POSITION OF OSTENSIBLE OWNER IN INDIAN PROPERTY LAW VIS--VIS

BENAMI TRANSACTIONS

Abstract:
This project analyzes the concept of Ostensible Owner and the essential conditions for
application of section 41 of Transfer of Property Act, 1882 and impact statutory changes brought
by Benami Transactions (Prohibition of the Right to Recover Property) Act, 1988.

INTRODUTION
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
1

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 41 OF 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
4

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
5

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, in this case 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 the
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.