Section 41 of the law deals with the scenario
where someone, with the permission (either stated or implied) of those involved
in a property, appears to be the owner of that property and sells it to another
party for some value. In such a situation, the sale won't be invalidated just
because the person who sold it wasn't actually authorized to do so. However,
for this safeguard to apply, the buyer must have taken reasonable steps to
confirm the seller's authority and must have acted in good faith during the transaction.
This section is closely linked to Section 115 of the Indian
Evidence Act, which discusses the principle of estoppel. It protects the buyer
only if they've genuinely acted in good faith and made efforts to ensure that
the seller had the right to make the sale. If a buyer deliberately ignores
verifying this information, they won't be protected. The level of care required
varies depending on the circumstances of each case.
An "ostensible owner" isn't the true owner but is
someone who can legally represent themselves as the owner to outsiders for
certain dealings. They gain this status when the real owner knowingly allows or
neglects the situation, making the apparent owner the representative. For
instance, if someone temporarily entrusts their property to a family member for
use, that family member becomes the ostensible owner. If they then sell the
property during this time, the original owner cannot reclaim it upon their
return.
In the legal case Raj Ballar Dass V. Haripada Das,
the Supreme Court established criteria for identifying a transaction as
"benami":
- The responsibility of proving a transaction is benami
lies with the party alleging it to be so.
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Several key aspects determine the nature of a
property transaction:
1. Source of Purchase Money: If it's proven that the money used for the purchase came from
someone other than the person in whose name the property is registered, it's
generally presumed that the property is intended for the benefit of the
individual who provided the funds, unless there's contrary evidence.
2. Intent of the Contributor: The real character of the transaction is defined by the
intentions of the person who contributed the purchase funds. Understanding this
intention necessitates an evaluation of various factors: the circumstances
surrounding the transaction, the relationship between the involved parties, the
motives guiding their actions in executing the transaction, and their
subsequent behavior.
The conditions stipulated by the section include:
- The transferor being the ostensible owner with the
express or implied consent of the genuine owner.
- The transfer being conducted in exchange for something
of value.
- The transferee acting in good faith, having taken
reasonable measures to confirm the transferor's authority to make the
transfer.
In the legal case of Jaya Dayal Podder Vs.
Bibi Hazara, the Supreme Court emphasized specific considerations when
determining if someone qualifies as an ostensible owner:
(a) Source of Funds: Who
provided the financial resources for the purchase?
(b) Possession: Who has
possession of the property?
(c) Motivation: What
drove the decision to purchase the property in someone else's name?
(d) Relationship: What
is the relationship between the actual owner and the ostensible owner?
These factors play a pivotal role in discerning whether an
individual can be regarded as an ostensible owner in a property transaction.
Additional considerations in determining
whether someone is an ostensible owner in a property transaction include:
(e) Conduct Regarding the Property: The
behavior of the involved parties in managing or taking care of the property.
(f) Custody of Title Deeds: Who holds
the official documents or title deeds related to the property.
Furthermore, in the case of Raj Ballar Dass V. Haripada Das, the
Supreme Court outlined essential principles for establishing whether a transfer
qualifies as a benami transaction:
a. Burden of Proof: The responsibility
of demonstrating that a transfer is a benami transaction lies with the party
making the assertion.
b. Source of Purchase Funds: If it's
established that the money used to purchase the property came from someone
other than the individual in whose name the property is held, it's presumed
that the transaction is primarily for the benefit of the person providing the
funds, unless contrary evidence exists.
c. Intent of the Contributor: The
genuine nature of the transaction is determined by the intentions of the
individual who contributed the purchase funds.
d. Evaluation of Intent: Understanding
the intentions requires an analysis of surrounding circumstances, the
relationship between the parties involved, the motives guiding their actions in
executing the transaction, and their subsequent conduct.
These principles provide a framework for discerning whether a
transaction should be classified as benami and underscore the critical role of
intent and the origin of purchase funds in such determinations.
Bibliography
BOOKS:
● Tripathi G.P., The Transfer of Property Act, Central Law Publications, 29 th edition 2017
● Sinha R.K., The Tranfer of Property Act, Central Law Agency, 20 th edition 2019
WEBSITES:
● https://www.lawctopus.com/academike/ostensible-owner-under-tpa/
● http://www.goforthelaw.com/articles/fromlawstu/article28.htm#_ftn9
● http://www.indiankanoon.lawofevidence.estoppel.com
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