Ostensible Owner

ostensible owner

The word ‘ostensible’ means something that appears to be true. The ostensible owner is thus not the real owner of a property. He merely represents himself out as real owner to the third parties. Such ostensible owner possesses all the rights of ownership in a property without being the real owner of it. He acquires these rights from the real owner by the express or implied consent of such an owner. He is the full and unqualified owner and the real owner is the qualified owner of the property.[i]

Persons who cannot be ostensible owners

  • Professed agents
  • Trustee
  • Servants
  • Guardians or any other person acting under fiduciary character[ii]

For example, A owns a property in India, he authorizes B to perform all rights of ownership relating to the property and leaves for the U.K. B will be the ostensible owner of such a property and all acts done by him will be considered at the acts of A. B further sells the property to C for consideration. A cannot recover from C his land in future. As C has believed B to be the owner of the property and has acted in good faith.

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.[iii]

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. [iv]

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.[v]

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.

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.[vi]

Essentials of Section 41

Consent

The consent that is referred to under section 41 should not be necessarily given by the real owner. However, the real owner should possess the lawful capacity to give such consent. [vii]  Consent given by minors is not valid as they have no authority to give consent under the provision of transfer by ostensible owner. The consent given must be free consent and shall devoid of any undue influence or fraudulently intent. This consent should be express or implied. Express consent means when one person authorizes another to do something or not to do something in clear words which might be spoken or written. The authority given should be apparent through such words. Implied consent means consent which is derived from the words or actions of another. Consent in such cases is not explicitly given but it has chances of being interpreted conversely. [viii]

Consideration

The transferee should give consideration to the transferor in return for the property. There cannot be a gratuitous transfer of property. Consideration is a compulsory criteria for invoking transfer under section 41 of the Act.

Reasonable care and good faith

The term reasonable care means care which a man of ordinary prudence would take. The transferee should take adequate care to determine the true title of the property. He should ascertain whether the transferor is the real owner of the property and he has acted in good faith.[ix] Sufficient care should be taken by the transferee in inspecting the relevant documents and title of the property. He should make proper inquiries to protect himself from the real owner. [x]

Burden of proof

In case of a dispute or if the legality of transfer is questioned, the burden of proof will lie on the transferee. [xi]The transferee has to prove that the transfer was executed in good faith by him. Additionally, he must prove that he had taken reasonable care to ascertain that the transferor was the true and real owner of the property however he can prove that material facts were concealed by the transferor while executing the transfer.

Case Law

Shafiquallah v. Samiulah[xii] The owner of a property died and thereafter the possession of his property was with his illegitimate sons who were not entitled to the legal title of the property. The legal heirs of the owner filed a suit against the illegitimate sons to recover the property However the illegitimate sons sold the property to a third party, claiming themselves to be ostensible owners. The court held that the illegitimate sons had no consent of the actual owner whether express or implied to be ostensible owners of his property. Hence section 41 cannot be invoked.

Nirvas Purve v. Mst. Tetri Pasin [xiii] A husband while leaving for pilgrimage entered his land in the revenue records under his wife’s name. He subsequently allowed her to mortgage the land. When the husband left, the wife sold the land to a third party and the purchaser paid off the mortgage. The court held that the husband cannot recover or redeem the land from the purchaser, provided the purchaser has acted in good faith and has taken reasonable care to ascertain the title of the land.

Conclusion

Hence the doctrine of ostensible owner states that an ostensible owner is a person who merely represents the real owner. He executes transfers on behalf of the owner with his consent. The real owner cannot avoid such a transfer made by the ostensible owner if the transferee has acted in good faith, has taken reasonable care while executing the transfer and give consideration for the same.

Frequently Asked Questions

Who is an ostensible owner?

Ostensible means something that is not real or true. Therefore ostensible owner means a person who is not the real owner of the property he represents the real owner in transfers made to the third party. Such a representation is based on the consent of the real owner. Such consent may be express or implied.

For example, A authorizes B his wife to perform all the rights of ownership in the property held by him while he is away. Hence when a transfer is executed by B it can be said that B is the ostensible owner who has all the rights of the real owner in that property.

What are the essentials of transfer executed by the ostensible owner?

The following are the essentials to prove that a transfer is executed by an ostensible owner

1. The real owner give a valid consent to the ostensible owner to represent him in a transfer of his property to a third party.

2. The transferee must give consideration for the transfer of property.

3. The transferee must act in good faith and take reasonable care to ascertain the true title of the goods. He shall make proper inquiries.

4. The transfer should be of an immovable property

Edited by Sakshi Agarwal

Approved & Published – Sakshi Raje

Reference

[i] Kannashi Vershi v/s Ratanshi Nenshi AIR 1952 Kutch 85

[ii] The Law studies, Transfer by Ostensible Owner, March 16 2018 http://thelawstudies.blogspot.com/2018/03/transfer-by-ostensible-owner.html

[iii] Vibha Sirothiya, Position of Ostensible Owner in Indian Property Law vis-à-vis Benami Transactions      http://www.goforthelaw.com/articles/fromlawstu/article28.htm

[iv] Transfer of Property Act 1882, section 41

[v] Mahinder Singh v. Pardaman Singh (1992) 196 ITR 786 Delhi

[vi] Neerja Gurnani, Ostensible Owner under TPA, April 4, 2015

https://www.lawctopus.com/academike/ostensible-owner-under-tpa/

[vii] Sambhu Prasad v. Mahadeo Prasad, (1933) A.I.R. 493 

[viii]Abdulla Khan v Bundi, (1912) ILR 34 All 22

[ix] Kanhu Lal v Palu Sahu, [1920] 5 Pat LJ 521.

[x] Gurbaksh Singh v Nikka Singh  1963 AIR 1917, 1963 SCR Supl. (1) 55

[xi] Ram v. Muktinath, (1956) A.I.R. 154  

[xii] AIR 1929 All 943

[xiii] (1916) 20 Cal W.N. 103

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I am Dhruvi Dharia from University of Mumbai Law Academy (UMLA), pursuing B.B.A.-LL.B.(Hons.) I have a penchant for studying Corporate laws like Companies Act, Securities Law, Insolvency and Bankruptcy Code, mergers and acquisitions etc. and strong inclination towards numbers. I am also a budding Company Secretary and one level away from becoming one. I aspire to become a Corporate Lawyer in the future. I have always enjoyed reading and working on various legal matters whenever given a chance to. I constantly try to better myself by reading various Acts, articles, interviews of eminent lawyers and professionals and researching on various topics. I like reading on various contemporary legal issues and articles and I sometimes attempt writing on the same. Apart from academics in my free time I like drawing, painting and travelling to new destinations.