INTRODUCTION
Ostensible can be defined as something that seems to be true but is not necessarily true. An ostensible owner is an individual who possesses all the indicia of ownership of a property but is not the actual owner of the property. An ostensible owner of a property is an individual whose name is on the records and is in possession of the property but he/she never meant to own the property. The true test is what is the source of acquisition of the purchase price; the intention behind the same is to impart a benami color to the possession of the property and who is benefiting from the property. This test for the actual owner don’t only distinguish between the real owner and apparent owner of the property but also preclude the person who hold the possession of the property in a fiduciary capacity such as agents, guardians etc. Since a minor cannot give consent, His/her guardians cannot be an ostensible owner of the property because the consent is of a very crucial role for an ostensible owner. Hence, an individual cannot be addressed as an ostensible owner if the real owner of the property delegates him with a temporary control over the property. The Transfer of Property Act, 1882 prescribes the definition of ostensible owner under Section 41, which reads that:
“Where, with the express or implied consent of the persons interested in immoveable property, an individual is the apparent owner of such property and transfers the same for consideration, the transfer shall not be voidable on the ground that the transferor was not so authorized to make it: provided that the transferee, having taken reasonable care to ensure that the transferor had power to make the transfer, has acted in good faith.”
The general principle of transfer of property is that one cannot transfer a property if he himself doesn’t hold a good title over it, but if the requirements of section 41 are complied with then such transfer can be made voidable on the ground that the transferor was not competent to make it. Thus section 41 is an exception to the above stated rule. The purpose of this section is to protect the buyer against a scenario where the actual owner of the property attempts to resist the transfer on the basis that the transferor was not entitled to do so. Thus, if the requirements of section 41 of the Act are satisfied then it removes the likelihood of challenging a transfer of a property on the basis of the authority of the transferor. The concept in this section does not hold good if there is no ostensible owner and/with if there is a real one.
This part of the Transfer of property Act implements the principle of estoppel against the actual owner of a property who:
* Leads others to believe that one person has full control over his property along with the power of alienation.
* Even though such a person is not entitled for such alienation of the property.
* But the person alienates the property as an ostensible owner.
* Such transfer is not a gift and is affected for a value or consideration in return of the property.
* The transferee behaves in an absolute bona fide manner and takes due care to ensure that the ostensible owner has the capacity to transfer such property, i.e. the transferee does not know of the actual/constructive notice of the facts.
* If the above-mentioned conditions are satisfied then the actual owner of the property will be restrained by this section from questioning the validity of such transfer on the basis of the capacity of the ostensible owner to transfer such property, i.e. whether the ostensible owner had the capacity to transfer the property or not.
The conveyance of the property in the name of an ostensible owner will only be looked upon as valid if the requirements specified in section 41 are complied with and there are proofs to regard a person as an ostensible owner of such property. In the case of Niras Purbe vs. Mussamat Tetri Pasin, a man owned a piece of land and altered its income records in his wife’s name and then proceeded on a pilgrimage. During this time, when the husband went on a pilgrimage, the wife sold the land to a third individual. The buyer of the property conducted a bona fide and due inquiry as to the property and wife’s ability to sell the property and paid consideration for transfer. Since the property was under mortgage, the buyer paid off the loan and redeemed the said mortgage as well. The husband while coming back could not claim back the land because, prior to departing on pilgrimage, he had made his wife the apparent owner of the land through his acts.
FINDINGS AND DISCUSSION ABOUT THE TOPIC
- Consent of The Real Owner
To prevail in the case of a bona fide purchaser, the express/implied consent of the true owner is crucial in establishing that the transferor is the ostensible owner of the said property. The only thing that makes the ostensible owner capable of transferring the property is the consent of the real owner hence such consent should be valid and free consent. Since the possession of the ostensible owner is justified by the consent of the real owner, and since such consent is so crucial, the real owner of the property should therefore be able to give consent for the transfer of the property and should have given it voluntarily. The consent given on account of a mistake of fact may be justified but not the one due to a misunderstanding of legal standings. The transferor must prove that he or she was the ostensible owner with the express or implied consent of the real owner, but the transfer itself need not be with the consent of the true owner. On the contrary if the transfer is induced by the purchaser by fraud and misrepresentation in the absence of bona fide, the plea for bona fide will not be available as the misrepresentation / fraud has vitiated everything. Hence section 41 of the Act will not be brought to application in such situations and where the real owner has not provided consent and is also opposing possession by the possessor
- Implied Consent
The real owner’s consent can be neither written nor express; Section 41 also encompasses implied consent of the real owner. As above stated, the ostensible owner must be in possession of property by consent of real owner and must hold himself out as being the real owner of the property and permits other to deal with the property as his own. Such conduct and act of ostensible owner shall constitute implied consent if the real owner knows the same. On the contrary, Negligence can also constitute implied consent. Two pardanashin women with husbands, who know about the business, permitting their brother to squander their share of property, the brother will be deemed to be the ostensible owner with the implied consent of the sisters; but when pardanashin women place the management of their property in the hands of male relatives who deal with it without their consent, the consent cannot be inferred.
Thus, the implied consent of the actual owner can only be established as true and valid when the actual owner has the full knowledge of the facts and circumstances with regard to the conduct and representation of ostensible owner in respect of the property.
- Consent Cannot Accommodate the Intention to Deceive
It is important to mention that the law of ostensible owner with the consent of the real owner, either express or implied, cannot have the intention to deceive the third party in the name of the real owner. It is not even required to establish that the intention of the apparent owner was to defraud the purchaser or true owner, and the transaction would be held valid. The intent of this section is protection of transferee’s interest. The actual owner of the property can be innocent and let the world believe that another person is the owner of his property, but if the transferee has made a proper inquiry and in a bona fide manner as stated in the section then the interest of the transferee will be safeguarded.
- Reasonable Care by Transferee
It is strictly necessary under section 41 to ensure that the transferee has exercised due care like an ordinary man would have exercised. Even otherwise, in each case, it is the responsibility of the transferee to remain cautious for safeguarding one’s rights and interests and conduct a proper due diligence of the property as an ordinary prudent person before getting involved in the transfer. Adequate care should be exercised by the transferee of property while going through the documents concerned and title of the said property. The section is laying down an obligation upon the transferee to do as regards the title and capacity of the transferor. The transferee cannot exculpate himself by expressing that he had assigned such obligation to his solicitor or only acted on the basis of revenue entries. In order to shield oneself from the imputation of willful abstention from reasonable inquiry and at the same time shielding from the imputation of constructive notice the transferee ought to demonstrate the commencement of such inquiry with the assistance of some evidences such as description of sale certificate, or the availability of other sharers in the case of a Joint Hindu Family.
If the starting point of the inquiry is not evident or there is no clue suggesting that the transferor is not the real owner of the property then the transferee does not have any further duty to inquire and find out defects. If the transferee has not acted similarly and moves towards effecting the transfer of consideration, he will not be covered under the above-mentioned provision.
The transferee cannot claim protection under section 41 unless he establishes that he acted in good faith and with reasonable care to ensure that the transferor had the power to transfer the land. It also becomes significant for the transferee to know the capacity of the ostensible owner and distinguish it with the capacity of the actual owner in any situation the actual owner will always have an advantage over the ostensible owner. In Mathura Kalwar vs. Ambika Dat & Ors.it was held by the court that when an ostensible owner sells the property to a transferee, but prior to such sale, the real owner of the same property sells the same to another person through a registered deed, the first transferee will not be protected by this section and the sale through registered deed by real owner will be held paramount. Therefore, the ostensible owner will not find protection in this section.
- Proper Inquiry
The transferee should make the inquiries as a reasonable and prudent person to protect his own interests. Transferee’s reasonable care is a subjective one and has to be found on reference to the facts and circumstances of each individual case before the court. Test of transferee is the test of prudence but whether such test was applied or not can be a question that can also arise in the second appeal of a case.
It is also necessary for the transferee to examine the capacity of the actual owner of a property and not only the capacity of the apparent owner as in some cases the actual owner of the property also do not have the capacity to transfer the property and hence leads to a void transfer. In the matter of Ishwar Dass vs Bir Singh & Ors. A property was disputed belonging to A, he donated the property to X, but during the course of the current suit it was found that the property donated included the ancestral property and thus W was only legitimate to the 1/6th share of that property. In the meanwhile, B has bought the very same property from W and has asserted that he has bought the property as a bona fide transferee. The court in the present case, held that the B cannot avail the protection of section 41 of the Transfer of Property Act since section 52 is overriding the operation of section 41 of the Act.
- Transfer Not Voidable
Section 41 of the Act declares the transfer as “not voidable” on the basis that the transferor had not had the authority to create it when the transferee has taken reasonable care and acted in good faith. In this context, the term ‘voidable’ does not imply that the whole dealing is not voidable. The section does not render the transaction null and void but nullifies only the ability of the actual owner to challenge the transaction on the basis of incapacity of the transferor, by rendering it not voidable. The transfer may be voidable on other grounds but by virtue of section 41, the actual owner cannot challenge the same on the basis of transferor’s incapacity.
- Burden Of Proof
In this section, the onus is on the transferee to establish that the transferor is the ostensible owner and bears all the signs of an owner. The transferee must establish that it is a benami transaction and that the transferee is the ostensible owner. Conversely the transferee also needs to establish that he has exercised reasonable care and has bought the property as a bona fide purchaser according to section 41. However, if the transferee reports the existence of facts that are creating a starting point of inquiry, which may further create a discovery of truth, on further investigation then the burden of proof shifts on the person. The transferee need to establish that he was not in fault while purchasing the property and that the burden of proof is transferred to the true owner. The rights of the legal owner must be protected prima facie unless the legal owner has themselves done something to cause innocent purchasers or promises to believe that the immediate possessor is the true owner. Pure bona fide by the buyer or pledgee is not enough. He’ll need to prove that the real owner has waived his right to recover his ownership because of some act or default on his part.
BENAMI TRANSACTIONS AND SECTION 41 OF THE TRANSFER OF PROPERTY ACT.
The real owner can never claim his title rights against the benami owner in any situation. The Benami Transaction (Prohibition) Amendment Act, 2016 prevents the transfer of property by an ostensible owner and has criminalized and illegalized it with some exceptions. In the matter of Thakur Krishna vs. Kanhayalal, the court held that any property which is held or possessed in the name of benami owner can be taken by the government’s competent authority without paying any form of remuneration. Though the Benami Transaction (Prohibition) Amendment Act, 2016 has granted some exception to the aforementioned rule which are as follows:
* Property owned by a Karta or any other member of an HUF and such property is owned for the benefit or advantage of the other members of such HUF and the same is acquired by a known source of the HUF will not constitute a Benami transaction under the Act.
* An individual who buys property on behalf of his spouse or any child is not under the benami transaction prohibition. But the known ancestors of the person must give the consideration.
* The property that is possessed by an individual in the position of a trustee in favor of another individual will not be considered a benami transaction / property.
* When a person’s property is jointly owned by the brother, sister, lineal descendant or antecedent and the consideration for the same is received from a person known to the owner.
The above stated exceptions are the spheres that are covered under the section 41 of the Transfer of Property Act, 1882.
CONCLUSION
The provisions of the Benami Transactions Act, 1988 govern the theory and concept of ostensible ownership. Ostensible Ownership is a notion whose genuineness and validity are based on notions of equity and natural justice, mainly the theory of estoppels. It creates an exception to the principle of “nemo dat quod non habet” so that ostensible owners are able to transfer actual ownership rights to bona fide transferees on basis of grounds of equity. Ostensible ownership has a strong concept of Benami transactions associated with it. Benami transactions are described in the Benami Transactions Amendment Act of 2016. The provisions of this Act do not extend to general bona fide transactions where an individual buys property in the name of his unmarried daughter or wife. The ambit of Section 41 has been curtailed due to the evolution of the Benami Transactions Act.
Contributed By: Diwanshi Arya (Intern)