'Position of Ostensible Owner in Indian property law vis-à-vis Benami transactions'
By Vibha Sirothiya
Final Year, NLIU,
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 minor’s 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:
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
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.
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.
 Muhammad Sulaiman v. Sakina Bibi, AIR (1922) All 392
 Thakur Krishna v. Kanhayalal , AIR (1961) All 206
 AIR (1974) S.C.171
 AIR 1992
 (1872 ) 11 Beng . L.R. 46,52
 Rai Sunil Kumar v.Thakur Singh .A.I.R.(1984)Pat.80
 Khwaja Afzalv.Md. Saheb, A.I. R. (1936) Nag. 214
 Beyas Singh v. Ram Janam Ahir , A.I.R. (1961)
 A.I.R. (1963) S.C. 1917
 Mithilesh Kumari v. Prem Behari Khare, AIR 1989 SC 1247.
 AIR 1994 HP 27