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WHO IS THE OSTENSIBLE OWNER?

A person does not become ostensible owner if the real owner has entrusted him with temporary
control over the property only for some specific purposes or, where he holds a property as a
professed agent or as guardian of minor’s property or in any other capacity of fiduciary character
.A manager cannot be treated as ostensible owner even though his name entered in the Municipal
records as a real owner. Karta of a joint Hindu family is also not an ostensible owner of the joint
family. Similarly, a trustee or manager of an idol is an ostensible owner of the endowed property
held by him.

The section is applicable only where the transferor is an ostensible owner. But it is difficult to
ascertain whether a person is ostensible owner or real owner because he has all the characteristics
of a real owner except the intention to own the property. Thus it is for the court to establish whether
the transferor was an ostensible owner.
In Jaydayal v. Bibi Hazara1
The Supreme Court observed that whether a person is an ostensible owner, is a subjective question
to be decided on this basis of facts circumstances. The Court observed further that following
considerations must be taken into account while deciding whether a person is ostensible owner or
not:

1. Source of the purchase – money i.e. who paid the price?


2. Nature of possession after the purchase i.e. who had the possession?
3. Motive for Benami transaction i.e. why the property was purchased in the name of
the other person?
4. Relationship between the parties i.e., whether the real owner and the ostensible
owner were related to each other or were strangers or friends?
5. Conduct of the parties in dealing with the property i.e., who used to take care of
and control over the property?
6. Custody of the title deeds.

1
AIR 1974 SC 171
The burden of proof that a transaction is benami and that the transferor is an ostensible owner lies
on the person who claims that he is the real owner.

In Mahinder Singh v. Pardaman Singh2, 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.

Transfer by Ostensible Owner – Section 41, Transfer of Property Act, 1882

"Where, with the assent, express or inferred, of the people inspired by resolute property, a man is
the ostensible proprietor of such property and exchanges the same for thought, the exchange should
not be voidable on the ground that the transferor was not approved to make it:

Provided that the transferee, in the wake of taking sensible care to learn that the transferor had
energy to make the exchange, has acted in great faith."3

Ostensible proprietor isn't the genuine proprietor yet one who can speak to himself as the genuine
proprietor to the outsiders for such dealings. He has procured that privilege by the persistent
disregard or passive consent by the genuine proprietor of the property in this manner presenting
on him the status of ostensible proprietor. For example, when the property is in spouse's name
however the husband dealing with it and going into exchanges for her benefit is the ostensible
proprietor and has the expert to arrange it off.

The wonder of naming an ostensible proprietor is a guideline of characteristic value, which must
be generally pertinent, that where one man enables another to hold himself out as the proprietor of
a bequest, and a third individual buys it for esteem from the evident proprietor in the conviction
that he is the genuine proprietor, the man who so enables the other to hold himself our might not

2
AIR 1992 DEL 357
3
Section 41, Transfer of property act, 1882
be allowed to recoup upon his mystery title, unless he can topple that of the buyer by appearing,
either that he had coordinate notice, or something which adds up to useful notice, of the genuine
title, or that there existed conditions which should have put him upon a request that, if arraigned
would have prompted disclosure of it.

ESSENTIAL CONDITIONS FOR APPLICATION OF SECTION 41:-

1. There is transfer of an immovable property by ostensible owner with express or implied


consent of the real owner
2. The transfer is for consideration
3. The transferee has acted in good faith
4. The transferee has exercised reasonable care in finding out the transferor’s power to
make the transfer.

EXPRESS AND IMPLIED CONSENT OF REAL OWNER

The transfer of property must be made by an ostensible owner with express and implied consent
of the real owner. However, whether the consent be express or implied, it must be a free consent.
Where a benamidar obtains the consent of the real owner by fraud, force, coercion, the consent is
not free and this section cannot apply. Similarly, if the real owner is incapable of giving consent
his consent is not consent. If the real owner is monor he is incapable of giving any consent.
Therefore, section 41, does not apply where ostensible owner transfers the property of a minor real
owner.

The consent of the real owner is express if it is given in clear words authorizing him to make the
transfer. But such consent must not be brought about by a misapprehension of legal rights. The
consent is implied if the real owner knows that the benamidar is dealing with his property as if it
were his own but remains silent or acquiesces.
EXPRESS CONSENT:

The consent is express when:

1. The owner expressly declares by words, spoken or written


a. That he had no interest in the property
b. That another person has interested in the property
2. The owner does any act which goes to show that he has no interst in the property, as when
he attests a deed which states that he has no interest in the property, or that a third person
has an interest in the property, as when he gets the property mutated in the name of another
and disclaims his own interest therein. Mere inaction or silence is not material unless there
is duty to speak, or the inaction or silence is equivalent to speech.

IMPLIED CONSENT

The expression implied consent which is to be conferred from the act or conduct of a person. If
the real owner knows another person is dealing with his property and acquiesces, his inaction may
imply consent. But before such consent can be inferred it must be proved that the person giving
the consent was aware of his right, title or interest in the property, and in spite of that knowledge
he gave the consent his act or conduct, at a time, when he was not conscious even of his own right,
does not debar him from urging his own claim against a transferee.

In the case of Anoda Mohan vs. Nilphamari4, A purchased a property in the name of his wife B.
B’s name was entered in the revenue records and she used to deal with the property. After A’s
death B mortgaged the property to C who took in good faith believing that B had authority to make
the transfer. It was held that since a he had entered B’s name in the revenue record and since a
allowed her to deal with the property, there was an implied consent of A to hold out B as an
ostensible owner authorizing him to transfer the property. Accordingly, the mortgage could not be
avoided and the mortgage was protected under this section.

4
AIR 1921 CAL. 549
RAMCOOMER KOONDOO vs. MACQUEEN5

There are several exceptions. One of them is, that, if the true owner permits another to hold himself
out as real owner a third person who (a) deals with that other after taking reasonable care to
ascertain that the transferor had power to make the transfer, and (b) acts in good faith, such third
person acquires a good title to the property as against the true owner. The ground of this exception
was stated by the Judicial Committee of the Privy Council in Ram Commar Koondoo v. Mac
Queen in the following words:

Facts:

One Alexander had purchased some landed properties in Calcutta in the name of Bunoo Bibee who
was his mistress. Macqueen was one of the two children born to him by this mistress. The sale
deed was in the name of Bunoo Bibee and she also used to manage the properties. Later on during
the life of Alexander, Bunoo Bibee sold the properties to Ramdhone (father of Ramcoomer). After
the death of Bunoo Bibee, Macqueen filed a suit against a Ramdhone claiming the properties on
the ground that her father alexander had left a will in her favour and that her father was the real
owner, not bunoo bibee who was a merely a benamidar. Ramdhone pleaded that he was a bona
fide purchaser without notice of benami title of the seller (Bunoo Bibee). The Calcutta high court
decided in favour of Macqueen whereupon Ramcoomer went in appeal to the Privy Council which
reserved the judgement of his Calcutta High Court and decided in favour of Ramcoomer.6

Allowing the appeal of Ramcoomer, the Privy Council held that even assuming the Alexander was
the real owner and that Bunoo Bibee was merely an apparent owner, since Alexander had allowed
to Bunoo Bibee to hold herself out as the real owner, he or his representatives could not recover
upon their secret title unless they could prove that purchaser had direct or constructive notice of
the real title. Delivering its judgement, the Privy Council made following well known
observations:

“it is principle of natural equity which must be universally applicable, that where one man allows
another to hold himself out as the owner of an estate and a third person purchases it, for value,

5
(1872) 11 BENG. LR 46

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Sinha R.K, Transfer of Property Act
from the apparent owner in the belief that he is the real owner, the man who so allows the other
to hold himself out shall not be permitted to recover upon a secret title, unless he can overthrow
that of the purchaser by showing, either that he had direct notice or something which amount to
constructive notice, of the real title; or that there existed circumstances which ought to have put
him upon an enquiry, that, if prosecuted would have led to a discovery of it.7”

1. TRANSFER IS WITH CONSIDERATION

Section 41 is applicable only where the transfer by an ostensible owner is with consideration. It
does not apply to gifts or gratuitous transfers. Therefore, the real owner is not precluded from
denying a gift made by an ostensible owner. However, if the transfer is with consideration. It may
be any kind of transfer or property e.g., it may be sale, exchange, mortgage or lease.

2. REASONABLE CARE BY THE TRANSFEREE

Reasonable care has been explained to mean such care as an ordinary man of business would
take. Reasonable care is to be expected from everyone who claims to have purchased free from a
really existing right. Revenue records are not documents of title, and it is not safe to rely on the
entry of the transferor's name in the revenue registers. A transferee who does so and omits to
inquire into title is not protected by this section. This also applies to entries in Municipal and Police
registers. Mere entrusting of an inquiry to a solicitor does not amount to reasonable care. A
discrepancy in the sale certificate between the description of the property by its name and
delineation by boundaries ought to put the transferee on guard. 8

7
1872) 11 BENG LR 46, P 52

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TRANSFER OF PROPERTY ACT BY MULLA
Illustrations

1. A tahsildar, being forbidden by departmental rules from acquiring land within the limits of
his tahsil, purchased land in the name of his minor sons and entered it in their names in the
revenue records. The sons afterwards sold and mortgaged the land to a person who acted in
good faith and in reliance on the entries in the revenue papers. Nevertheless, the purchasers
and mortgagees were not entitled to the protection of this section, as they should not have
been satisfied with entries in the revenue records.
2. A is the owner of property which is entered in the revenue records in the name of B. B.
mortgages the property to C who accepts the mortgage relying on the revenue register.
If Chad made further enquiry, he would have found that A had objected to the entry of the
property in B's name and that the property had been left to A by will. C is not protected by
this section.

3. TRANSFEREE ACTS IN A GOOD FAITH

It is necessary that transferee acts in good faith i.e., he has purchased the property in the honest
belief. Good faith means bona fide intention. When a person purchases property with full
knowledge that the transferor is merely an apparent owner his intention is not bonafide and there
is no good faith on his part. Principles of equity on which this section is based, protects the interest
only of a bonafide purchaser. He who seeks equity must do equity. Thus, this section can protect
the interest only such purchaser whose own conduct is equitable and just. In the absence of good
faith, the court may presume collusion between ostensible owner and the purchaser. Accordingly
if the transaction is a sham (false) one, section 41 cannot apply because the transferee would then
be in the knowledge of the reality. And it should also be noted that even if the purchaser makes
due enquiry about the title of the seller but has no good faith i.e. purchases the property with
dishonest intention, he cannot get the benefit of this section. This section imposes both conditions:
good faith and reasonable enquiry about the title; they are not so in the alternative.
Where the transferee had full knowledge of the fact that the person purporting to transfer the
property to him was not the owner because it belonged to his grandparents, the court held that he
could not acquire title. The consent letter, even if it was genuine, could not operate as a conveyance
or create any interest in favour of the plaintiff. Where the vendor did not give original title deeds
to his vendee, the sale was held to be not in good faith. The title deeds were lying with the bank as
a security. The bank’s claim to recover vacant possession of the property was allowed.

Statutory changes

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.9

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.

Further Sec. 4(2) of the Act provides that –

No defence based on any right in respect of any property held benami whether against the person
in whose name the property is held or against any other, shall be allowed in any suit, claim or
action by or on behalf of a person claiming to be the real owner of such property.

In view of the provisions of this enactment, it may be stated that now an ostensible owner has
become real owner except where he is a co-parcener in a hindu undivided family or, a trustee,
standing in a fiduciary capacity. Accordingly, the law laid down in section 41 of the transfer of

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BENAMI TRANSACTIONS ACT, 1988
property act stands modified except where benamidar is a co-parcener or a trustee or a person
standing in a fiduciary capacity.

A significant feature of this act is that besides prohibiting benami transactions, section 3(3) of the
act provides also that a person who enters into such transaction is punishable with imprisonment
for a term which may extend to three years or with fine. However, there is no prohibition and no
punishment if the property is purchased in the name of wife or unmarried daughter for their benefit.

In Mithilesh Kumari vs. Prem Behari Khare10 the Supreme Court held that Benami Transactions
Act, 1988 is a piece of declaratory enactment which makes Benami transactions punishable and
also prohibits the right to defence against recovery under benami transactions. The court observed
that as a result of the provisions of this enactment, all properties held benami at the time of coming
into force of this act may be affected irrespective of their beginning; duration and origin.

Nature and scope of the act

1. The benami transactions act, 1988 is not a retrospective operation. It cannot be made
applicable to suits or proceedings which already started before commencement of this act
and, in such cases benamidar cannot be treated as a real owner.
2. This act is not declaratory in nature. Rather it is prohibitory in nature and prohibits benami
transactions which are entered into after commencement of this act i.e. 5th September 1988.

EXCEPTIONS

Section 4(3) provides two exceptions. The provision of the benami transaction act do not apply if
the benamidar is:

1. Coparcener of hindu undivided family and property is held by him for the benefits of
coparceners and

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AIR 1989 SC 1247
2. The benamidar is a trustee or, other person standing a fiduciary capacity and property is
held by him for the benefit of some other person.

These two exceptions given in section 4(3) of the act are sensible and necessary. On certain
occasions the property does not exclusively belongs to a person, but he has to hold the property in
his name for the benefit of and on behalf of other persons. For eg. Karta of a hindu undivided
family holds the property of other coparceners on their behalf. But in official records the name of
the only karta is entered. This is done for the sake of convenience in good faith that such karta
would not act against the other co parceners. Similarly, in any trust the property is not owned by
the trustee; he simply takes care of and also protects the property for the benefit of beneficiaries.
For the sake of his convenience the property stands in his name. The karta of HUF and the trustee
are not the real owners of all these properties but they are in fiduciary relationship. Therefore,
properties in their names have been exempted from the mischief of benami transaction act. Thus ,
karta of HUF or trustee of any trust do not become real owners although the properties are in their
names.

PROPERTY IN THE NAME OF WIFE OR UNMARRIED DAUGHTER

Besides the above mentioned two exceptional cases, the provisions of the benami transaction act,
1988 do not apply, also in usual bona fide transactions where person purchases property in the
name of his wife or unmarried daughter. Section 3(2) provides that there is no prohibition on the
purchase of property by any person in the name of his wife or unmarried daughter and it shall be
presumed, unless the contrary is proved, that the said property had been purchased for the benefit
of the wife or the unmarried daughter.”

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