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Parthik Choudhury, Relevance of Section 41 after the Enactment of Prohibition of
Benami Transaction Act, 1988, 3 INDIAN J.L. & LEGAL Rsch. 1 (2021).
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Parthik Choudhury, Relevance of Section 41 after the Enactment of Prohibition of
Benami Transaction Act, 1988, 3 Indian J.L. & Legal Rsch. 1 (2021).
APA 7th ed.
Choudhury, P. (2021). Relevance of section 41 after the enactment of prohibition of
benami transaction act, 1988. Indian Journal of Law and Legal Research, 3(1), 1-6.
Chicago 17th ed.
Parthik Choudhury, "Relevance of Section 41 after the Enactment of Prohibition of
Benami Transaction Act, 1988," Indian Journal of Law and Legal Research 3, no. 1
(October-November 2021): 1-6
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Parthik Choudhury, "Relevance of Section 41 after the Enactment of Prohibition of
Benami Transaction Act, 1988" (2021) 3:1 Indian JL & Legal Rsch 1.
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Benami Transaction Act, 1988' (2021) 3(1) Indian Journal of Law and Legal Research 1
MLA 9th ed.
Choudhury, Parthik. "Relevance of Section 41 after the Enactment of Prohibition of
Benami Transaction Act, 1988." Indian Journal of Law and Legal Research, vol. 3, no.
1, October-November 2021, pp. 1-6. HeinOnline.
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Indian Journal of Law and Legal Research Volume III Issue I ISSN: 2582-8878
RELEVANCE OF SECTION 41 AFTER THE ENACTMENT
OF PROHIBITION OF BENAMI TRANSACTION ACT, 1988
Mr. Parthik Choudhury, Army Law College, Pune
ABSTRACT
Section 41 of the "Transfer of Property Act, 1881" [Hereinafter, "TPA"] lays
down the law regarding the transfer of a property by an ostensible owner. An
"ostensible owner" is a person who has been given the title by the real owner
of the property. Even though the ostensible owner does not have the actual
title of the property, he has the right to sell the property to a third person.
However, with the introduction of the "Benami Transactions (Prohibition)
Act, 1988" [Hereinafter, "Benami Act"], the Government has sought to
enforce a crackdown on benami properties, in order to curb financial crimes,
and corruption. In the present article, an attempt would be made to analyze
the relevance of Section 41 of the TPA after the enactment of the Benami
Act.
Keywords: Transfer of Property; Benami Transactions; Ostensible Owner;
Ownership Rights.
1
Indian Journal of Law and Legal Research Volume III Issue I ISSN: 2582-8878
1. Introduction
The Benami Transactions (Prohibition) Act, 19881 was brought into force by the Government
of India with a view to curb the financial transactions of certain types wherein a property is
transferred from one person to another person, while the consideration is paid by a third person.
Benami properties and benami transactions are a serious mode of committing acts of financial
irregularities and corruption, and are therefore, prohibited in India 2
.
There are certain similarities in terms of Benami Transactions which have been given under
the Benami Transaction Act, and the transactions which are undertaken under Section 41 of
the Transfer of the Property Act.
2. Insight into Section 41 of the Transfer of Property Act, 1982
Section 41 of the Transfer of Property 3 Act deals with the concept of an 'ostensible owner'4.
The relevant section thus states, "Transfer by ostensible owner - Where, with the consent,
express or implied, of the persons interested in immovable property, a person is the ostensible
owner of such property and transfers the same for consideration, the transfer shall not be
voidable on the ground that the transferor was not authorized to make it: provided that the
transferee, after taking reasonable care to ascertain that the transferor had power to make the
transfer, has acted in good faith." 5
In simple terms, an ostensible owner is known as a 'Benamidar' in India, which means a person
who holds a property 'without name 6 '. However, it needs to be mentioned herein that an
ostensible ownership is not a sham transaction, as has been declared so under the Benami
Transactions (Prohibition) Act, 19887. However still, the Benami Transactions Act, especially
under Section 48, has placed several restrictions, which by extension are also made applicable
to transactions under section 41 of TPA 9
.
1 THE BENAMI TRANSACTIONS (PROHIBITION) AMENDMENT ACT, 2016". The Gazette of India. 11
August 2016
2 The Benami Transactions (Prohibition) Act, 1988. Universal Law Publishing.
p. 1.
3 Sumeet Malik. PROPERTY LAW MANUAL (Hard Bound) (2014 ed.). Eastern Book Company. p. 1-968..
4
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5 (41, Transfer of Property Act 1882)
6 Kannashi Vershi v/s Ratanshi Nenshi AIR 1952 Kutch 85
? ibid
8 Transferof Property Act 1882, section 41
9 Sinha R.K., The Transfer of Property Act, Central Law Agency, 4th edition 1999
2
Indian Journal of Law and Legal Research Volume III Issue I ISSN: 2582-8878
Section 41 is considered to be an exception of the general rule which is followed with regards
to the title of a property. The general rule of Nemo Dat Quod Non Habet means that a person
cannot convey a better title than he himself has in the property. It is a principle of common
law1 0 . The exception to this rule is that a person, who does not have the title of the property
himself, may also be able to transfer that property". This is the concept which is provided for
under Section 41. In such cases, owner of the property, who has the title to that property,
entrusts that property on a third person, and then another person1 2, in a bona fide manner buys
that property from the person to whom such property has been entrusted, he may get a better
ownership of the property than the title holder. Section 41 of the Transfer of Property Act lays
down this very principle that in case such an event happens, the transfer of the said property
shall not be voidable in the eyes of law1 3
.
Firstly, the question of who an ostensible owner is would need to be addressed. The Hon'ble
Supreme Court of India in the case of JayadayalPeddarv. Bibi Hazra4 , laid down the criteria
which would be applicable if it would need to be determined as to who was an ostensible owner.
The criteria includes:
1. "Source of the purchase - money i.e. who paid the price?
2. Nature of possession after the purchase i.e. who had the possession?
3. Motive for Benami transaction i.e. why the property was purchased in the name of the
other person?
4. Relationship between the parties i.e., whether the real owner and the ostensible owner were
related to each other or were strangers or friends?
5. Conduct of the parties in dealing with the property i.e., who used to take care of and control
over the property?
6. Custody of the title deeds." 15
10 Tripathi G.P., The Transfer of Property Act, Central Law Publications, 11th edition 1999
" https://shodhganga.inflibnet.ac.in/bitstream/10603/31643/13/13_chapter%205.pdf
12
The Law studies, Transfer by Ostensible Owner, March 16 2018
http://thelawstudies.blogspot.con2018/03/transfer-by-ostensible-owner.html
13 Mulla D.F., The Transfer of Property Act, Butterworths, 9th edition, 2000
4 Jayadayal Peddar v. Bibi Hazra, 1974
15 (Jayadayal Peddar v. Bibi Hazra, 1974)
3
Indian Journal of Law and Legal Research Volume III Issue I ISSN: 2582-8878
Therefore, for understanding as to who would be included within the ambit of an ostensible
owner pursuant to Section 41, the Court would need to consider the above mentioned criteria.
3. Difference between Transactions under Section 41 and Benami Transactions
The basic difference between Section 41 of the TPA and Benami Transactions is that while
under Section 41, the person who is transferring the ownership of the property has the
indications of ownership with him i.e. the title documents, or similar rights, this is not the case
in Benami transaction, as in those transactions, the Benamdar is only a name lender, while the
true ownership rights are with someone else 16
.
Secondly, in the case of Section 41, true ownership is given to another person explicitly, while
no such thing is done in the case of Benami transactions".
The Hon'ble Supreme Court of India in the case of Bhim Singh v. Kam Singh has explained the
difference in the two types of transactions in the following words:
"Two kinds of Benami transactionsare generally recognized in India. Where a person buys a
property with his own money but in the name of anotherwithout any intention to benefit such
other person, the transactionis called Benami. In that case, the transferee holds the property
for the benefit of the person who has contributedthe purchasemoney, and he is the real owner.
The second case which is loosely termed as Benami transactionis a case where a person who
is the owner of the property executes a conveyance in favor of anotherwithout the intention of
transferringthe title to the property thereunder. In this case, the transferorcontinues to be the
real owner. The difference between two kinds of Benami transactionslies in the fact that in
former case there is an operative transferfrom the transferor to the transferee though the
transferee holds the property for the benefit of the person who has contributed the purchase
money, in the latter case, there is no operative transfer at all and the title rests with the
transferornotwithstandingthe execution of the conveyance. "18
Therefore, it can safely be stated that there exists a clear difference between the transactions
which are undertakenpursuant to Section 41 of TPA, and the Benami transactions. However,
it still needs to be considered that the scope of transactionsunder Section 41 have been limited
16 Vibha Sirothiya, Position of Ostensible Owner in Indian Property Law vis-a-vis Benami Transactions
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17
MITRA B. B., COMMENTARY ON TRANSFER OF Property ACT (1 th ed. 2009).
1
18 (Bhim Singh v. Kam Singh, 1980)
4
Indian Journal of Law and Legal Research Volume III Issue I ISSN: 2582-8878
after the Benami TransactionsAct has been passed.
4. Analysis of The Impact on Section 41 after Benami Transactions Act
There has been some impact on Section 41 with the passage of the Benami TransactionAct,
even though Section 41 is still considered to be an exception to Benami transactions. One of
the major reasons as to why Section 41 is consideredto be an exception is that itplaces reliance
on the principles of naturalequity. This had been explained in the case of wherein it was stated,
"It is a principle of natural equity, which must be universally applicable, that where one man
allows another to hold himself out as the owner of the estate, and a third person purchases it
for value from the apparentowner in the belief that he is the owner, the man who allows other
to hold himself out shall not be permitted to recover upon his secret title unless he can
overthrow that the purchase by showing either that he had direct notice or something which
amounts to constructive notice, of the real title, or that there existed circumstanceswhich ought
to have put him upon an enquiry that ifprosecuted, would have led to a discovery of it." 19
The problem which has arisen after Benami Transaction Act is that now, an ostensible owner
has become the real owner of the property. Section 4 of the Benami Transaction Act states that
there exists a prohibition now with regards to the right to recover property which is being held
benami, and a bar on any type of suit, or claim has been put in place in such instances 20 . But
again, it has been held that the illegitimate sons did not have the consent of the actual owner,
whether express or implied, to be ostensible owners of his property 21 . Hence section 41 cannot
be invoked.
It needs to be further mentioned herein that the purposes of Section 41 of TPA was to protect
the innocent third parties who had bought the property from an ostensible owner. In such cases,
the innocent third parties had taken the step after due care and consideration, and only then
gotten into a transaction with the ostensible owner, who in turn had explicit consent from the
real owner to sell the property. However, after the passage of the Benami Act, the ostensible
owner becomes the real owner of the property, and now the third party, on account of the bar
on any type of suits and claims under the Benami Act, the scope of protection under Section
41, has thus, been limited to a great extent.
19 (Ramcoomar Koondoo v. Macqueen, 1946)
20 Rai Sunil Kumar V. Thakur Singh, Air (1984) Pat 80.
21 Md. Shafiqullah Khan vs Md. Samiullah Khan AIR 1929 All 943
5
Indian Journal of Law and Legal Research Volume III Issue I ISSN: 2582-8878
Conclusion
Therefore, to conclude, it can be stated that even though, fundamentally, section 41 and the
transactions undertaken as prescribed under the Benami Transactions Act are different, the
passage of the Benami Act has limited the scope of section 41. The Benami Act has put in place
several limitation in terms of the transfer of ownership which are Benami in nature, and
therefore, such limitation has further decreased the scope of section 41.
Therefore, after Benami Act has been passed, the ostensible owner under Section 41, has now
become the real owner of the property in question, as the Benami Act has prohibited benami
transactions. Therefore, in that regard, the scope of Section 41 of the Transfer of Property Act
has been reduced considerably.
