'POSITION OF OSTENSIBLE OWNER IN INDIAN

PROPERTY LAW VIS--VIS BENAMI TRANSACTIONS'

This paper analyzes the concept of Ostensible Owner and the essential conditions for
application of section 41 of Transfer of Property Act, 1882 and impact statutary changes
brought by Benami Transactions (Prohibition of the Right to Recover Property) Act ,
1988.
Section 41. Transfer by ostensible owner 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 .

Further it can be explained that since ostensible owner is not a real owner of the
property, he has no authority to make the transfer . But under the circumstances laid
down in this section, the transfer is binding upon the real owner; it cannot be denied by
him . Thus the law incorporated in this section is similar to the rule of estoppel given
under section 115 of The Indian Evidence Act. Which provides that where a person by his
declaration or act permits another person to believe a thing to be true and to act upon
such belief, he shall not be allowed later on to deny the truth of that thing.
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.
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 minors 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 Hazra. 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.

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 Singh, 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.

ESSENTIAL CONDITIONS FOR SECTION 41OF TPA

1. There is transfer of an immovable property by ostensible owner with express or
implied consent of the real owner.
The transfer must be made by an ostensible owner with express or implied consent of the
real owner and it must be a free consent. Where a benamidars obtains the consent of the
real owner by fraud, force or coercion, the consent is not free and this section cannot
apply. Similarly, if the real owner is incapable of giving any consent (e.g., he is insane or
minor) his consent is no consent .If the real owner is minor he is incapable of giving any

consent. Therefore section 41 does not apply where ostensible owner transfers the
property of minor real owner.
The law incorporated in section 41 is based on the rules laid down by the Privy Council
in the leading case of Ramcoomar Koondoo v. Macqueen Here the Privy Council made
following well-known observations :
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
allows the other to hold himself out shall not be permitted to recover upon the secret title .

2. 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 .
3. Transferee acts in 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.
4. Reasonable care of the transferee
Reasonable care means that care which a man of ordinary prudence should take while
making inquiries regarding the title of an immovable property .But it is not possible to lay
down any general rule regarding the nature of enquiry to be made by the transferee which
may be called as reasonable care for all the cases . The standard of enquiry expected
from the transferee depends upon the facts and surrounding circumstances which may

vary according to the different circumstances of each case. However ,the enquiry must be
diligent and not superficial or casual .Some specific circumstance or fact should be
pointed out as starting point of an enquiry which might have led to some result. In
Supreme Court case of Gurbaksh singh v Nikka singh Subba Rao .J. said that Being an
exception, the onus certainly is on transferee to show that the transferor was the
ostensible owner of the property and that he had, after taking reasonable care to ascertain
that the transferor had power to make the transfer, acted in good faith
STATUTORY CHANGE
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 .
Here any property held benami is not limited to any particular time, date or duration i.e.
the Act, 1988 is retrospective in operation. Once the property is found to have been held
benami no suit, claim or action to enforce any right in respect thereof shall lie.

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 Om Prakash Rawal v. Justice Amrit Lal Bahri the defence taken by the defendant
that the plot in fact was purchased by him in the name of his brother i.e. the plot was
purchased benami, cannot be allowed by virtue of section 4(2) of the Benami
Transactions (Prohibition) Act, 1988..
As by way of an exception to the above-mentioned rules, section 4(3) provides that that
now an ostensible owner has become a real owner except where he is a coparcener in a

Hindu Undivided Family or a trustee. Accordingly the law laid down in section 41 of the
Transfer of Property Act stands modified except where benamidars is a coparcener of a
trustee or a person standing in a fiduciary capacity. Besides the above mentioned two
exceptions the provisions of this Act do not apply, also in usual bonafide transactions
where person purchases property in the name of his wife or unmarried daughter. Section
3(2) provides that there is no prohibition on such transactions and it shall be presumed
unless the contrary is proved that the said property had been purchased for the benefit of
the wife or unmarried daughter.

CONCLUSION
After analyzing different cases and concept of benami . We reach to the conclusion that
After enactment of Benami Transactions ( Prohibition) Act the situation is quite clear. It
may be stated that now an ostensible owner has become a real owner except where he is a
coparcener in a Hindu Undivided Family or a trustee . Besides them the provisions of this
Act do not apply, also in usual bonafide transactions where person purchases property in
the name of his wife or unmarried daughter.