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Transfer By Ostensible Owner: Transfer of property act - 1882(TPA)

Osrensible Owner

Section 41 of the act deals with ostensible owner and it has been defined as:
"Transfer By Ostensible Owner: where, with the consent, express or implies, of the persons interested in immovable property, a person is the ostensible owner of such property and transfer the same for consideration, the transfer shall not be voidable on the grounds 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 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.
  • 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.

Ostensible Owner

Ostensible owner is not the real owner but who can represent himself as the real owner to the 3rd party for such dealings. He has acquired that right by the willful neglect or acquiesces by the real owner of the property thereby making him an ostensible owner. A person who has gone abroad for some years has given his property to his family relative for making use of it for agricultural purpose and for all other purposes as he may deem fit.

In this case the family relative is the ostensible owner and if during that period he sells the property to a third party, then the real owner after coming back cannot claim his property and say that the person was not authorized to transfer his property. An alternative case can be when the property is in wife's name but husband used to take care of it and the other dealings related to the property. If the husband thereby sells this property, the wife cannot claim her property back.

Or as in the Mohamad Shakur v/s Shah Jehan, in which the real owners lived in a different village, and had authorized a widow to use the property as she liked and afterwards she sold it. The real owner lost the case and the transfer was a valid one.

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.

Tests For Determination Of Ostensible Owner

  • Firstly the documents concerned with the property have 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, see "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.

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.

In the case Ananthula Sudhakar v/s P.Bucha Reddy, 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/s Samiulah, 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.

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.

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.

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.
     
  • 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.

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/s Surjit Kaur, 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 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 therefore, 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.
  1. Reasonable care
    Reasonable care can be understood as the care which a reasonable and ordinary man would have taken. He has a duty to check the title of the transferor. Like in the case of Nageshar prasad v. Raja pateshri where there was an error in the revenue records regarding the name of the owner. The name written was of some other person and the real owner had already made a complaint about this error.

    The person whose name was in the revenue records subsequently sold it to a third person and the third person without making proper inquiries took the property and the real owner afterwards objects to it. The court held that the third party has not taken reasonable care which was required of him and therefore he will not be protected by this section. The advice of solicitor will not be enough to prove that the third party has taken reasonable care in determining the title of the property.

    The third party is required all the available documents which can possibly give some more information regarding the title of the property and these documents may include police registers, municipal registers apart from other documents. There is also a safeguard for the real owner.

    In the case of Mathura v. Ambika, where the real owner had sold the property to another person and got it registered before the transfer by the ostensible owner could be registered, then it was held that the transfer by the real owner would be held valid as he has a greater title over the property than the ostensible owner and the rights of third person who had purchased this property from the ostensible would not be protected under this section.
     
  2. Proper inquiry
    As a person is required to make reasonable inquiries, sometimes it is difficult to make out what will amount to proper inquiry. The courts in India have held that this being subjective, it will depend on the facts and circumstances of each case and it can also be the case that what amounts to proper inquiry in one case may not called proper inquiry in another case with completely different facts.

    If the transfer is by Mahmomedans, it is a required of the purchaser to inquire if there is any female heir also. In many cases it is such that only males transfer the property without taking the consent of the females and this will not be a valid transfer because they also have a share in the property and therefore the third person has to inquire about such things. The ultimate test that is that the "transferee should show that he acted like a reasonable man of business and with ordinary prudence."
     
  3. Good faith
    Good faith simply means that the transferee should have honestly believed that the ostensible owner is the true owner after all the proper inquiries conducted by him. But where after proper inquiries the transferee has knowledge that the person selling him the property is not the real owner but only the ostensible owner, the transferee cannot neglect true facts. This is because of the fact that a person cannot take advantage of his own negligence and then claim protection of this act. The rights of real owner also need to be safeguarded against such persons.
     
  4. Burden of proof
    • The burden of proof is on the transferee to prove that the person making the transfer was in fact the ostensible owner and had the requisite authority for such transactions. He should at least prove that is a Benami transaction. Also he must prove that he took reasonable care to protect his interest. And hence also must make relevant inquiries.
       
    • Transferee has to prove that the transferor was actually the ostensible owner and had the consent to sell the property. Also he has to prove that he actually acted in good faith and had taken all reasonable care that was required from him while taking the property. This is because he has to prove that he was not at fault while taking the property and to shift the burden on the real owner. Alternatively, to shift his burden, he can also prove that the transferor did not allow the transferee to know the real facts and tried everything to suppress the facts.
     
  5. 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.

Conclusion
Section 41 of the act has done a fair job in protecting the interest of the innocent third party. Though this section may seem to be a bit biased towards the third party but this is mainly if the real owner is himself at some fault. No one can simply say that he has now acquired the property and he cannot be evicted now.

The third party has to take a lot of care while purchasing the property and these necessary requirements has been put by law itself to check the misuse of this section by ostensible owner and the third party. This, in a way protects the interest of the real owner also.

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.

Observation
Exception to 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.

Written By: Shashank H Singh LLB (H)

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