MEANING OF OSTENSIBLE OWNER:
The word ‘ostensible’ literally means ‘apparent’ or ‘seeming’. An ostensible owner is a person who appears to be the owner of immovable property even though he is not the real owner of the property. The provisions regarding transfer by ostensible owner are governed by section 41 of the Transfer of Property Act, 1882.
PROVISIONS RELATED TO TRANSFER BY OSTENSIBLE OWNER:
Section 41 of The Transfer Of Property Act, 1882 states that
“Where, with 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.”
The provision is based on the principle Nemo dat quod non habet i.e. no one can confer a higher right on property than what he himself possess and nemo plus juris and alium transferee potest quam ipsa habet i.e. no man can transfer a right or title greater than what he himself has. The transfer by ostensible owner underlines the principle of holding out.
The privy council in Ram Coomar v. MacQueen, in regard with transfer by ostensible owner held that
“It is principle of natural equity which must be applicable that where one man allows another to hold himself 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 shall not be permitted to recover upon a secrete title, unless he can overthrow that of notice, or something which amounts to constructive which ought to have put him upon an enquiry, that, if prosecuted would have led to a discovery of it.”
ESSENTIALS OF SECTION 41 OF THE TRANSFER OF PROPERTY ACT, 1882
The real owner is binding on transfer of immovable property by the ostensible owner if the following conditions are satisfied –
1. A person must be the ostensible owner of a property,
2. That person must be such owner with the consent, express or implied, of the real owner,
3. The transferee must purchase the property from such ostensible owner for the consideration,
4. Before taking transfer, the transferee must take reasonable care to ascertain that the transferor has the power to make the transfer; in other words, he must have acted in good faith.
The real owner is deprived of his rights in the property under this section only if above essential conditions for the applicability of the section are satisfied.
The consent must be free and intelligent. Free consent is defined as per section 14 of the Indian Contract Act, 1872. The intelligent consent is the consent which is not brought by a misapprehension of legal rights. Consent may be implied or expressed. Since the “consent, express or implied”, mentioned in section 41, it operates as an estoppel.
The real owner would be prevented on disputing the validity of the transfer on the ground that the transferor was not, in fact, competent to do so because of real owner’s act of giving implied or expressed consent to the ostensible owner to hold himself out the world as the owner of the property.
EXCEPTIONS TO SECTION 41 OF THE TRANSFER OF PROPERTY ACT, 1882:
If the true owner permits another to hold himself out as a real owner, a third person who –
(a) deals with that other after taking reasonable care to ascertain that the transferor had the power to make transfer &
(b) act in good faith, such third person acquires good title to the property as against the true owner.
With respect to degree of reasonable care to be taken by the transferee, the requisite for ascertaining whether the transferor has power to make transfer, it may be said that-
1. The question, whether a transferee took reasonable care to ascertain that the transferee had power to make the transfer, has to be determined with the reference to the circumstances of each particular case, the test being, whether he acted
- like a reasonable man of business &
- with ordinary prudence.
2. The ordinary standard of diligence, for ascertaining whether the transferor had the power to make the transfer, is calling for the title under which transferor claims and inspecting them by transferee. While an inspection of title deed before the transfer, if there is any indication anything which put the transferee on notice or enquiry regarding any infirmity in the title of the transferor, then it might be further investigated.
The expression good faith means that the transferee has acted honestly and in the real belief that the ostensible owner is the true owner. The proviso to section requires that the transferee must not only take reasonable care to ascertain that the transferor has power to transfer the property, but also transferee must act in good faith. It is possible that there may be enquiry without good faith and good faith without an enquiry. In none of the above cases, the real owner is affected by one’s transaction with ostensible owner.
BURDEN OF PROOF:
Section 41 of The Transfer Of Property Act, 1882 is similar to Section 115 of Indian Evidence Act,1872. The burden of Proof signifies an obligation to prove a fact. Normally burden of proof lies on the person who claims fact to be true. But when a person intentionally induced another person to act, the case falls under section 115 of Indian Evidence Act, 1872 and the burden to proof is on the person inducing, to show that transferee knew the truth and therefore, is not entitled to rely upon the plea of estoppel.
In Mahinder Singh v. Pardaman Singh, the Delhi High Court said that when a transaction is Benami and transferor is ostensible owner, the burden to prove lies on a person who claims that he is the real owner.
Agnew described that the word ‘Benam’ is of Persian origin made up of two words ‘be’ and ‘nam’ meaning ‘no name’ i.e. nameless or fictitious. The simple meaning of Benami is that a purchaser desires to buy property but does not desire to buy in his own name and therefore buys it in the name of someone else. The objective behind benami transaction is to hide the real property, sometimes to avoid creditors and sometimes merely from habit or superstition.
Section 3 of Benami Transaction Act, 1988 lays down prohibition of benami transaction while section 41 of The Transfer Of Property Act, 1882 allows such transfer. Thus transfer by ostensible ownership under section 41 is subject to provision of Benami Transaction under section 3 of Benami Transactions (Prohibition of the Right to Recover Property) Act, 1988.
However, the principle laid down in section 41 is not restricted to sale. It applies to mortgage also, provided the mortgagee from ostensible owner acts in good faith and with reasonable care. If the conditions specified in section 41 of the Transfer of Property Act, 1882 are fulfilled and none of the ground in exception can be proved, the real owner is binding by transfer of immovable property made by ostensible owner.
This article is authored by Rashmi Nikam, student of Adv. Balasaheb Apte College of Law.