TRANSFER BY OSTENSIBLE OWNER

SECTION 41
INTRODUCTION
The provision of ostensible owner has been laid down under section 41 of transfer of
property act 1882. The transfer of property act was established in order to make transfer
of immovable property easy, accessible and uniform considering the large population.
Moreover, the concept of ostensible owner (which means assumed or pretend to owner)
was established in order to protect the rights of innocent third person party in a transfer.
According to Section 41 of the Act, “Where, with consent, express or implied, of the
persons interested in immovable property, a person is the ostensible owner of such
property and transfers the same for consideration, the transfer shall not be voidable on
the ground that the transferor was not authorized to make it:
Provided that the transferee, after taking reasonable care to ascertain that the transferor
had power to make the transfer, has acted in good faith.
CONTD.
In simpler words, section 41 states that-
With the consent (be it express or implied) of the person whose interest lies in the
immovable property(real owner),
Another person who is an ostensible owner of the same property,
Transfers the said property in exchange of consideration,
Such transfer shall not be declared voidable on the ground that the person was not
authorized to do it,
Provided that the person to whom such transfer was made took reasonable care and
acted in good faith,
CONTD.
The concept of transfer by ostensible is based on 2 principles:
1. Nemo dat quod non habet: According to this principle, no one has the right or power
to confer or present a higher right over the property than what he himself actually
possess. Actually transfer by ostensible owner is an exception to this general rule.
2. Nemo plus juris and alium transferee potest quam ipsa habet: According to this
principle, no person can transfer a title or right over the property greater than what he
actually himself has. The transfer which is made by the ostensible owner underlines the
principle of holding out.
But this general rule is not without exceptions. One exception is that if the true owner of
property permits another to hold himself out as the real owner, a third person who deals
in good faith with that other may acquire a good title to the property as against the true
owner
RAMCOOMAR KOONDOO V. JOHN AND MARIA MCQUEEN
CASE
The concept of transfer by ostensible owner was first established in the much celebrated
and landmark case of Ramcoomar Koondoo Vs John McQueen.
Facts: Alexander Macdonald lived in Calcutta with his mistress Bunno Beebee and 2
children. Maria married Mcqueen both of them being respondent of the case. The land in
question was given as sale deed out to Bunno beebee. After the deed, it could not be said
with certainty whether Alexander lived on the said property. After death of Alexander,
Bunno Beebee did live on that property for a while and later rented it out. Later, Bunno
Beebee sold the property to other party where the other party raised certain buildings.
Bunno Beebee died after this and the person (Ramdhoone) who built building on the
property let it out to respondent. The landlord (Ramdhoone) here filed a case against
tenants due to non-payment of rent. Later this, the respondent also brought a suit against
Ramdhoone (now appellant Ramcoomar son of Ramdhoone) to eject his family from the
property.
CONTD.
Issues: 1) Whether the property in question was of Macdonald's? 2) Whether the
property came by his will to the respondent Maria McQueen? 3) Whether the
appellants in the question had purchased bond fide for valuable consideration
without any notice?
Arguments raised: The appellant denied the existence of any express or
constructive notice about the title of Bunno Beebee. The respondent stated that
the duty of appellant to take notice regarding every fact and circumstances
relating to the property was not fulfilled in the current case. The appellant
contented that his father bought property from Bunno Beebee without receiving
any notice about her having Benami title over the property and from the side of
respondent it needs a stronger case to defeat the title after them having such long
procession over the property.
CONTD.
Judgement:
The court held that, “It indeed is a principle of natural equity which should be
applied that where one person allows an another person to hold himself as an
owner of property and a third person buys it, for consideration, from the
ostensible owner under the belief that he is actually the real owner should not at
all be permitted to recover under a secret title, unless and until he can overthrow
that the notice, or something similar to which can amounts to constructive notice
which must have to put him upon under an enquiry, that, if it would have been
prosecuted then it would have led to a discovery of it”.
Under this case it was held that the appellant cannot take back the property from
the third party since the sale of the property was valid in eyes of law. Through
this case, the concept that arose from this case can also be witnessed under
section 41 of the Transfer of Property Act.
MEANING OF OSTENSIBLE OWNER
The term ‘ostensible’ means ‘apparent’ or ‘something which is seeming’. The person
ostensible owner is known as a person who appears or seems to be the owner of immovable
property in question even though he in reality is not the real owner of the property in
question.
The provisions of transfer by ostensible owner are mentioned under the section 41 of the
Transfer of Property Act, 1882.
Ostensible owner in simpler sense is not even the real owner but someone who can represent
oneself as the real owner of the property in question to the 3rd party under the dealings. in
order to affect the real owner by a transfer made by another person, it must be established
that the transferee knew that he has dealing with the person who has power to transfer.
In other words, the transferor, if he does not happen to be the real owner, must be the
"ostensible owner" of the property. The word "ostensible" means "professed" and the
expression "ostensible owner" is used in contradistinction to the expression "real owner’.
CONTD.
An “ostensible owner" is one who has all the indicia of ownership without being the real
owner, i.e., he must appear to have power of disposition, and if the circumstances under
which he holds the property are consistent with the limited authority to deal with it, the
rule laid down in this section does not apply. Where the real owner has entrusted a
temporary dominion, over the property for a limited purpose to a person, the person so
entrusted does not become ostensible owner.
In Suraj Ratan Thirani v. Azambadad Tea Co. Ltd., AIR 1965 SC 295 the Supreme
Court held that in order to attract this Section, it must be shown that the transferor was
the ostensible owner of the property with the consent of the co-sharers where the
property is the subject matter of joint ownership and that the transferee took reasonable
care to ascertain that the transferor had power to make transfer.
CONTD.
Where property was purchased by the father with consideration supplied by him in the name of
his minor sons, the father is the real own of the property whereas the sons are the ostensible
owners.
The following persons have not been held to be the ostensible owner.
A manager in possession of property;
A professed agent;
A licensee in possession of property;
A menial servant in occupation of a property;
A manager or a trustee of an idol;
A co-sharer in occupation of a joint family property,
A donor who has not reserved to himself any power of revocation of the deed of gift.”
TRANSFER BY BENAMIDAR
A transfer by a benamidar is covered by this section and the transferee will be protected
provided he takes property in good faith after taking reasonable care to ascertain that the
transferor had power to make the transfer. A benamidar is an ostensible owner within the
meaning of this section. A benami transaction is that where a person with funds supplied
by himself, buys property in the name of another, there is a resulting trust in favor of the
person who has supplied funds, the beneficial interest being in him, though the ostensible
ownership is in the latter. Thus, the person who supplies funds for purchase of property is
the real owner and the person in whose name property is acquired is a benamidar or an
ostensible owner, e.g., if A purchases a house with his money in the name of his wife or
his child, A will be the real owner and the wife or child, as the case may be, will be a
benamidar.
A benamidar is an ostensible owner and if a person purchases from a benamidar, the real
owner cannot recover unless he shows that the purchaser had actual or constructive notice
of the real title.
CONTD.
In the case of Mohamad Shakur v Shah Jehan, where the real owners of the property lived
in a different village from the property and they had authorized a widow to use the said
property in question the way she liked and afterwards in future she sold the said property in
question. Under this case, the real owner lost the claim over the property and the transfer
was held valid.
Under the case of Jayadalal Poddar v. Bibi Hazara, 1974, where the circumstances of the
as revolved around the question of ostensible owner, the supreme court gave few tests to
determine whether the person was ostensible owner or not. The tests were as follows:
the source from which the purchase money came;
the nature and possession of the property after the purchase;
motive, if any, for giving the transaction a benami colour,
CONTD.
the position of the parties and the relationship, if any, between the claimant and
the alleged benamidar;
the custody of the title-deeds after the sale; and
the conduct of the parties concerned in dealing with the property after the sale.
Test 1 is to search the source of the money. The money in question is the one
through which the purchase of property had taken place. The test is to find out that
whether the source (i.e. the person from whom the money is taken) his name is in the
documents of the property or whether some other person’s name is involved in it or
present in the document. In simpler words, it is to be proven that the money for
purchase came from some other than the person in whose name the purchase was
actually made.
CONTD.
Test 2 is to determine the intention-Under test 2 it is to be determined whether the
person whose name is mentioned in the document does really have an intention to
purchase the property or not.
Test 3 is the most essential test of all to determine whether a person is ostensible owner
or not. In order to establish this test, one needs to find out who in reality is enjoying
the benefit of the property. Is it the person who purchased the property or someone
else? Here the term enjoyment of the property must be understood well. Mere residence
or possession does not constitute to be enjoyment of the property however the right to
transfer, right to give on lease, right to get consideration for same are the wider aspects
for the terminology of enjoyment of property. If the person who is enjoying the property
is not the same person whose name is given in the legal authoritative document then in
that case, the chances of property in procession of ostensible owner who is completing
the wishes or task of real owner is more.
CONTD.
Test 4 is more of a concluding one-Under this test it is to be verified about the
reason why the property was bought under the name of ostensible owner and not
the real owner. The test seeks the reason behind the aspect of the ostensible
owner.
But the above indicia are not exhaustive and their efficacy varies according to
the fact of each case. Nevertheless, the source from where the purchase money
came and the motive why the property was purchased benami are by far the most
important tests for determining whether the sale standing in the name of one
person is in reality for the benefit of another.
It is well settled that intention of the parties is the essence of the benami
transaction and the money must have been provided by the party invoking the
doctrine of benami.
ESSENTIALS DURING TRANSFER BY OSTENSIBLE OWNER
The following conditions are necessary for taking the benefit of Section 41 –
(1) The transfer must be done by an ostensible owner,
(2) There should be express or implied consent of the real owner at the time of
the transfer of property to the ostensible owner.
(3) The ostensible owner must get some consideration in return of the transfer.
(4) The transferee of the property must have acted in good faith, taking
reasonable care in ascertaining that the transferor has the power and authority to
make the transfer.
(5) Property must be transferred within the meaning of Sec. 5 by the ostensible
owner.
ROLE OF CONSENT
The main rationale of Section 41 is to protect the rights of the innocent third party who
had purchased the property when the real owner was himself at fault by not protesting
the transfer. But a necessary requirement is that the real owner should have the capacity
to give the consent and that consent should not be obtained from any illegal or unlawful
act. In the case of minors transfer, even if the ostensible owner asserts that he has the
consent of the minor, it will be held to be of no consent as minors have no such capacity
to give the required consent.
This was established in the case of Satyanarayana Murthi vs. Pydayya, that consent
need not be taken from the real owner and it might also be the case or possibility that the
true owner had no such knowledge of the transfer. The consent must be a real consent. It
must not have been obtained by fraud, coercion, force or undue influence practiced by
the ostensible owner on the real owner of the property. The consent can be express or
implied in such transactions.
EXPRESS AND IMPLIED CONSENT
In cases, where the consent is given in words, either spoken or written, it is an express
consent. Where the consent is given by a manner of conduct, it is implied consent.
The consent is defined as implied where the real owner has knowledge of the fact that
the ostensible owner is dealing with the real owner's property as his own but the real
owner remains silent or acquiesces.
Such acquiescence or silence in this case amounts to consent. But in the situations where
the real owner is himself not aware of his ownership rights, his silence will not amount
to his consent.
In such a case, his silence would not exclude him from claiming that the transfer is made
by an unauthorized person. The real owner will be entitled to avoid the sale and Section
41 will not come to the protection of the transferee.
CONTD.
It is not required that the real owner of the property has to give express consent or give
his consent in writing. Hence, where another person is trading with the property of the
real owner, as if the property was his own, and the real owner has knowledge about it,
then it will be said, as an implied consent on the part of the real owner.
Attestation does not imply consent by itself. However, if it is manifested that the
attestation took place in circumstances which involved the knowledge of the real owner
or consent of him to the transaction, it may be regarded as an implied consent.
In the case of Shamsher Chand v Bakshi Meher Chand, it was held that, if the party
in transaction is not responsive or aware of his rights or is silent about them, then in such
cases it cannot be said that the real owner had given consent to the transfer of the
property. It is prerequisite that a person who is not aware of his rights could never have
consented to that and such a transaction will not be valid.
CONSIDERATION
Consideration is one of the essential if there is a transfer by ostensible owner. The
property cannot be given away as a gift. If the transfer is done without consideration,
i.e., gratuitous, this section will not apply.
The Indian Contract Act, 1872 states that consideration is necessary component of any
contract and transfer of property by an ostensible owner is done by way of contract only.
Also Section 4 of the Transfer of Property Act states that anything not expressly defined
in this act shall be deduced form the general definitions given under the Indian Contract
Act, 1872.
Reasonable Care- Reasonable care means such care as a man of ordinary prudence
would take in his own case. Reasonable care is to be expected from everyone who
demands to have purchased free from a really existing right.
CONTD.
There exists no possibility to mention any general rule of enquiry which may be
called reasonable care for all the cases. The standard of enquiry expected from
the transferee depends upon the circumstances and facts of each case.
In the case of Mathura v. Ambika, the real owner sold the property to another
person and got it registered before the transfer was made by the ostensible owner
could be registered. It was held that the transfer made by the real owner would be
considered valid as he has a superior title over the property than the ostensible
owner in this case. The rights of the third person who purchased this property
from the ostensible would not be safeguarded under this section.
PROPER INQUIRY
Proper inquiry as observed by the courts in India held that this being subjective,
it will depend on the facts and circumstances of each case. It can also be the case
that what amounts to a proper inquiry in a specific case may not be called as
proper inquiry in the another case with completely dissimilar facts.
In the case of Azima Bibi v Shamalanand, the transfer was made by Muslim.
The court held that the purchaser is required to inquire if there is any female heir
also in the family. As in certain cases only males transfer the property without
even taking the consent of the females. It will not be considered as a valid
transfer because they also have a share in the property. Thus, the third person has
to inquire about such things. The ultimate test is that the, “transferee should show
that he acted like a reasonable man of business and with ordinary prudence.”
GOOD FAITH
Good faith means the bona fide intention, i.e., the transferee had acted sincerely and
honestly that the ostensible owner was the real owner after all the enquiries are made by
him.
In cases, where after the proper inquiry is done and the transferee has knowledge that
the person selling him the property is not the real owner but only the ostensible owner,
the transferee cannot neglect true and real facts.
A person cannot because of his own negligence claim protection of this act. The rights
of real owner need to be ensured and protected against such persons.
The rule of law states that, "he who seeks equity must do equity". Thus, the protection
of this section will be accessible only for that person (transferee) whose own conduct is
just, fair and equitable.
BURDEN OF PROOF
The burden of proof in first place lies on the transferee to prove that the
transferor was actually the ostensible owner and had the consent to sell the
property.
The person has to prove that he genuinely acted in good faith and had taken all
reasonable care that was needful from him while taking the property.
The transferee has to prove that he was not at fault while taking the property and
also to shift the burden on the real owner.
BENAMI TRANSACTIONS (PROHIBITION) AMENDMENT
ACT, 2016
This Act prohibits the transfer by an ostensible owner (referred as Benami Transactions)
and has made it illegal and unlawful with certain exceptions.
As per Section 2 (9) "benami transaction" means,—
(A) a transaction or an arrangement— (a) where a property is being transferred to, or is
held by, a person, and the consideration for such property has been provided, or is paid
by, another person; and (b) the property is being held for the immediate or future benefit,
direct or indirect, of the person who has provided the consideration, There is a total
prohibition against the real owner affirming his ownership rights against the benami
owner. The property which is held and owned in the name of the benami owner is liable
to be acquired by the government through a competent authority (appointed under the
Act for this purpose) without paying any remuneration whatsoever. The burden of proof
lies on the person who sets up the Benamidar.
EXCEPTIONS
Exceptions under the Act According, to Section 2(9) A (b) under The Benami
Transactions (Prohibition) Amendment Act, 2016, Benami transactions is prohibited, but
there are a few exceptions to this rule-
The property which is held by a Karta or any other member in a Hindu Undivided
Family and the property is held for the gain or benefit of the other coparceners of the
family and the remuneration or consideration of which is given by the known sources of
HUF will not amount to a Benami transaction.
The property that is held by a trustee or other person who, in a fiduciary capacity has the
benefit of another person for whom he has a trustee. This will not amount to a Benami
transaction. Fiduciary capacity means, being in a position of a trustee and being in a
position where the person can be affirmed to have duties of good faith, confidence, trust
and transparency and one who must exercise a high standard of care in managing
another person’s property or money
CONTD.
The prohibition on benami transactions does not apply to an individual who buys
property in the name of his spouse or in the name of any child. But the consideration
has to be paid by the known provenances of the individual.
Where the person’s property is held jointly by brother or sister or lineal ascendant or
descendant and the consideration is paid by the known sources of the individual.
These exceptions are governed by Section 41 of The Transfer of Property Act, 1882 as
these are not included in the definition of Benami Transactions under the Section 2(9) A
of Benami Transactions (Prohibition) Amendment Act, 2016.
CONCLUSION
The theory and concept of ostensible ownership is subjected to the provisions of Benami
Transactions Act, 1988 (Which is now, Benami Transactions Amendment Act, 2016).
After analyzing different case laws and concept of ostensible ownership, we reach to the
conclusion that, Ostensible Ownership is a concept that derives its authenticity and
legitimacy from the ideas of equity and natural justice, meticulously the doctrine of
estoppels. It holds an exception to the doctrine, “nemo dat quod non habet” as it does,
for reasons of equity, allow ostensible owners to deliver the rights of true ownership
to the bone fide transferees. Ostensible ownership is irretrievably linked with the
concept of Benami transactions. Benami transactions are defined under the Benami
Transactions Amendment Act, 2016. The provisions of this Act do not apply, in usual
bona fide transactions where person purchases property in the name of his wife or
unmarried daughter. Therefore, after the passing of the Benami Transactions Act, the
scope of application of Section 41 has become very narrow.