This article on ‘Section 41 of the Transfer of Property Act, 1882‘ was written by an intern at Legal Upanishad.
Section 41 of the Act, of 1882 protects the transferee from the Ostensible owner. The ostensible owner is the one who is not actually the real owner but in the eye of the public ostensible owner is the real owner. The real owner is the one who had given the consent either expressed or implied to the ostensible owner with regard to the ownership in the eye of the public. The ostensible owner has all the power and can sell the property to the bonafide purchaser for consideration and the real owner can not sue the ostensible owner on the ground that he is not the real owner of the immovable property.
In the transaction made by the ostensible owner, it is required that it is made to a bonafide purchaser and the purchaser is required to make sure that the transferor is having the power to transfer the immovable property to the purchaser. In Partnership Act, 1932 Doctrine of Holding Out is discussed under section 28 of the Act. The Benami Transaction Act of 1988 has introduced some modifications in the law of section 41 of the Transfer of Property Act, of 1882.
The ostensible owner is the person who is getting the ownership of the immovable property either expressed or implied with the consent of the real owner. The ostensible owner is the one who is known to the public as a real owner of the immovable property. If the ostensible owner sells the property of the real owner for consideration to the bonafide third party, so this transaction can not be considered voidable on the ground that the real owner in the eye of the public is not the real owner of the immovable property actually.
The real owner cannot take the defence on this ground that the ostensible owner does not have the right to sell the immovable property. An ostensible owner has all the rights without owing the property really.
Modifications introduced by the Benami Transaction Act, of 1988
Some modifications were introduced in section 41 of the Transfer of Property Act, 1882 by the Benami Transaction Act, 1988. And this Act takes away all the rights of the actual owner with respect to the recovery of the property. No suit can be initiated against the ostensible owner or any other person by the actual owner or on behalf of the real owner for the property which was held benami, it was specified as per the Act of 1988.
A real owner can not at all recover his property by showing his secret title because the ostensible owner had got the title from the real owner and has all the rights which the real owner has and can sell the immovable property as well.
It is required in this sale transaction that the sale is made with the third because of having the bonafide interest. But in this case of the ostensible and real owner, there is one exception when the defence of the real owner is allowed. That defence is allowed in this case, if the property is held as a coparcener in a Hindu Undivided Family, as trustee, or in any other fiduciary capacity for the benefit of the coparcener and another person.
Section 41 of the Transfer of Property Act, of 1882 is based on the principle that when there are cases when two innocent persons were suffering from the fraud of a third party then in the eye of the law the burden is on the person who has created this situation and in this cases the hardship is caused by the strict enforcement of the general rule that is “Nemo dat quod non-habet” which means no one can confer a better title in property than he himself possesses.
This principle says that if two innocent persons are then the law would penalize the one whose indiscretion had created the fraud and the law would favour the one who is having possession of the immovable property.
EQUITABLE ESTOPPEL RULE
If consent is given by the real owner to the ostensible owner by entrusting the ostensible owner with documents and showing to the public that the ostensible owner is the real owner and he is having a good title then the real owner can not say it in the public that he is having the title of the property, not the ostensible owner. The real owner cannot claim on the basis of his secret title for the recovery of the immovable property.
PRINCIPLE OF NATURAL EQUITY
This principle says that when one man allows another person to hold his property as his own property in the eye of the public and third party can purchase that property from the ostensible owner too. And the real owner cannot claim it because the third person is in the belief that the ostensible owner is the real owner. This principle of natural equity is universally applicable.
In Ram Kumar v. Mcqueen case, a suit was filed by Mcqueen for the recovery of 3 and a half Bigha of land and a house as well. The suit was filed by Mcqueen on the basis of the Will made by his father whose name is Mcdonald. In 1843 the land was purchased by Mcdonald’s from the Banno Bibi in the name of Banno Bibi and it was a Benami purchase made by Mcdonald’s. For 24 years Mcdonald and his son had resided without raising any argument. Mcqueen was the daughter of Banno Bibi and the original purchaser of the property was Ram Dhan Kundoo.
In 1834 Mcdonald died and the actual buyer Ram Dhan Kundoo paid all the price and some more construction was made by Ram Dhan on the land. The reason for filing the suit is that Banno Bibi is only benamidar and Mcdonald is the real owner of the property. The Hon’ble Court has laid down the law specified under section 41 of the Transfer of Property Act, 1882, and dismissed the suit.
The doctrine of holding out is the doctrine that gives protection to the third party who is innocent. The aim of this doctrine is to give protection to the transferee who is purchasing from the ostensible owner. The real owner cannot claim defence for the immovable property on the basis of his secret title because the law would question why you kept it secret and what is fraud involved in it. The act in itself is leading to some kind of fraud or cheating.
So it will not be justified in the eye of the law. The sale made by the ostensible owner to the third party would not be declared invalid that would be considered valid and the real owner cannot claim that the transaction is voidable.
List of References:
- Tejaswini Kaushal, Section 41 of Transfer of Property Act, 1882, iPleaders Blog, 15 May 2022, available at: https://blog.ipleaders.in/section-41-of-transfer-of-property-act-1882/
- Siddhant Sharma, Ostensible owner under TPA, Lawctopus, 4 April 2015, available at: https://www.lawctopus.com/academike/ostensible-owner-under-tpa/