DR.

RAM MANOHAR LOHIYA NATIONAL LAW UNIVERSITY, LUCKNOW

SESSION (2018-2019)

TRANSFER OF PROPERTY LAW- I

PROJECT

TRANSFER BY OSTENSIBLE OWNER

UNDER SUPERVISION OF: SUBMITTED BY:

Ms. Ankita Singh Sakshi Agarwal

Assistant Professor of Law V Semester

Dr. Ram Manohar Lohiya National Law University B.A. LL.B. (Hons.)

170101113
ACKNOWLEDGEMENT

Every work accomplished is a pleasure and a sense of satisfaction. The success and final
outcome of this project required a lot of guidance and assistance from many people and I am
extremely fortunate to have got this all along the completion of my project work. Whatever I
have done is only due to such guidance and assistance and I would not forget to thank them.

I respect and thank our mentor for giving me an opportunity to dwell upon this case and
providing me all support and guidance which made me complete the project on time.

I am obliged to the staff members of the Madhu Limaye Library, for the timely and valuable
information provided by them in their respective fields. I am grateful for their cooperation during
the period of my project.

Lastly, I thank almighty, my family and friends for their constant encouragement without which
this project would not have been possible.
I: INTRODUCTION

The purpose behind passing of the transfer of Property Act, 18821 (hereafter, ‘The Act’) was
making transfer of property simpler and accessible to the public at large. General principles as to
the transfer of property are laid down by the Act. Amongst them, one of the concepts is transfer
of property by an ostensible owner which was incorporated to guard the rights of innocent third
parties vis-à-vis the property owners.

One of the basic principles of common law is nemo dat quod non habet which basically means
that a person cannot have a better title than he himself possesses. However, this is subject to an
exception, wherein a true owner himself entrusts upon another person to deal with a third person.
In such cases, if the third person carries on the dealing with the third person in a bona fide
manner, the third person is said to acquire a good title in law to the property.2

This concept is incorporated under Section 41 of the Act.3 The law relating to transfer of
property by an ostensible owner under this section is now subject to the provisions of Benami
Transactions Act, 1988.4 Each of them shall be discussed at length in the project. Chapter I shall
focus on the concept of ostensible owner along with the judicial precedents which analyses the
concept. Chapter II shall elaborately deal with the essential requirements of Section 41. Chapter
III shall examine the impact of statutory modifications in the form of Benami Transaction Act to
the long incorporated Section 41. The conclusion will critically focus and evaluate the legal
significance of this concept.

1
The Transfer of property Act, 1882
2
Dr. Avatar Singh, The Transfer of Property Act, Universal Law Publishing, 4th edition, 2014.
3
The Transfer of Property Act, 1882, Section 41.
4
The Benami Transactions (Prohibition of Right to Recover Property) Act, 1988.
II: CONCEPT OF ‘TRANSFER BY OSTENSIBLE OWNER’

The general principle of law of transfer of property is that no person can transfer to another a
right or title greater that what he himself possesses. The maxim on which this principle is based
is nemo dat quod non- habet, i.e., no one can transfer better title than he himself has. This
general rule has certain exceptions too.

One exception which forms the touchstone of the concept of ostensible owner 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 person may acquire a good title to the property as against the true
owner.5 This principle was used for the first time in the notable case of Ramcoomer Koondoo v.
John and Maria McQueen, which observed:

“ It is a 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 , from the apparent owner in the belief that he is the real owner, the man who so allows
the other hold himself out shall not be permitted to recover upon his secret title, unless he can
overthrow that of the purchaser, by showing either that he had direct notice or something which
amounts to constructive notice, of the real title, or that there existed circumstances which ought
to have put him upon an inquiry that, if prosecuted , would have led to a discovery of it.”6 The
same has been reiterated in plethora of cases.7

Section 41 states as follows and will be examined at length in the next chapter.

“Where, with the 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.”8

5
Broom, A selection of Legal Maxims , 10th edition, 1939.
6
Ram Cooper v. Macqueen, 18 NR 166: 11 Beng LR 46: IA Sup Vol 40.
7
Crystal Developers v. Astha Lata Ghose, AIR 2004 SC 4980.
8
The Transfer of Property Act, 1882, Section 41.
III: ESSENTIAL REQUIREMENTS

Section 41 lays down the following conditions and each must be satisfied for taking its benefit.9

1. The transferor must be an ostensible owner.

2. The transfer of property to the ostensible owner must be with express or implied consent
of the real owner.
3. The transfer by the ostensible owner must be for consideration.
4. The transferee must have acted in good faith, taking reasonable care in ascertaining that
the transferor has the power to make the transfer.

A. Ostensible owner

An ostensible owner is that person who is not the real owner of the property.10 He is the one who
has all the indicia of ownership without being the real owner.11 He is a person who is apparently
unqualified and full owner and not a person who is a qualified owner like a mortgagee or hirer of
goods.12

The Supreme Court in the case of Jayadayal Poddar v. Bibi Hazra13 held that the following
considerations must be taken into account in deciding upon the fact of ownership. Firstly, the
source of purchase- money must be ascertained to determine as to who paid the price. Secondly,
nature of possession must be looked into to find who had the possession of property. Thirdly, the
reason for purchasing the property in the name of other person must be determined. Fourthly, the
relationship between the parties must be analysed as to whether they were friends, strangers or
relatives and lastly, the conduct of the title deeds must be examined to find out as to who had the
title deeds.

These requirements were put to use in variety of judgements to ascertain the ostensible owner.
Thus, a manager in possession of property,14 a licensee in possession of property,15 a menial

9
V. Chandrasekaram v. Administration Ofiicer, (2012) 12 SCC 133.
10
Jamanadas v. Uma Shankar (1914) 36 All 308.
11
Seshumull M shah v. Sayed Abdul Rashid and Ors., AIR 1991 Kant 273.
12
Kannashi Vershi v. Ratanshi Nenshi, AIR 1952 Kutch 85.
13
Jayadayal Poddar v. Bibi Hazra, AIR 1974 SC 171.
14
Mohd. Suleman v. Sakina Bibi, (1922) 44 All 674.
15
Chunilal Khemani v. Nilmadhab Barik, AIR 1925 Cal 1034.
servant in occupation of property,16 a professed agent,17 a manager or trustee of an idol,18 a co-
sharer in occupation of joint family property19 and such others do not fall in the category of
ostensible owners because they are either restricted or qualified owners.

B. Express or implied consent of real owner

It is necessary that the transfer of property must be made by the ostensible owner with the
express or implied consent of the real owner. The consent must be a real consent. It must not be
obtained by fraud, coercion, force or undue influence practised by the ostensible owner on the
real owner of the property.

Where the consent is given in words, either written or spoken, it is an express consent. Where
the consent is given by conduct, it is implied consent. The consent is implied where the real
owner knows that the ostensible owner is dealing with the real owner’s property as his own but
the real owner remains silent or acquiesces. Such conduct amounts to consent.20

But where the real owner is not aware of his ownership rights, his silence would not amount to
his consent. In such a case, his silent would not debar him from claiming that the transfer is made
by an unauthorised person. In this situation, the real owner will be entitled to avoid the sale and
this section will not come to the protection of the transferee.21

C. Transfer for consideration

The protection of this section is available only when the transfer is for consideration. If the
transfer is without consideration, i.e., gratuitous, this section will not apply. This protection is
also not available to gifts. Thus, the real owner will not be precluded from denying a gift made
by an ostensible owner.

16
Id.
17
Dambar Singh v. Javitri, (1907) 29 All 282.
18
Ratan Singh v. Suraj Bhan, AIR 1944 All 1.
19
Lakshmi Bai v. Ravji, (1949) A. Kutch 34.
20
Shambhu Prasad v. Mahadeo Prasad, (1933) 55 All 554.
21
Layak Ram v. Usha Devi, AIR 2014 Chh 23.
 D. Good faith and reasonable care

Good faith means the bona fide intention, i.e., the transferee had acted honestly and in the real
belief that the ostensible owner was the real owner. Reasonable care is not enough if there is
absence of good faith. Where a man purchased a property after due inquiry believing that the
seller was the real owner, he will be protected against the real owner, But where the purchaser
after enquiry found that the seller was only ostensible owner not the real owner, and even then he
purchased the property for him, he would not be taken to act honestly. Therefore, the protection
of this section will not be available to him.

The rule of law is that “he who seeks equity must do equity”. Thus the protection of this section
will be available only for that person (transferee) whose own conduct is just and equitable. In the
absence of good faith the court will presume collusion between the ostensible owners and the
transferee. For example, where the real owner and the transferee lived in the same village and the
transferee was acquainted with the circumstances of his family, even then he purchased the
property from some other person; the court was slow in believing the good faith of the
transferee.22

Mere good faith is not sufficient. The purchaser must establish that he made reasonable
enquiries.23 Reasonable care means such care as the person of ordinary prudence would take in
his own case. It means 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.24 It
is not possible to lay down 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 facts and
circumstances of each case.

The persons who want to take the benefit of this section must be able to show that they made an
enquiry about the transferor’s title. Only such persons are entitled to claim protection under
section 41, who despite the enquiry, have not been able to discover who the real owner of the

22
Gurbaksh Singh v. Nikka Singh, AIR 1963 SC 1917; Mohd. Ibrahim v. Mohd. Yusuf, AIR 2007 (NOC) 1923
(All).
23
Khwaja Afzal v. Md. Saheb, (1936) Nag 177.
24
Zungabai v. Bhawani, (1907) 9 Bom LR 388.
property is and who have full belief that the person making a transfer in their favour is really
entitled to that property.25

In the case, where the subsequent purchaser had sufficient time to enquire prior to getting sale-
deed registered in his favour but no genuine enquiries were made around the area where the
property was located and parties were residing , the subsequent purchaser could not be a bona
fide purchaser. 26

E. Burden of proof

In the first place, burden of proof lies on the transferee to show that the transferor was the
ostensible owner and that he acted in good faith and with reasonable care. The onus is them
shifted to the party who wants to defeat the transferee’s title to show that there was something
which called for inquiry and attention. This is because the real owner having created the
appearance of title in another person, it is incumbent on him, or on those who derive title from
him to show something which amounts to constructive notice have led to the discovery of it. 27

The subsequent purchaser in supercession of an earlier agreement to sell has to prove his bona
fide. The burden of proof lies upon him and in case he fails to discharge the burden, he would be
disentitled to claim protection of section 41. He cannot plead failure of earlier agreement holder
to prove any notice of agreement to him. Where both the parties are living in the same locality or
in a small village, knowing each other personally, presumption is of notice of agreement to one
another. Therefore, when the plaintiff and defendant are real cousins having adjoining houses, no
notice of prior agreement can be pleaded.28 Where the subsequent vendee entered into agreement
to sell and executed to sell and executed sale deed despite notice from the earlier agreement
holder, he could not claim to be a bona fide purchaser.29

25
Pratap Chand v. Saiyidi Bibi, ILR (1901) 23 All 442.
26
Bailey v. Barbes, (1894) 1 Ch 25.
27
Rajani Kanta v. Bashiram Mestari, (1929) 49 Cal LJ 532.
28
Balwan Singh v. Mange Ram, 2003 (3) RCR ( Civil) 590.
29
Gurbachan Singh v. Gurmit Singh, 2003 (4) RCR (Civil) 223.
IV: BENAMI TRANSACTIONS

The law relating to transfer of property by an ostensible owner under this section are now subject
to the provisions of Benami Transactions (Prohibition of the Right to Recover Property) Act,
1988.

‘Benami transactions’ means any transaction in which property is transferred to one person for a
consideration paid or provided by another person. In simple words, the person who purchases the
property and pays the price for it does not purchase the property in his own name but in the name
of any other person. The other person whose name is used as the owner of the property is known
as benamidar (ostensible owner). In truth, he holds the property on behalf of the real owner
because he is not real owner The Benami Transaction Act of 1988 provides that where a property
is transferred benami (i.e., in the name of another person), the person, in whose name the
property is held, shall become the real owner.30

The real owner now after the enforcement of this Act cannot claim the property from the
benamidar by any suit, claim or action. The defence of being the real owner shall also not be
allowed. This means that now an ostensible owner or benamidar has become a real owner except
where he is a coparcener in a Hindu Undivided Family or a trustee standing in a fiduciary
capacity. Therefore, the law laid down by section 41 of the Transfer of Property Act stands
modified except under the above mentioned scheme.

The Act does not have a retrospective effect i.e., it does not apply to transactions completed
before it came into force. A suit for recovery of property held by a name lender (Benami) before
the enforcement date of the Act was held to be not hit by the prohibition under section 4 of the
Act.31

30
Samittri Devi v. Sampuran Singh, AIR 2011 SC 773.
31
Thakur Bhim Singh v. Thakur Kan Singh, AIR 1980 SC 727.
V. CONCLUSION

The concept of Ostensible Ownership derives its existence from the principles of equity and
natural justice, in specific, the doctrine of estoppels. Section 41 of the Act protects the interest of
the innocent third party .This section comes into play when the rights of two innocent parties
come into conflict. On fulfillment of the conditions examined in the project, the transferee from
the ostensible owner is protected of the real owner. The requirements mentioned keep a check on
the misuse of this section by the ostensible owner and the third party.

This concept is interlinked with the concept of Benami transactions. Benami transactions are
those in which the real ownership rests in another who pays the consideration. The ostensible
ownership under this concept rests in the benamidar who only engages in lending his name for
the purpose of title deeds.

Clearly, with the coming of Benami Transactions Act, the scope of the applicability of section 41
has turned out to be limited. Eventually the transferee, who indulges into purchasing the property
from the ostensible owner, cannot enjoy the benefit of Section 41 unless the ostensible owner is
the wife or unmarried daughter of the real owner.32

32
The Benami Transactions (Prohibition of the Right to Recover Property) Act, 1988, Section 3(2).
VI: BIBLIOGRAPHY

BOOKS

 Dr.G.P Tripathi, Transfer of property Act, 16th edition, 2009.

 S.N.Shukla, Transfer of property Act, 27th edition, 2009.
 Mulla, Transfer of property Act, 10th edition, 2006.
 Dr. Poonam Pradhan Saxena, Property law, 2nd edition, 2011.
 Dr. Avtar Singh, Text book on the Transfer of property Act, 2nd edition, 2009.

STATUTES

 Transfer of property Act, 1882.

 The Benami Tansactions (Prohibition of Right to Recover Property) Act, 1988.