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SECTION 41- TRANSFER BY OSTENSIBLE OWNER

Section 41 is an exception to general principle “no man can transfer to another a right/ title
greater than what he himself possesses and he gives not who hath not.” Section 41 of TPA is
now subject to provisions of Benami Transaction (Prohibition of the Right to Recover
Property) Act, 1988.

Section 41 is based on decision of Privy Council RAMCOOMAR KOONDO V/S


MACQUEEN “Ii is principle of natural equity – where one person allows another to hold
himself as the owner of the property and third person purchases the estate with consideration
from apparent owner in belief that he is real owner. In this case real owner will not be
allowed to recover his secret title unless he shows that 3rd person has notice that he is
purchasing from ostensible owner and not from real owner and he acted in good faith.”
FACTS- Alexandra had purchased some property in name of his mistress Binno Bibbe. From
her, he has two children and Macqueen was one of two. The sale deed was in her name and
she received rent from it

In 1843 she sold the property to Ramdhone (father of Ramcoomar). After


death of Binno Bibbe, Macqueen filed the suit against the Ramdhone on ground that her
father was a real owner and Binno Bibbe was merely a benamidar (apparent owner).
Ramdhone(father of Ramcoomar) pleaded that he was a bonafide purchaser without the
notice of Benami Title. DECISION- Calcutta High Court- decided in favour of Macqueen.
Appeal to Privy Council- reverse the decision and held that Ramdhone(father of Ramcoomar)
was a bonafide purchaser without the notice of Benami Title.

LAW PRIOR TO BENAMI TRANSACTION ACT


OSTENSIBLE OWNER – means a person who is an apparent owner but not a real
owner. Theory of ostensible owner estops the real owner of property who clothes another
with apparent title from latter asserting that his title against an innocent purchaser who has
been induced to deal with apparent owner. BENAMIDAR MEANS- in whose name property
is purchased. A person may have the possession of property and enjoyment of the property
and may also have his name entered in the official record but even than he might not be the
real owner. Such a situation arises where real owner purchase the property in the name of
another person.

PERSON WHO IS NOT AN OSTENSIBLE OWNER


 If real owner entrust property for temp. period
 Where person holds the property as agent, guardian, as manager, trustee
 Karta of Joint Hindu Family
TEST- Section 41 is applicable where the transferor is an ostensible owner. But in some
cases it is difficult to ascertain who is the real owner and ostensible owner. Supreme Court in
JAYADAYAL PODDAR v. BIBI HAZARA held that whether transferor is an ostensible
owner or not depends upon facts and circumstances of cases and also depends upon following
consideration

 who purchase the property


 nature of possession after purchases
 reason- for purchasing the property in the name of other person
 Relation between parties(real owner and ostensible owner)
 Custody of title deed

BURDEN OF PROOF- Lies on person who claims that he is a real owner

SECTION 41 of TRANSFER OF PROPERTY ACT


1. Transfer by an ostensible transferor
2. With the consent of real owner, ostensible transferor is dealing with property
3. Transfer is for consideration
4. Transferee acted in good faith and exercised the reasonable care – that
transferor(ostensible transferor) has power to transfer

If all these ingredients are present (real owner can’t claim his property back)

 Transfer is not voidable


 Real owner is estopped from denying the transfer on ground that transfer is by an
unauthorized transferor

Eg- ‘A’ purchased the property in the name of his wife. The wife looks after the property.
After sometime she mortgaged the property to ‘Z’. It was held that silence of ‘A’ on
mortgaged by his wife as an ostensible owner. The interest of ‘Z’ is protected and ‘A’ can’t
claim his property back as ‘A’ himself allowed her to deal with property and there was
implied consent of him. (Annodo Mohan v.Nilpharmri)

CONSENT OF TRUE OWNER- one of the important requirements of section 41 is that in


transfer of property by ostensible owner must take place with the consent of real owner. That
consent can be express or implied, but it should be free consent.

 Consent is express when it is given in clear word by real owner to ostensible owner to
deal with property.
 Consent is implied if real owner knows that ostensible owner (benamidar) is dealing
with property like its own. The real owner’s silence amounts to implied consent.
Eg- ‘A’ purchase the property in the name of ‘B’ and give his consent to deal with property.
‘B’ sold the property to ‘C’ with consideration and ‘C’ has taken the reasonable care that ‘B’
has title to transfer the property. Section 41 of TPA and Section 115 of Evidence Act both
will operate and estop ‘A’ from claiming his property back, that he is a real owner and ‘B’
ostensible owner.

CONSIDERATION- For the applicability of section 41 transfer is with consideration it


should not be gratuitous. Where transfer by an ostensible is without consideration i.e by the
way of gratuitous or through gift, real owner has right to claim his property back.

REASOBABLE CARE and GOOD FAITH- Section 41 lays down that transfer by an
ostensible transfer shall not be voidable on grounds that transferor has no right to transfer, if
transferee

 If transferee has taken the reasonable care to ascertain that transferor has right to
transfer, and
 Acted in good faith

GOOD FAITH- “He who seeks equity must do equity” where transferee has the
knowledge that transferor is merely an ostensible owner and not the real owner, his
intention is malafide and therefore he can’t take the protection of section 41. There was
partition of joint family property and on the same property there was dispute which was
pending in the court. During the pendency of proceedings, a part of property was sold.
The Supreme Court held that since parties are living in same village and facts are
established beyond the reasonable doubt that purchaser had knowledge of disputed title.
Therefore transferee had no good faith and can’t claim the benefits of section 41of TPA
(Gurubaksh Singh v.Nikka Singh)

REASONABLE CARE- Good faith is not only enough transferee must exercise
reasonable care in ascertaining the title of transferor. Reasonable care means care which
man of ordinary prudence would have taken. Revenue records are not documents of title
and transferee relaying solely on entries would not mean he he taken the reasonable care.

Eg- ‘S’ owned the house. In 1912 ‘S’ went to pilgrimage leaving the house in charge of
‘B’. In 1915 ‘B’ applied to municipality that he was not aware of ‘S’ whereabouts and
whether he was dead or alive, and prayed that house be entered in his name being his heir.
The application wsa accepted and after two years he sold the house to ‘Z’ who purchases
the house in good faith after inspecting the register. ‘S’ returned in 1918 and claimed his
house. It was held that protection of section 41 to defendant ‘Z” not maintainable.
Because if ‘Z’ had make the proper inspection, he would come to know that ‘S’ was the
original owner and ‘B’ had admitted that he didn’t know whether ‘S’ was alive or dead.
And further presumption of death could not be made before 7 years.( Md. Sulamian v.
Sakina Bibi)

SUBSEQUENT TRANSFEREE – Section 41 not only protect the interest of first


transferee but all subsequent transferee.
SECTION 41 OF TRANSFER OF PROPERTY ACT AFTER
BENAMI TRANSACTION ACT, 1988
BENAMI TRANSACTION- Transaction in which property is transferred to one person for
consideration paid/provided by other person.(section 2(a))

 All Benami transaction are punishable


 All Benami transaction made after the commencement of the Act (5th sept 1988)- no
person is allowed to take plea u/s of 41 of tpa that property only stand in the name of
Benamidar and he is a real owner. Now plea is not acceptable by the court
 Now ostensible owner becomes the real owner.

MITHILESH KUMARI v PREM BEHARI- SC held that statute is declaratory and makes
the all benami transaction punishable. Statute has retrospective effect. However in R.
RAJAGOPAL REDDY v. P. CHANDRASHEKHRN- SC held that statute has no
retrospective effect and it is not a declaratory.

SECTION 4 OF THE ACT

Prohibition of the right to recover property held benami.—


1. 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.

2. 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 person,
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.

3. Exception
 where the person in whose name the property is held is a coparcener in a Hindu
undivided family and the property is held for the benefit of the coparceners in the
family; or
 where the person in whose name the property is held is a trustee or other person
standing in a fiduciary capacity, and the property is held for the benefit of another
person for whom he is a trustee or towards whom he stands in such capacity.