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Ostensible Ownership Vis a Vis Benami Transaction in India

Yuvraj Dilip Patil

Property is one of the essential elements besides food & clothes to lead life for human being.
Besides essential need now a day‘s people are more interested in investing in property. The
people are more interested in investing property besides gold, the reason being that it is always
profitable as you can reside in the property or can give it on lease or can sale it in higher price.
The reason is that the rates of property are increasing day by day. Many of the people purchase
the property for one price & after 6 months or 1 year sale it for higher price.
Ostensible Ownership is the concept which allows family members to purchase property in the
name of another member in the family for the future protection of the person. The concept of
ostensible owner is mentioned under sec 41 of Transfer of Property Act.
The author in this research paper has critically analyzed the concept of ostensible ownership. The
author answer the following research question i.e. - Transfer of property Act, 1882 allows to
purchase the property in the name of another person which is known as ostensible ownership
whereas the Benami Transaction Act, 1988 which is having the same meaning as of ostensible
owner under transfer of property act then why purchase of the property in the name of another is
permitted under Transfer of Property Act & is prohibited under Benami Transaction Act?
The Objective of research1. To study the concept of Ostensible owner Vis a Vis Benami Transaction
2. To critically analyse the benami Transaction Act
3. To make recommendations

Electronic copy available at: http://ssrn.com/abstract=2191951

including that of alienation. while the real owner is the wife. (Ed-2nd 2011). AIR 1952 Kutch 85 3 Sec 41 of Transfer of Property Act. The husband‘s name is entered in the revenue records for the purpose of paying the taxes. after taking reasonable care to ascertain that the transferor had power to make the transfer. express or implied. .By his conduct or consent or otherwise makes the other believe that a particular person has all the powers over the property as that of the owner over the.. though in reality he is not. i. He alienates it as an ostensible owner. 2) Alienation .The concept of Ostensible Owner & Benami Transaction ‗Ostensible‘ literally means ‗apparent‘ or seeming‘. Property Law. of the persons interested in immoveable property. the transfer shall not be voidable on the ground that the transferor was not authorized to make it: Provided that the transferee. 4 The consent includes express or implied as well. Beys. Negligence may amount to implied consent. He can be called an ostensible owner. Ratanshi Nenshi. it is he who finalizes whether and who should be inducted as a tenant in the property and the wife does not object to it. 1882 4 Ramjanam V. The transferor should be shown to have been the ostensible owner with the express or implied consent of the true owner but the transfer itself need not be with the consent of the true owner.2 He is different from a mere trespasser or a person in unlawful occupation of the property.Such person in fact is not authorized to alienate the property. it is not a gift.e. a woman owns the property and permits her husband to deal with it as if he is real owner. the transferee does not 1 Dr. with the consent.com/abstract=2191951 .3 For instance. Saxena Poonam Pradhan. The essential of the section 41:1) Free Consent.The transferee acts bona fide and has taken reasonable care to ascertain that he is competent to transfer. 3) The transfer is for value or consideration.178 Kanashi Vershi v. AIR 1958 Pat 537 2 Electronic copy available at: http://ssrn. An Ostensible owner is a person who apparently or seemingly appears to be the owner.1 He is person having al indicas of ownership having being real ownership. 4) Transferee must take reasonable care. Transfer by ostensible owner. i. His behavior and conduct appears to be that of the owner of the property with the consent or conduct of the real owner. P. has acted in good faith.e. a person is the ostensible owner of such property and transfers the same for consideration.Where.

in fact. who used to take care of and control over the property? 6.e. Nature of possession after the purchase i. and 5) Estoppel. who paid the price? 2..have actual or constructive notice of the real facts. Source of the purchase – money i. the Supreme Court observed that whether a person is an ostensible owner . The Court observed further that following considerations must be taken into account while deciding whether a person is ostensible owner or not: 1. 5 AIR (1974) S.The real owner would be prevented on disputing the validity of the transfer on the ground that the transferor was not. Relationship between the parties i.e...171 . The transferee must show that he had made such enquires as a reasonable prudent man would have taken to safeguard his interests.e. Bibi Hazra5.C. competent to do so. Custody of the title deeds. The burden of proof that a transaction is benami and that the transferor is an ostensible owner lies on the person who claims that he is the real owner. who had the possession? 3. Motive for Benami transaction i. Conduct of the parties in dealing with the property i. whether the real owner and the ostensible owner were related to each other or were strangers or friends? 5. why the property was purchased in the name of the other person? 4. In Jaydayal v. is a subjective question to be decided on this basis of facts circumstances .e. The burden of proving that the transferee was an ostensible owner is on the transferee who seeks the protection of this section.e.

The Government has recently been facing a great deal of heat on the issue of black money and corruption from the Supreme Court. shall be allowed in any suit.saarclaw.4(1) of the Benami Transaction Act lays down that. This act provides where a property is transferred benami.Benami Transaction Benami transactions are one of the most notorious sources of circulation and investment of black money. unless the contrary is proved. that the said property had been purchased for the benefit of the wife of the unmarried daughter.7 Sec 3. Of the Benami Transaction Act lays down Prohibition of benami transactions(1) No person shall enter into any benami transaction. the civil society.com (visited on 14th Dec 2012) 7 According to Sec. such transactions are rampant in the real estate sector of our country.6 ―Benami transactions‖ means any transaction in which property is transferred to one person for a consideration paid or provided by another person. (2) Nothing in sub-section (1) shall apply to the purchase of property by any person in the name of his wife or unmarried daughter and it shall be presumed. Sadly. Further Sec.claim or action to enforce any right in respect of any property held benami against the person in whose name the property is held or against any other person shall lie by or on behalf of a person claiming to be the real owner of such property. and the Opposition for not doing enough to deal with this menace.No suit . SAARC LAW. Benami Transction Bill 2011: A ray of hope? .2 (a) of Benami Transactions (Prohibition of the Right to Recover Property) Act. 1988 . 4(2) of the Benami Transaction Act provides that –No defence based on any right in respect of any property held benami whether against the person in whose name the property is held or against any other. (3) Whoever enters into any benami transaction shall be punishable with imprisonment for a term which may extend to three years or with fine or with both. the person in whose name the property is held. claim or action by or on behalf of a person claiming to be the real owner of such property. Sec. shall become the real owner. www. 6 Manila M Sarkaria.

To prevent that the Benami Transaction act. etc. there is a provision of ‗clubbing of income‘ 8. Now it is question arises that why it is permitted in one & prohibited in the other act. that the said property had been purchased for the benefit of the wife of the unmarried daughter. But the exception under benami transaction act clearly mentions that. 1988 is enacted. to convert black money or to hide the earnings. Therefore. the result of this is that. unless the contrary is proved.Income of individual to include income of spouse. 8 Sec 64 of Income tax Act. 1988. even though the person purchases the property in the name of family member it will be taxed & there are no chance of hiding the income therefore. (iii) does not confer the powers of the Civil Court upon the authorities for its implementation. Benami transactions are permitted to certain extent as mentioned under exception of definition of Benami Transaction. there shall be included all such income as arises directly or indirectly . the Concept of Ostensible Ownership under sec 41 is subject the provisions of ‗Benami Transaction‘ under sec 3 of Benami Transactions (Prohibition of the Right to Recover Property) Act. inter alia. Whereas. 1995. 1988. minor child. After study of Provisions under Benami Transaction Act. One of the reasons may be to avoid the payment of tax. Under the Income tax act.Critical analysis Under Transfer of property act it is clearly mentioned that when the one person pays consideration & purchases the property in the name of another person the later is considered as ostensible owner & the transaction is benami transaction. (ii) Does not have any provision for an appellate mechanism against an action taken by the authorities under the Act. There are many reasons behind purchasing the property in the name of another person. while barring the jurisdiction of a Civil Court. 1 2[ 3[ (1)] In computing the total income of any individual. under the Benami Transaction Act it is prohibited.— (i) does not contain any specific provision for vesting of confiscated property with the Central Government. it is clear that the provisions of the aforesaid Act are inadequate to deal with benami transactions as the Act. Benami transaction prohibition shall not apply to the purchase of property by any person in the name of his wife or unmarried daughter and it shall be presumed.

in the name of his– (a) Spouse. He shall issue a notice. on and after the commencement of this Act. which he has reason to believe is held benami. 3) There is need to provide a mechanism and procedure for confiscation of property held benamiMechanism:The Central Government shall vest powers under this act to following revenue authorities for the purposes of this Act:1. Talathi at Village level 2. being an individual. 4. etc. 1988 as follows:(1) No person shall. after the inquiry. after hearing the person whose property is attached. may make an order for the confiscation of the property held benami . He may impound or retain any books of accounts that it may feel is required for the inquiry. or (c) Any lineal ascendant or descendant. for a period not exceeding three months from the date of attachment of the property 5. enter into any benami transaction. Tahasildar at Taluka level 3. (b) Brother or sister. production of documents. If the above Authorities have reason to believe that a property is held benami. (2) Nothing contained in sub-section (1) shall apply to a benami transaction entered into by any person. issuing commissions. 2. These authorities shall have same powers as vested in a civil court while trying a suit in matters such as inspection. to provisionally attach any property.Recommendations – 1) There is need to amend the following provisions of sec 3 of Benami Transaction act. 2) Property held benami liable to confiscation by the Government authority after serving the notice by the authority & satisfaction that the person possessing the property under benami transaction. he may issue a notice to the benamidar and call for documents and reports for inquiry 3. Collector at District level Powers of the Authorities 1.

shall for trial (as per Cr. 4) Special Court – Any person who enters into benami transactions. .6. In addition.P. by notification. designate one or more Courts of Session as Special Court or Special Courts for such area or areas or for such case or class or group of cases as may be specified in the notification. Any person aggrieved by the Civil Court in turn may appeal to the High Court. Any person aggrieved by an order of the Officer shall appeal to the Civil Court. The Central Government. or abets or induces another person to enter into such transactions shall be punishable with an imprisonment for six months to two years. and liable to a fine of up to 25 per cent of the fair market value of the property held in benami. The Bill provides for Special Courts to try such cases.C) of an offence punishable under the Benami Transaction Act. in consultation with the Chief Justice of the High Court. any person who wilfully gives false information shall be liable to an imprisonment of three months to two years and a fine of up to 10 per cent of the market value of the property.

Beys. 2000 2.171 . Butterworths. 9th edition. Jaydayal v. Bibi Hazra. The Transfer of Property Act. AIR 1958 Pat 537 3.. Ratanshi Nenshi. Lexis Nexis Butterworths Wadhwa Nagpur.. Mulla D. 11th edition 1999 Case Laws:1. The Transfer of Property Act. AIR (1974) S.F.C.P. Kanashi Vershi v.References:1. AIR 1952 Kutch 85 2. Saxena Poonam Pradhan. 2nd Edition 2011 3. Tripathi G. Ramjanam V. Property Law. Central Law Publications.