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Ostensible Ownership: The Bone of Contention between Two

Existing Laws
In order to present the collision between Transfer of Property Act & Benami
Transaction Act regarding the concept of ostensible ownership i.e. - Transfer of
property Act, 1882 allows purchasing the property in the name of another
person which is known as ostensible ownership. Whereas the Benami
Transaction Act, 1988, in spite of having the same meaning as that of ostensible
owner under Transfer of Property Act, then why purchase of property in the
name of another is permitted under the former Act; at the same time is
prohibited under the later Act?
Firstly, the term Ostensible literally means apparent or seeming. An
Ostensible owner, despite being ostensible owner he is person having all
indication of genuine ownership.
Secondly, a Benami transaction means any transaction in which property is
transferred to one person for a consideration paid 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. In itself, a Benami transaction is
not illegal.
The concept of transfer by ostensible owner is mentioned in section 41 under
the Transfer of Property Act, 1882------Where, with consent, express or implied, of the persons interested in
immoveable 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. *
The essential sum and substance of the section are:1) If the consent of the true owner taken once by the ostensible owner (is a
must, whether express or implied) but the transfer itself need not be with
the consent of the true owner. Hereby, negligence may amount to implied
consent.
* Syed Hasan Jamil, Transfer of Property Act, National Law Book House, pg: 108 to 114
** Mulla D.F., The Transfer of Property Act, Butterworths, 9th edition, 2000

2) Such person who has no authority to alienate the property can alienate it
as an ostensible owner.
3) It is applicable only where the transfer by an ostensible owner is with
consideration but does not apply either to gifts or to gratuitous transfers.4
4) The transferee has taken reasonable care, which means the care an
ordinary man of prudence would have taken to safeguard his interests.
The object of this section is to protect a bona fide purchaser prejudiced by
the conduct, however innocent and unintentional, of the real owner in
allowing the world at large to think someone else is the owner of the
property. *
5) Estoppel- The real owner would be prevented on disputing the validity of the
transfer on the ground that the transferor was not, in fact, competent to do so. In
Jaydayal Poddar v. Bibi Hazra(1974), the Supreme Court observed that
whether a person is an ostensible owner , is a subjective question to be decided
on this basis of factual 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 giving the transaction a benami colour- 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 after the sale. i.e., who
used to take care of and control over the property?
6. Finally, the custody of the title deeds after the sale.**
In this respect, the law in this section derives from the same roots as the Rule of
Estoppel given under section 115 of The Indian Evidence Act. The perquisites
for this section applies are:
The transferor should have led the transferee to believe that he is, in fact the
owner of the property
The right should have devolved on the transferor subsequently.
The transfer was in good faith, in believing that the he is dealing with the real
owner of the property. Good faith means bona fide intention. The principles of
equity and good conscience protect the interest of a bona fide purchaser only.
He who seeks equity must behave equitably.
* Syed Hasan Jamil, Transfer of Property Act, National Law Book House, pg: 108 to 114
** Mulla D.F., The Transfer of Property Act, Butterworths, 9th edition, 2000

The transferee had no notice of the transferors real position at the time of
transfer. *
The Latin maxim nemo dat quod non habet is one of the basic principles of
common law, which means that a person cannot convey a better title than he
himself possesses. An exception to this general principle occurs when the true
owner, entrusts another person with the documents of title etc., and a third
person, who dealt with that other in a bona fide manner.
In Mahinder Singh v. Pardaman Singh, the Delhi High Court said that when a
transaction is Benami & the transferor is an ostensible owner, the burden of
proof then lies on the person who claims that he is the real owner. In an Oudh
case, the Additional Judicial Commissioners discussed the case law on the
subject and the proposition was laid down that section 82, Trust Act, appears to
throw the burden of proof of Benami transaction on the person who alleges or
asserts that the transaction is Benami.*
Benami transactions are one of the most notorious sources of investment of
black money may be the reasons behind purchasing is to hide the earnings.
Sec 3. Of the Benami Transaction Act, 1988 lays down Prohibition of benami
transactions(1) No person shall, on and after the commencement of this Act, enter into any
Benami transaction.
(2) Nothing in sub-section (1) shall apply to 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.
(3) Whoever enters into any benami transaction shall be punishable with
imprisonment for a term which may extend to three years or with fine or with
both.**
Act regarding joint family property. In case the joint fund of the HUF is enough
to purchase the property, the presumption is that the property has been acquired
for the HJF. Also, an acquisition in the name of the wife of a coparceners shall
not be considered an acquisition for the joint family.
The Benami Transaction Act does not apply to agricultural land since it was
enacted by the Parliament under Entry 6 of List II of the Seventh Schedule,
relating to the transfer of property other than agricultural land.

* Syed Hasan Jamil, Transfer of Property Act, National Law Book House, pg: 108 to 114
** Mulla D.F., The Transfer of Property Act, Butterworths, 9th edition, 2000

Under the Income tax act, the person purchases the property in the name of
family member it will be taxed & there are no chance of hiding the income
therefore, Benami transactions are permitted to certain extent as mentioned
under exception of definition of Benami Transaction. Therefore, the Concept of
Ostensible Ownership under sec 41 is subject to the provisions of Benami
Transaction under sec 3 of Benami Transactions (Prohibition of the Right to
Recover Property) Act, 1988. After study of Provisions under Benami
Transaction Act, 1988, it is clear that the provisions of the aforesaid Act are
inadequate to deal with Benami transactions. Sec 64 of Income tax Act, 1995Income of individual to include income of spouse, minor child, etc. 1 2[ 3[ (1)]
In computing the total income of any individual, there shall be included all such
income as arises directly or indirectly.*
After analyzing different cases and concept of ostensible ownership, the
drawing conclusion is that Ostensible ownership derives its legitimacy from the
ideas of equity and natural justice, in particular the doctrine of estoppels. It is an
exception to the doctrine nemo dat quod non habet since it does, for reasons of
equity, allow ostensible owners to have delivered the rights of true ownership to
bone fide transferees. Benami transactions are where the real ownership lies in
another who pays the consideration, while the ostensible ownership lies in the
benamidar who only lends his name to the title deeds.
Since the enactment of Benami Transactions (Prohibition) Act, 1988 an
ostensible owner has become a real owner except in certain situations. So,
clearly, after the passing of the Benami Transactions Act, the scope of
application of section 41 has become very limited. Ultimately, the transferee,
who purchases the property from the ostensible owner, cannot take the benefit
of section 41 unless the ostensible owner is the wife or unmarried daughter of
the real owner.
Bibliography:
1. Mulla D.F., The Transfer of Property Act, Butterworths, 9th edition, 2000
2. Saxena Poonam Pradhan, Property Law, Lexis Nexis Butterworths Wadhwa Nagpur, 2nd
Edition 2011
3. Tripathi G.P., The Transfer of Property Act, Central Law Publications, 11th edition 1999
4. Aminul Islam, Transfer of Property Act, 1882. Sufi Publications, pg: 42
5. Syed Hasan Jamil, Transfer of Property Act, National Law Book House, pg: 108 to 114

Case Laws:
I. Kanashi Vershi v. Ratanshi Nenshi, AIR 1952 Kutch 85
II. Ramjanam V. Beys, AIR 1958 Pat 537
III. Jaydayal v. Bibi Hazra, AIR (1974) S.C.171
* Syed Hasan Jamil, Transfer of Property Act, National Law Book House, pg: 108 to 114
** Mulla D.F., The Transfer of Property Act, Butterworths, 9th edition, 2000

IV. Mahinder Singh v. Pardaman Singh

Reference:
a. http://ssrn.com/abstract=2191951
b. Manila M Sarkaria, Benami Transction Bill 2011: A ray of hope? , SAARC LAW,
www.saarclaw.com (visited on 14th Dec 2012)
c. Sec 41 of Transfer of Property Act, 1882
d. Land disputes | Law Teacher http://www.lawteacher.net/property-trusts/essays/landdisputes-law-essays.php#ixzz3KHeQY3Y5

* Syed Hasan Jamil, Transfer of Property Act, National Law Book House, pg: 108 to 114
** Mulla D.F., The Transfer of Property Act, Butterworths, 9th edition, 2000