Transfer by ostensible owner
Section 41 of Transfer of Property Act, 1882 – Transfer by ostensible owner
Before diving into the topic the section 41 of transfer of property act is called as transfer by ostensible owner or doctrine of holding out or benami transaction.
Section 41 states that with the consent of real owner of immovable property, another person acts as ostensible owner and transfers such property for consideration, such transfer shall not be made voidable by real owner, provided that if the transferee acted with reasonable care to find whether the transferor authorised to transfer the property and has acted in good faith.
Conditions for transfer under section 41
1. Transferor must be ostensible owner
2. Real owner’s consent – Either Express or Implied
3. Transferor i.e.., ostensible owner must get consideration
4. Reasonable care must be taken by transferee
5. This section applies only to immovable property, not to movable property
Transferor must be ostensible owner
The primary condition for application of this section is that the person transferring the property must be ostensible owner, An ostensible owner is a person not being a real owner. To ascertain the person as ostensible owner, the supreme court laid down the certain conditions in the judgment ‘Jayadayal Poddar vs. Bibi Hazra’
(i) who paid the price ?
(ii) who had the possession ?
(iii) why the property was purchased in the name of other person ?
(iv) Relation between real owner and ostensible owner
(v) who used to take care of and had control over the property ?
(vi) custody of title deeds.
Consent – Either Implied or Express
The consent of real owner either implied or express is enough to constitue this section, if the real owner of the property, knows that the ostensible owner is dealing with his property thus it regards to implied consent and if the real owner either by words spoken or by written creates the apparent ownership of the transferor then it can be stated as express consent.
If the property is owned by A, B is allowed as ostensible owner by A and if B sells A’s property to a purchaser, since the real owner renders the fraud, by holding out B as owner, A has to suffer.
Reasonable care
Transferee to claim benefit under this section, must be able to show that the inquiry was made regarding the transferor’s title.
To claim protection under this section, the transferee must show that there was a reasonable inquiry regarding the real owner of the property.once the reasonable inquiry was made, but the transferee was not able to find the real owner of the property and beliefs that the person transferring the property has authority to do so and in such cases they are entitled to the benefit under sec.41.
Only reasonable inquiry was not merely enough to claim protection under this section, the word good faith was mentioned in sec.41 stating the transferee must act honestly while or during the inquiry regarding the transferor’s title, once the transferee made reasonable inquiry, but after ascertaining the facts, if he chooses to ignore, then he is not entitled to claim protection.
So, To entitle for protection under this section, the transferee must conduct reasonable care and has acted in good faith, the reason is that a man can act without honesty.
Burden of Proof
At first, the burden of proof lies on transferee to show that transferor was ostensible owner and then onus lies on transferee that he acted with reasonable care and with good faith.
Landmark Cases
Ram Coomar Koondoo v. John and Maria McQueen (1872)
This is considered a foundational case. It established the principle that if a person allows another to appear as the owner of property, and a third party purchases it in good faith, the true owner may be estopped from claiming the property back.
Jagannath Sakharam Sahale And Anr. vs Vasudeo Vyankatesh Kanade And Ors. (1987)
This case clarified the scope of Section 41, emphasizing that the transferee must have acted in good faith and taken reasonable care to ascertain the transferor’s authority to transfer the property.
