OSTENSIBLE OWNER

The Transfer of Property Act, 1882, was passed with the purpose of making transfer of property easier and makes it accessible to the population at large. This Act lays down certain general principles as to transfer of property which has to be followed. Transfer of a property by an ostensible owner is such a concept which was incorporated to protect the rights of innocent third parties vis-à-vis the property owners. In respect of transfer of property, one settled principle is that a person cannot transfer to another person a right or title, which is greater than what he himself possesses. Therefore, a person cannot give what he does not have. However, Transfer of Property Act has provided an exception to this settled principle through concept of ostensible owner.

The privy council in Ram Coomar v. MacQueen[1], in regard with transfer by ostensible owner held that

“It is principle of natural equity which must be applicable that where one man allows another to hold himself as the owner of an estate and a third person purchases it, for value, from the apparent owner in the belief that he is the real owner shall not be permitted to recover upon a secrete title, unless he can overthrow that of notice, or something which amounts to constructive which ought to have put him upon an enquiry, that, if prosecuted would have led to a discovery of it.”

Ostensible owner is the person who is though not the real owner but has all incidents and/or characteristics as the real owner.The person on the face of it i.e apparently looks like the real owner but in fact he is not the real owner.

The ostensible owner only fulfills and/or carries somebody else’s wishes and/or aims. As per the wishes of the ostensible owner puts his name as an owner on the records of the property although his has the intention to own the property

This principle was first used in the much

celebrated   case   of Ramcoomar   Koondoo   v. John   and   Maria McQueen

3

by   the   Judicial

Committee

general principles as to transfer of property which has to be followed. Transfer of a property

by and ostensible owner is such a concept which was incorporated to protect the rights of

innocent third parties vis-à-vis the property owners.

ims and Objectives Of Research:

The main aim behind the making of this project is to find out way by which a immovable

property   can  be  transferred by an ostensible   owner   and   in  addition  to this, meaning   of

ostensible owner is also to be explained under this assignment

CHAPTER-1

  • MEANING OF OSTENSIBLE OWNER:

The word ‘ostensible’ has two meanings

  1. that the object bears a certain from or appearance without suggesting that it is or is not that of which it has the superficial appearance , and
  •   that the object bears a certain appearance but is not really that of which it bears the appearance. [ Debi Singh v.Jagadish Saran AIR 1952 All 716 ].[2]

The word ‘ostensible’ literally means ‘apparent’ or ‘seeming’. An ostensible owner is a person who appears to be the owner of immovable property even though he is not the real owner of the property. The provisions regarding transfer by ostensible owner are governed by section 41 of the Transfer of Property Act, 1882.

The word ‘ostensible’ means something that appears to be true. The ostensible owner is thus not the real owner of a property. He merely represents himself out as real owner to the third parties. Such ostensible owner possesses all the rights of ownership in a property without being the real owner of it. He acquires these rights from the real owner by the express or implied consent of such an owner. He is the full and unqualified owner and the real owner is the qualified owner of the property.

  • DEFINITION
  • Ostensible owner is the person who is though not the real owner but has all incidents and/or characteristics as the real owner.The person on the face of it i.e apparently looks like the real owner but in fact he is not the real owner.
  • Though he owns the property and all the property documents, papers and records are on his name on a minute scrutiny it can be found that he has never the intention to own the property.
  • The ostensible owner only fulfills and/or carries somebody else’s wishes and/or aims. As per the wishes of the ostensible owner puts his name as an owner on the records of the property although his has the intention to own the property.
  • The money required as the consideration of the property is funded by the real owner i.e. the person whose wishes are carried on by the ostensible owner,that person who had the intention to buy the property.[3]
  • BENAMI TRANSACTION / BENAMIDAR

In simple words, a person may have possession and enjoyment of the property and may also have his name entered in the official records, but even then, he may not be the real owner of that property.

Such a situation may arise in case if a person purchases a property in the name of another person. It is called a Benami transaction, and the person in whose name the property is purchased is called Benamidar.

So, a Benamidar is an ostensible owner.

In some situations, it may also be said that the ostensible owner has acquired that right because of the wilful neglect by the real owner of the property. This has conferred him the status of an ostensible owner.

In Mahinder Singh v. Pardaman Singh,[4]

court clarified the position saying that the burden lies on the person who asserts that it is such a transaction. The governing principal for determining the question whether a transaction is benami or not is to be proved by showing that the purchase money came from a person other than the person in whose favour the property is transferred . The intention of the person who contributed towards the money has to be inferred from the circumstances and the relationship of the parties and the motive governing their action in bringing about the transaction and their subsequent conduct.

This section is applicable only where the transferor is an ostensible owner. But it isn’t very easy to ascertain whether a person is an ostensible owner or real owner because he has all the features of an actual owner except the intention to own the property. So it is for the court to establish whether the transferor was an ostensible owner or not.

CHAPTER-2

  • PROVISIONS RELATED TO TRANSFER BY OSTENSIBLE OWNER:

S. 41 of The Transfer Of Property Act, 1882  states that

“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.”[5]

  • CONDITIONS LAID UNDER SECTION 41
  • The person who subsequently transfers the property should be the ostensible owner himself.
  • There should be consent from the real owner,which can be expressed or implied.[6]

{Abdul Gaffer VS Nawab Ali AIR (1949) }

  • The ostensible owner shall receive consideration for the transferred property from the purchaser.
  • The purchaser must believe the ostensible owner to be the real owner and act is good faith. He should have also exercised reasonable care while executing the transfer of the property by the transferor.[7]{ Chandini Prasad V. Gadhadhar Singh RoyAIR (1949)}
  • The transfer executed by the transferor should be of an immovable property and not a movable property.
  • ESSENTIALS OF SECTION 41 :
  1. CONSENT OF THE PERSON INTERESTED INPROPERTY :

The transferor must be ostensible owner with the consent express or implied, of the person interested in the property. The section will not apply unless the ostensible ownership of a person is consented to by the persons interested in the property. The main purpose of the section 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.[8]

                      In the case of { Satyanarayana Murthi v. Pydayya[9]  }

it was held that the consent need not be taken from the true owner and it might also be the case that the true owner had no knowledgeof the transfer.

The consent may be :

  • EXPRESSED
  • IMPLIED

Where the conduct of the person allows another to act in a particular way, it amounts as implied consent. Mere silence would not amount to implied consent unless there is a duty to speak, but the negligence on the part of a real

  • Person interested

A transfer by an ostensible owner is binding only on the person interested in the property with whose consent the transfer has been made.

  • IMMOVABLE PROPERTY

The property must be immoveable.

  • This section applies to partial transfers as well. Hence, it is not necessary for a transfer to be that by sale or exchange. A transfer includes the transfer of an interest in the property, for example, mortgage.
  • The transfer must be a voluntary on one. Hence, the transfer made by the order of court would not fall under this section.

3.)CONSIDERATION

The transferee should give consideration to the transferor in return for the property. There cannot be a gratuitous transfer of property. Consideration is a compulsory criteria for invoking transfer under section 41 of the Act. Consideration is must and cannot give away the property as a gift.

As it has been provided in Indian Contract Act,1872 that consideration is necessary component of any contract and transfer of property by an ostensible owner is done by the way of contract only.

Padam Chand v. Lakshmi Devi[10]

A gift deed was executed by father, who was the ostensible owner of the property in favour of his daughter and the consideration for the transfer was contended to be love and affection in favour of his daughter. It was held that a gift is “parting of the property by the owner without any pecuniary benefit” and that Section 41 of TPA

4.)  REASONABLE CARE

The transfer must have taken reasonable to ascertain that the transferor had power to make transfer. REASONABLE CARE can be understood as the care which a reasonable and ordinary man would have taken.[11] { Chutabalakundu V. Sailen Bihari Paul AIR 1988}

  1. Degree of care
  2. Ordinary Prudence and Resaonability
  3. Standard of diligence
  4. Transferor must show that he has made usual inquiry about title
  5. No enquiry called for if title be clear.

Consideration is a must if there is a transfer by ostensible owner. He cannot give away the

property   as   a   gift.   As   it   has   also   been   provided   in   the   Indian   Contract   Act,   1872   that

consideration   is   necessary   component   of   any   contract   and   transfer   of   property   by   an

ostensible owner is done by way of contract only. Also it has been provided in S. 4 of the Act

that anything not expressly defined in this act shall be deduced form the general definitions

given under the Indian Contract Act, 1872

Section 41 says that the transferee must have taken reasonable care before entering into the transaction and must have believed that the transferor had the authority to transfer. The test of reasonable care is the amount of care that an ordinarily prudent man would take. This puts a duty on the transferee to inquire before entering into the transaction as to the title of the transferor and protect his own interest[12].

5.)  ACT IN GOOD FAITH

The expression good faith means that the transferee has acted honestly and in the real belief that the ostensible owner is the true owner. The proviso to section requires that the transferee must not only take reasonable care to ascertain that the transferor has power to transfer the property, but also transferee must act in good faith. It is possible that there may be enquiry without good faith and good faith without an enquiry.  In none of the above cases, the real owner is affected by one’s transaction with ostensible owner.

Layak Ram V. Dharmavatu AIR (2010)[13]

It was held that good faith simply means that the transferee should have honestly believed that the ostensible owner is the true owner of the property,

6.) Cannot be avoided by Real Owner

   Once the transfer is made by the real owner it cannot be avoided by the real owner.

7.) Transfer is valid

If the essentials of Section 41 are fulfilled, then the transfer by Ostensible owner is Valid and not voidable or void.

  • BURDEN OF PROOF

The burden of proof under Section 41 lies on the transferee, to prove that:

  1. A transferor is an Ostensible Owner, and
  2. He took reasonable care, like a reasonable prudent man would, t

In case of a dispute or if the legality of transfer is questioned, the burden of proof will lie on the transferee. [14] {Ram v. Muktinath, (1956) A.I.R }

The transferee has to prove that the transfer was executed in good faith by him. Additionally, he must prove that he had taken reasonable care to ascertain that the transferor was the true and real owner of the property however he can prove that material facts were concealed by the transferor while executing the transfer.

CHAPTER-3

  • EXAMPLES
  • A, the transferee knew that the land belonged to X. Y told A that X has given him the authority to sell the land. Without making any inquiries and knowing that Y cannot sell the land, entered into the transaction. A is not entitled to protection under Section to protection under Section 41 of TPA.
  • A authorizes B his wife to perform all the rights of ownership in the property held by him while he is away. Hence when a transfer is executed by B it can be said that B is the ostensible owner who has all the rights of the real owner in that property.
  • For example, X buys a property in the name of Y. X pays consideration for executing the sale. Y subsequently sells the property to Z and conceals the sale from X. X cannot avoid such a sale unless he proves that Z had knowledge of the real title of the property and has acted in bad faith.
  • PERSONS WHO CANNOT BE OSTENSIBLE OWNER
  • Professed agents
  • Trustee
  • Servants
  • Guardians or any other person acting under fiduciary character[15]

For example, A owns a property in India, he authorizes B to perform all rights of ownership relating to the property and leaves for the U.K. B will be the ostensible owner of such a property and all acts done by him will be considered at the acts of A. B further sells the property to C for consideration. A cannot recover from C his land in future. As C has believed B to be the owner of the property and has acted in good faith.

  • STATUTORY CHANGE

{Benami Transactions  (Prohibition of the Right to Recover Property) Act , 1988.}

The law relating to transfer by an ostensible owner as given in section 41 of the act is now subject to the provisions of the Benami Transactions  (Prohibition of the Right to Recover Property) Act , 1988.

According to Sec.2(a) of this act “benami transactions” means any transaction in which property is transferred to one person for a consideration paid or provided by another person . This act provides where a property is transferred benami , the person in whose name the property is held ,shall become the real owner .

Here any property held benami is not limited to any particular time, date or duration i.e. the Act, 1988 is retrospective in operation. Once the property is found to have been held benami no suit, claim or action to enforce any right in respect thereof shall lie.

Sec.4(1) of the Act lays down that– No suit ,claim or action to enforce any right in respect of any property held benami against the person in whose name the property is held or against any other person shall lie by or on behalf of a person claiming to be the real owner of such property.

In Om Prakash Rawal v. Justice Amrit Lal Bahri[16]

the defence taken by the defendant that the plot in fact was purchased by him in the name of his brother i.e. the plot was purchased benami, cannot be allowed by virtue of section 4(2) of the Benami Transactions (Prohibition) Act, 1988..

  • EXCEPTION TO THE RULE OF Nemo Dat Quod Non Habet

The rule enunciated in this section 41 is an exception to the general rule that a person cannot convey a better title than he himself has in the property. i.e., Nemo dat quod non habet. To this general principle there is a well recognized exception that if the true owner, as by entrusting him with the documents of title or in some other way, a third person, who (after due inquiry) bona fide deals with that other, may acquire a good title to the property as against the true owner.

This section is based on the principle that where one of the two innocent persons must suffer from the fraud of the third party, the loss should fall on him who has created or could have prevented the opportunity for the fraud and that in such cases hardship is caused by the strict enforcement of the general rule that no one can confer a higher right on property than he himself possesses.[17]

CHAPTER-4

  • CASE LAWS
  1. Shafiquallah v. Samiulah[18]

The owner of a property died and thereafter the possession of his property was with his illegitimate sons who were not entitled to the legal title of the property. The legal heirs of the owner filed a suit against the illegitimate sons to recover the property However the illegitimate sons sold the property to a third party, claiming themselves to be ostensible owners. The court held that the illegitimate sons had no consent of the actual owner whether express or implied to be ostensible owners of his property. Hence section 41 cannot be invoked.

  • Nirvas Purve v. Mst. Tetri Pasin [19]

 A husband while leaving for pilgrimage entered his land in the revenue records under his wife’s name. He subsequently allowed her to mortgage the land. When the husband left, the wife sold the land to a third party and the purchaser paid off the mortgage. The court held that the husband cannot recover or redeem the land from the purchaser, provided the purchaser has acted in good faith and has taken reasonable care to ascertain the title of the land.

Mahinder Singh v. Pardaman Singh[20]

The court clarified the position saying that the burden lies on the person who asserts that it is such a transaction. The governing principal for determining the question whether a transaction is benami or not is to be proved by showing that the purchase money came from a person other than the person in whose favour the property is transferred . The intention of the person who contributed towards the money has to be inferred from the circumstances and the relationship of the parties and the motive governing their action in bringing about the transaction and their subsequent conduct.

  • CONCLUSION

Hence the doctrine of ostensible owner states that an ostensible owner is a person who merely represents the real owner. He executes transfers on behalf of the owner with his consent. The real owner cannot avoid such a transfer made by the ostensible owner if the transferee has acted in good faith, has taken reasonable care while executing the transfer and give consideration for the same.

However, the principle laid down in section 41 is not restricted to sale. It applies to mortgage also, provided the mortgagee from ostensible owner acts in good faith and with reasonable care. If the conditions specified in section 41 of the Transfer of Property Act, 1882 are fulfilled and none of the ground in exception can be proved, the real owner is binding by transfer of immovable property made by ostensible owner.

After analyzing different cases and concept of benami . We reach to the conclusion that After enactment of Benami Transactions ( Prohibition) Act the situation is quite clear. It may be stated that now an ostensible owner has become a real owner except where he is a coparcener in a Hindu Undivided Family or a trustee . Besides them the provisions of this Act do not apply, also in usual bonafide transactions where person purchases property in the name of his wife or unmarried daughter.

  • BIBLIOGRAPHY

[1] Ram Coomar v. MacQueen ,AIR 1872

[2] Debi Singh v/s Jagadish Saran AIR (1952)

[3] https://lawexplainedindia.wordpress.com/2013/04/30/ostensible-owner-and-benamdar/  (last visited 16/11/2020, 12:30 pm)

[4] Mahinder Singh v. Pardaman Singh AIR( 1992).

[5] SECTION 41,TRANSFER OF PROPERTY ACT,1882

[6] Abdul Gaffer VS Nawab Ali AIR (1949)

[7] Chandini Prasad VS Gadhadhar Singh RoyAIR (1949)

[8] http://thelawstudies.blogspot.com/2018/03/transfer-by-ostensible-owner.html?m=1 (last visited 16-11-20,      2:00pm)

[9] Satyanarayana Murthi vs Pydayya, AIR (1943)

[10] Padam Chand v. Lakshmi Devi, AIR(2010)

[11] Chutabalakundu VS Sailen Bihari Paul AIR 1988

[12] https://www.legalbites.in/ostensible-owner/  (last visited 17-11-20 12:00pm)

[13] Layak Ram VS Dharmavatu AIR (2010)

[14] Ram v. Muktinath, (1956) A.I.R1956) A.I.R

[15] The Law studies, Transfer by Ostensible Owner, March 16 2018 http://thelawstudies.blogspot.com/2018/03/transfer-by-ostensible-owner.html   (last visited 17-11-20 12:45pm)

[16] Om Prakash Rawal v. Justice Amrit Lal Bahri ,AIR 1994

[17] http://www.goforthelaw.com/articles/fromlawstu/article28.htm (last visited 17-11-20 2:45pm)

[18]  Shafiquallah v. Samiulah AIR 1929

[19] Nirvas Purve v. Mst. Tetri Pasin AIR 1916

[20] Mahinder Singh v. Pardaman Singh AIR 1992

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