willfulabstention hints at want of bona fides as distinguished from
mere omission to make enquiries.7
 Gross negligence: Gross negligence refers to not to an ordinary negligence, but
negligence so grave, that it cannot be relatable to the conduct of an ordinary reasonable
prudent man. In these even though the person claims that he had no knowledge of the
fact, the court will attribute knowledge or notice to him. As also held in Tilakdhari v
khedan Lal8 that before purchasing the immovable property, the omission to search the
registers kept in the registrar’s office may amount to gross negligence so as to attract the
consequences which result from the notice.
 Registration of the document/ transaction: the statutory provisions providing that the
registration of a compulsorily registrable document operates as constructive notice was
introduced in the Act by amending Act of 1929. Act was promulgated in 1908, and
provided for compulsory registration for transfer of immovable property. Constructive
notice will not be imputed unless the document is registered, in accordance with the
manner provided under the Registration Act 1908 and the instrument or memorandum
has been duly entered in the books/registers.
Explanation I of the Sec 3 of Transfer of Property Act 9 describes 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 of, or share
or interest in, such property shall be deemed to have notice of such instrument as from
the date of registration or, where the property is not all situated in one sub-district, or
where the registered instrument has been registered under sub-section (2) of section 30
of the Indian Registration Act, 1908 (16 of 1908), from the earliest date on which any
memorandum of such registered instrument has been filed by any Sub-Registrar within
whose sub-district any part of the property which is being acquired, or of the property
wherein a share or interest is being acquired, is situated. He may himself have actual
notice or the constructive notice may be imputed to him when information of fact has
been obtained by his agent in the course of business transacted by the agent for him”

7
KausalaiAmmad v SanakaaraMuthiah, AIR 1941 Mad 707.
8
Tilakdhari v Khedanlal, AIR 1921 PC 112.
9
Transfer of property Act 1882 s3.
 It is a general rule that the transfer of the property takes place with a written document
that is signed by the transferor, is properly attested and is registered. In transfer of
property, as registration of the document is mandatory requirement, more so when it is
transfer inter vivo, the duty of the a prospective transferee is to search the registers and
ascertain the registered transaction that had taken place in the past, relation to the
particular property. A failure to inspect the registers will result in the imputation of
constructive notice with respect to all the transactions that are required, by law, to be
compulsorily registered10

 Actual possession:
Explanation II of sec 3 of Transfer of Property Act11 provides that “Any person acquiring
any immovable property or any share or interest in any 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.”In order to operate as constructive notice possession must be 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 tohave notice of the title, if any, of any person who is not in actual possession.
The general rule for transfer of property is that where a person other than the transferor is
in the actual possession of the property, it behaves a prospective purchaser to ascertain
what all rights the person in actual possession really has in respect of the property, and if
he omits to do so and if equities exists in favor of the person in possession, the
prospective purchaser would be bound by them.
 Notice to agent- Explanation III of Sec 3 of Transfer of Property act 12 says 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 thee fact, the principal shall not
be charged with notice thereof as against any person who was a party to or cognizant of
the fraud.

10
Ibid.
11
Transfer of property Act 1882 s3.
12
Ibid.
 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.

Scope of the Rule.-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: 1. as an
agent,

2. during the agency,

3. in the course of the agency business,
4. in a matter material to the agency business.

Exception: Fraudulent concealment of fact by agent.--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 otherwiseknew of the fraud.
In Arumilli Surayya v. Pinisetti Venkataramanamma13, it was held that “Sec. 100 of the Transfer
of Property Act does not apply to auction sales because the transfer within the meaning of the
Transfer of Property Act does not include an auction sale. It was added that the position of a
purchaser at an execution sale is the same as that of the judgment -debtor and his position is
somewhat different from that of a purchaser at the private sale.”

13
Arumilli Surayya v. Pinisetti Venkataramanamma (1940) 1 MLJ 831.
 CONSEQUENCES OF NOT MAKING ENQUIRY

It is the duty of the buyer to make every possible inquiry related to the property which he is
going to buy. If the buyer fails to make any such inquiry the benefit is given to the seller.The law
also demands a careful and vigilant conduct on the part of the transferee to verify the correctness
of the title, and the possibility of existence of a charge over the property. For this certain rules
are to be kept in mind, which are as follows:

1. The transferee must satisfy himself with 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. The transferee must examine all the relevant documents relating to the property and the
transaction. Each and every relevant paper is to be inspected as the rule is ‘Actual notice
to a deed is the constructive notice of its contents’. If the transferee has in his possession
a document relating to the property, he will deemed to know about its contents, and if the
liability on the property is ascertainable from a particular document, he will be imputed
with the constructive notice of the same.
3. The transferee must satisfy himself as to whether there is a charge due over the property.
One way of doing this is to go beyond the present transaction and find out how and from
whom the present transferor has acquired the property. If he had purchased the property,
and the person is available, he can enquire from him about the possibility of the charge.
He can also inspect those document 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 the existence of a charge.

In Bank of Bombay vs. suleman14, a person died and in his will left his house and land to his sons
from his first wife. He also left four sons from his second wife. In his will, he had provided that
the sons from the first wife were to have land but were under an obligation to pay Rs. 30k to the
sons from the second wife. The sons did not pay this amount and in course of their business
mortagaged the house to the bank. When the sons failed to pay the amount, bank brought the
property up for the sale. The sons from the second wife contented that their claim over the land

14
Bank of Bombay vs. suleman 1909 ILR 33 Bom 1.
and house had precedence over the bank claim. The Court held that “if the bank had made
enquiries as to how the sons had derived the title to the property, it would have known about the
will and an inspection of the will could have brought them the knowledge or the charge”. In
doing so, they were guilty of willful abstention from making an enquiry, and therefore were
imputed with constructive notice of the charge in favour of the sons from the second wife, who,
it was held, had priority of claim.

Notice cannot be imputed on bona fide purchasers who purchase the property after due inquires
and have acted in good faith.

E.g. -Property was in possession of tenant. The vendee has not made any enquiry with the tenant
in respect of prior agreement for sale executed in favour of the tenant. The vendee purchased the
property without taking any enquiry though the property was in possession of the tenant. It was
held that the vendee would be deemed to have notice of the prior agreement in view of Section 3
of T.P.A.
 CONCLUSION

In my view the phrase “a person is said to have notice of fact when he actually knows the fact”
itself is self explanatory which clearly states that knowledge/intention is an important ingredient
for a person to have the notice of a fact.Knowledge is a familiarity, awareness or understanding
of someone or something, such as facts, information, descriptions, which is acquired
through experience by perceiving, discovering, or learning.For the transfer of a property notice is
a mandatory requirement to be followed and it can be actual notice or notice which may be
acquired or gained through the circumstances. A notice which is acquired through the
circumstances is termed as Constructive notice which is imputed on the party as an actual notice
i.e. as if the person had all the means to have the knowledge of the facts but due to his negligence
did not try to find out the fact. Also it is the duty of the buyer to make every possible inquiry
related to the property which he is going to buy. If the buyer fails to make any such inquiry the
benefit is given to the seller and the constructive notice is imputed on the transferee. The law
also demands a careful and vigilant conduct on the part of the transferee to verify the correctness
of the title, and the possibility of existence of a charge over the property. So to have the notice of
the fact it is necessary that the person has the knowledge of the fact.
 BIBLIOGRAPHY

 V.P. Sarathi, Law of Transfer of Property, Eastern Book Company, 5thEdn., 2011.
 Dr. G.C. Bharuka, Mulla Transfer of Property Act 1882, Lexis Nexis Butterworths India,
10thEdn., 2006.
 Dr. P.P. Saxena, Property Law, Lexis Nexis Butterworths India , 2ndedn., 2012.
 http://www.scconline.com/
 http://www.maupatra.com/