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OSTENSIBLE OWNER

OSTENSIBLE OWNER

 


INTRODUCTION

In respect of transfer of property, one settled principle is that a person cannot transfer to another person a right or title, which is greater than what he himself possesses. Therefore, a person cannot give what he does not have. However, Transfer of Property Act has provided an exception to this settled principle through concept of ostensible owner.

Ostensible means which appears to be true but in reality it is not. An ostensible owner means a person who appears to be the owner of a particular property but is not. He is not a trespasser or person having unlawful possession of the property.



 

 MEANING OF OSTENSIBLE OWNER


Ostensible ownership means apparent ownership which is derived from conduct or words.

OR

An ostensible owner is one who has all the indicia of ownership without being the real owner.

Section 41 of Transfer of Property act 1882 relates to ostensible owner.

Example: X owns property in Delhi but she lives in the USA. She allows Y, her brother who happens to live in Delhi to take care of the property including the payment of taxes, carrying major repairs, etc. Here X is the Real Owner of the property whereas Y is the Ostensible Owner. Benamidars or Benami Transactions are also an example of Ostensible Owners.

 

 

 

TRANSFER OF PROPERTY BY OSTENSIBLE OWNER


                               

The doctrine of transfer of property by ostensible owner is an exception to the maxim ‘nemo dat quod non habet’ which means no one can confer a higher right on the property that he himself possesses. Section 41 protects the innocent parties from the fraudulent acts of the third party. The loss arising from such an act shall fall on the person who created or failed to prevent the fraud.

 

Section 41 of the Act lays down that “when a person acts on the express or implied consent of a person who is interested in an immovable property, the person who acts on such consent is the ostensible owner of the property.” He possesses all the indicia of ownership like the right to title, possession, documents etc. He can transfer the property for consideration to the transferee. The transferee must act in good faith and believe that the ostensible owner is the real owner of the property. The real owner who allows the other to hold himself out cannot be allowed to recover from his secret title. Hence the transfer is not voidable on the ground that the ostensible owner was not authorized to execute a transfer.

However, the owner can recover from the purchaser if he proves that the purchaser had knowledge or notice of the title of the real owner. He further proves that the transferee has not acted in good faith and has not taken reasonable care which a man of ordinary prudence would take for executing such a transfer.

 



BENAMI TRANSACTIONS

Benami transactions are an example of transfer by an ostensible owner. In case of such transactions, the burden of proof lies on the person who claims to be the real owner of the property. However surrounding facts and circumstances such as the intention of the parties, conduct, source of purchase etc. shall also be considered for ascertaining the burden of proof.

For example, X buys a property in the name of Y. X pays consideration for executing the sale. Y subsequently sells the property to Z and conceals the sale from X. X cannot avoid such a sale unless he proves that Z had knowledge of the real title of the property and has acted in bad faith.

 

 


CONDITIONS TO BE FULFILLED BY OSTENSIBLE OWNER TO TRANSFER

To determine whether a transfer is made by an ostensible owner the following criteria should be fulfilled. Even if one of the below-mentioned points are not fulfilled, it will not be regarded as a transfer by ostensible owner.

1. The transfer executed by the transferor should be of an immovable property and not a movable property.

2. The real owner should give express or implied consent to a person to authorize him to act as an ostensible owner.

3. The person who subsequently transfers the property should be the ostensible owner himself.

4. The ostensible owner shall receive consideration for the transferred property from the purchaser.

5. The purchaser must believe the ostensible owner to be the real owner and act is good faith. He should have also exercised reasonable care while executing the transfer of the property by the transferor.



ESSENTIALS OF SECTION 41

1.     AGREEMENT

Consent referenced under section 41 should not necessarily be granted by the actual owner. However, the real owner must have a legitimate capacity to give such consent. Consent given by minors is not valid as they have no right to consent under the provision of transfer by the ostensible owner. The consent given must be free consent and shall be devoid of any undue influence or fraudulent intent. This consent must be expressed or implied. Express consent means when one person authorizes the other to do something or do something in clear terms that can be spoken or written. The given rights should be made clear through such words. Implicit consent means consent that is derived from the words or actions of another. Consent is not expressly given in such cases, but is likely to be interpreted to the contrary.

 

 

2.     CONSIDERATION

The transferree should give consideration to the transferor in exchange for the property. Transfer of property cannot be done. Consideration is a mandatory criterion for transfer under Section 41 of the Act.

 

 

3.     DUE CARE AND GOOD FAITH

The term reasonable care means the care that a person of ordinary discretion takes. The transferre must take adequate care to determine the correct title to the property. He must ascertain whether the transferor is the real owner of the property and has acted with good faith. [ix] Adequate care must be taken by the transferee in inspecting related documents and property titles. He must make proper inquiries to protect himself from the real owner.



4.     BURDEN OF PROOF 

In the event of a dispute or if the validity of the transfer is questioned, the burden of proof will be on the transferor. [xi] Transferre must prove that the transfer was executed by him in good faith. Additionally, he would have to prove that he took reasonable care to ascertain that the transferor was the true and real owner of the property, although he could prove that the material facts were concealed by the transferor while executing the transfer. .

 

 

 

RAMKOMAR KONDU VS. JOHN AND MARIA MCQUEEN

This principle was first used in the much awaited case of Ramkomar Kondu Vs. John and Maria McQueen by the Judicial Committee

Ramkomar Kondu v. John and Maria McQueen case

Section 41 of the Act deals with the ostensible owner and is defined as:

"Transfer by Ostensible Owner: Where, with the consent, express or implied, of persons interested in real estate, a person is the ostensible owner of such property and transfers the same for consideration, the transfer shall not be void on the ground that the transferor Was not authorized to make it: Provided that the transferor after taking reasonable care to ascertain that the transferor TA has the power to transfer, have worked in confidence. "

 

FACTS OF THE CASE

Bunoo Bebee was Alexander McDonald’s mistress. Alexander bought the property in the name of Bunoo Bebee. In June 1843, she sold the property to Ramdhoni Kundoo (father of Ramcoomar Kundoo) by a sale deed. After which he and after his death, his heir enjoyed undisputed ownership for 24 years. Alexander made a will and the will be stated that after Alexander’s death, the property would go to Macqueen, who was the daughter of Alexander and Bunoo Bebee.

When the will came to the knowledge of Bunoo Bebee, a case was filed contending that Bunoo Bebee didn’t have the right to sell the property as she was merely an ostensible owner. Alexander had no intention to transfer the property to Bunoo Bebee. His intentions are clearly reflected in his will where he transferred his property to his children after his death.


ARGUMENTS BY THE APPELLANT

It was contended by the appellant that as per the registered sales deed, Bunoo Bebee was the registered owner of the land and was residing on the same property after the death of her husband. Ramdhoni Kundoo (father of Ramcoomar Kundoo), had no idea about the Benami title.

Calcutta HC decided in favour of Macqueen. But the decision of Calcutta HC was reversed by the Privy Council.

 

HELD: Sale was bonafide in nature and that reasonable inquiry as a prudent man was made by the appellants.

 

 

 

 

SECTION 41 OF TPA ENACTS RULE OF ESTOPPEL OVER THE REAL OWNER OF THE PROPERTY

Estoppel signifies a situation where a person makes others believe in something or some fact which is not true / which is false and then the person acts over that belief, the person who made the representation can’t refuse to act on that representation then.

Here,

The real owner of the property makes the other person (transferee) believe that the person dealing with the property (ostensible owner) has the authority to deal with it as the owner of that property and that includes the authority to alienate the property, whether impliedly or expressly;

The person alienating doesn’t have the authority to alienate the property but he alienates it as the ostensible owner;

For a consideration ;

The transferee even after taking reasonable care, believes that the transferor has the authority to make the transfer;

Now the real owner is prevented from questing the transfer on the ground that the transferor was not competent to do so.

This is based on the principle that because of the conduct of one person the transfer took place.  Even if the two parties were defrauded by the transferor, one enabled the fraud to take place (the real owner because of the consent). The other innocent party should not suffer because of this.

 

 

THE CONCLUSION

Hence the theory of the ostensible owner states that the ostensible owner is the person who represents the real owner. He executes the transfer on behalf of the owner with his consent. The real owner cannot survive such a transfer made by the ostensible owner if the transferor has acted in harmony, taking reasonable care while executing the transfer and giving consideration for the same.

 


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