Law

Transfer by Ostensible Owner

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

“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.”[1]

Ostensible owner is not the real owner but one who can represent himself as the real owner to the third parties for such dealings. He has acquired that right by the willful neglect or acquiescence by the real owner of the property thereby conferring on him the status of ostensible owner. For instance, when the property is in wife’s name however the husband taking care of it and entering into transactions on her behalf is the ostensible owner and has the authority to dispose it off.

The phenomenon of appointing an ostensible owner 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 to hold himself our 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 discovery of it.[2]                                                    

The provision for its application lays down certain requirements to avail the benefit of this section. They are:

  • The primary condition is that the person who is transferring the property should be ostensible owner ( as explained above)
  • There should be either implied or express consent from the owner of the property.
  • The transfer should be for some consideration in return.
  • Reasonable care has to be taken by the transferee regarding the authority of the transferor to effectuate the transaction and also of the fact that he has acted in good faith.
  • The doctrine of transfer by ostensible owner is based on the doctrine of estoppel that when real owner of property makes some one apparent to be the owner to third parties and they act upon it, he cannot go back his representation.
  • These rules and the section is available only to immovable property and not on the movables.

For determining whether a person is ostensible owner or not some practical tests could be done;

Firstly the documents concerned with the property has to be checked whether they contain the name of transferor as owner or not. Secondly, whether the person having his name in the documents of the property in question has any intention to purchase the same or not. Thirdly, it is the most important test for determining whether a person is ostensible owner is that who is the possession of the property and who is enjoying it. If the person who is the owner as per the records and the documents of  the property in the matter at hand  the chances of being it a property of an ostensible owner or he being an ostensible owner is quite less. However if the person whose name is there in the property documents is not similar then it enhances the chances of it being a property of ostensible owner who is full filing the wishes of the real owner.                                                                                                                       

However enjoying the property here does not only mean the mere enjoyment of the property being in the possession of the property but includes the selling rights, right to lease out the said property and get the consideration from the same , to enjoy the benefits out of the said property etc. Enjoyment has been given a broader aspect in this aspect and particular case. Fourthly, the reason behind it being given the aspect of ostensible ownership, i.e the reason why the real owner has not purchased same in his own name.

Authority of ostensible owner and not the title is necessary:

Looking at examples of such transactions, a benami transaction is one where one buys property in the name of another or in the disguise of a beneficiary transfer, without indicating an intention to benefit the other. The benamidar though has a property in his name, has no beneficial interest existing in the same. He represents in fact the real owner and as far as their relative legal position is concerned, he is a mere trustee for him. Benami transaction results in creation of a trust. The general rule and principle of the Indian law as to resulting trusts differs a little from the general rule of English law upon the same subject. In India, 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. But from this it does not follow that the benamidar has real title to the property, he is merely an ostensible owner thereof.[3]

Consent of owner and authority of ostensible owner is material:

Actions of owner also establish whether he has authorized an individual as ostensible owner or not. Consent of owner over this authority is the prerequisite of this provision to apply. If an owner with his free consent gives apparent authority to some -one to enter into transactions on his behalf, then that apparent authority is deemed to be real authority.[4] In the case Ananthula  Sudhakar v. P.Bucha Reddy[5] , the defendant  Damodar Rao negotiated with plaintiffs, for sale of the two sites, on behalf of his sister Rukminibai, representing that his sister was the owner thereof . He attested the sale deeds in the favor of plaintiffs as witness and by making his sister as vendor executant. Those acts of Damodar Rao supported the claim of Rukmanibai that there was an oral gift. However even there has not been an oral gift in favor of Rukmanibai and Damodar Rao still remains the owner, the aforesaid acts of Damodar Rao showed that he has given implied consent for her representation as ostensible owner of the suit property and to transfer the same to plaintiffs for consideration. This attracted the provision of section 41 of Transfer of Property Act, 1882 and therefore the transfers in favor of plaintiffs was not voidable at the instance of Damodar Rao or his successor alleging that Rukmanibai was not the owner of the property. For being an ostensible owner, not the title but the authority arising from either express or implied consent of owner is needed.

In the landmark case Shafiquallah v. Samiulah[6], after the death of owner, the property was in possession of his illegitimate sons who were legally ineligible to hold the property. The real heir filled a suit claiming his rights of inheritance. However the possessors retained the possession and sold it to a third party, claiming themselves to be ostensible owners. However present legal position cannot attract section 41 as the possession was not neither with express nor implied consent of the legitimate owner. Additionally consent must not be understood to be including an intention to deceive the transferee on the part of the real owner nor is the need to prove it.[7]

Transfer does not include an involuntary transfer:

This section only applies to voluntary transfers not to involuntary or legally mandated transfers like ones by the order of the court such as an auction sale.[8]

Transfer include a partial transfer:

For the provision to apply there is no necessary sale or exchange to take place. It just denotes to a transfer of interest which could be mortgage, lease etc. and hence an ostensible mortgagee could be held as an ostensible mortgagee.[9]

The transfer has to be against some consideration:

The transaction entered by ostensible owner has to be for consideration. There has to be an element of quid pro quo. This section does not contemplate gratitutious transfers.

Extent of rights of transferee:

Also the rights of the transferees making a purchase from ostensible owner depends upon the extent to which the ostensible owner has rights in the said property. In the case State of Punjab v. Surjit Kaur[10], owner’s widow had an authority over his estate as an ostensible owner, however it being limited only to life interest. Hence the rights of the transferee purchasing the property from her would be co-extensive with her and hence will cease to exist with her life time.

Duties of Transferee during transaction:

Section 41[11] along with mentioning nature of authority of an ostensible owner also lays emphasis on intention of transferee and the duty of care he has to oblige to during the transaction. It provides that a transfer by an ostensible owner cannot be avoided on the ground that the transferor was not authorized therefor, subject to the condition that the transferee should take reasonable care to ascertain that the transferor had power to make the transfer and to act in good faith before a benefit thereof is claimed by him.[12]

Burden of proof:

The burden of proof is on the transferee to prove that the person making the transfer was infact the ostensible owner and had the requisite authority for such transactions.[13] He should at least prove that is a benami transaction. Also he must prove that he took reasonable care to protect his interest.[14] And hence also must make relevant inquiries.

The Transfer is not voidable at the option of owner:

When a transfer is made by ostensible owner this section provides that the transfer shall not be voidable on the ground that the transferor was not authorized to make it ; provided the transferee has taken due care and must have acted in good faith. The principle applies when the whole transaction is not voidable.[15]

Conclusion

The essay stresses on the legal provision in Transfer of Property Act, 1882 defining the powers of ostensible owner and discussing the nature of transactions entered by him. Ostensible owner has as its more prominent characteristic the authority given by the owner of the property to enter transactions on his behalf. The consent for this authority could be either express or implied which could be understood by various landmark case laws. However consent does not include an intention to deceive. Also once made the transfer of property is not voidable at the option of the owner. This transfer also include partial transfers like mortgage, lease along with complete transfer of rights like sale, exchange. Also the law places burden of proving that the transferor is ostensible owner, on the transferee. He must also act bona fide in good faith and make proper inquiries as to the status of transfer and be vigilant.

By: Ananya Mishra, WBNUJS, Kolkata

References

[1] Section 41, Transfer of Property Act, 1882

[2] Ramcoomar Koondoo v. John and Maria Mcqueen (1872) 11 Beng LR 46, p 52.

[3] The controller of Estate duty v. Alok Mitra  1981 AIR 102,1981 SCR (1) 943

[4] Pickering v/s busk 15 est 38.43

[5] Appeal (civil)  6191 of 2001

[6] AIR 1929 All943

[7] Baidya Nath v. Alfeian AIR 1923 Cal 240.

[8] Jote Singh v. Ram Das Mahto , Air 1966 SC 2773.

[9] Jogendra v. Salamat AIR 1930 Cal 92

[10] JT 2001 (10) SC 42

[11] Supra Note 1.

[12] Appeal (civil)  6222 of 2000

[13] Ram v. Muktinath, [1956] A.I.R. 154

[14] Suraj Ratan Thirani v. Azamabad Tea Co., AIR 1965 SC 295.

[15] Sethumadhva v. Bacha Bibi , AIR 1928 Mad 778.

Leave a Reply