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Home > Articles > Property Law > Rights of the Bona fide Purchaser - A Case Study
TABLE OF CONTENTS S.NO. INDEX PAGE I BONA FIDE PURCHASERS MEANING &
CONCEPT 4-5 II THE BONA FIDE PURCHASERS-
RIGHTS UNDER TPA 6-16 III EXCEPTION TO THE GENERAL RULE OF PROTECTION OF RIGHTS
OF BONA FIDE PURCHASER 17-19 IV CONCLUSION 20 BONA FIDE PURCHASERS-MEANING &
CONCEPT During a transfer of property, or conveyance of property by one person to another,
one who transfers the property is known as transferor and the one who purchases that
property or to whom the property is being transferred is known as the Purchaser or the
Transferee. In general term Bona fide is a Latin Term meaning In Good faith. Thus, a Bona
fide Person means the person having a good or sincere or an honest intention or belief. A
Bona fide Purchaser is a term used in the law of property to refer to an innocent party who
purchases property without notice of any other party's claim to the title of that property. He
is a person who purchases the property for value that is must pay for it or must give
considerations rather than simply be the beneficiary of a gift. Even when a party, fraudulently
conveys property to a bona fide purchaser, may be by any way that is by transferring or
selling to the bona fide purchaser property that has already been conveyed or transferred to
someone else, that bona fide purchaser will, get a valid title or a good title to the property
despite the competing claims of the other party. However, parties who are claiming for the
real ownership in the property will retain a cause of action (a right to sue) against the party
who made the fraudulent conveyance. Thus, a Bona fide purchaser is a person , who acts in
good faith , without any notice of the real title over the purchased property, purchases that
property from a person , who himself not having a good title over that property, Here, 2
things must be noticed that , Firstly, He is acting in good faith, secondly, he must be honestly
in his intentions and thirdly, he purchased the property with a false notice of false title over
the purchased property but as he is the bona fide purchaser , his rights and interests are
protected under the laws. Thus, here we see that Bonafide Purchasers act in good faith and
has no notice of the good title over the property even after a reasonable care and
investigation. But, final thing is that, they are ultimately Bonafide and were not aware of the
real title over the property even after a reasonable enquiry. Thus TP Act. provides them some
Rights and Immunities so that their interest, over the property, though purchased under a
defective/bad Title must be protected. This concept is an exception to the rule contained in
the maxim Nemo dat quo non hobet and also of Section 27 of Sales of Goods Act.
CASE STUDY---
In Luchman v Kallicharan, A held out his wife as the owner of the property by taking the sale
deed in her name with a recital that the purchase money was paid out- of her stridhan. After
the death of A, his wife sold the property to the defendant that purchased it Bonafide and for
value. As son, as his heir sued to recover possession of the property from the defendants. It
was held, that he could not recover possession. The court observed that there was
misrepresentation by the father in allowing the property to be taken by the wife under a deed
of sale, representing that the purchase money was her stridhan and in all his acts both public
and private during his life-time representing that it was his wifes property. After such
representation his heirs were no more entitled to recover, than the father would have been in
his life time. Ramcoomar Koondoo v. John and Maria McQueen The Privy council observed
that the principle of the natural equity must be universally applicable that, where one man
allows another to hold himself out as owner of an estate, and a third person purchases it, for
value from the apparent owner, in the belief that he is the real owner, the man who so allows
the other to hold himself out shall be not permitted to recover his secret title, unless he can
overthrow that of the purchaser by showing either that he had no bona fide intention to
purchase the property or even after knowing about the real title he doesnt made inquiry.
CASE STUDY---
Narayan Chand Shaha v. Dipali Mukherji In the instant case the son transferred the property
still in the name of father. This fact was known to the transferee. Father died and son became
co-owner of that property. The court had held that there was no evidence on record to show
that the son made statement that the property belongs to him. There was no representation
regarding the authority to sell. As such buying, such property is a collusive conduct. There
are no estoppels when the truth was known to transferee. Hence the transferees right is not
protected since he was not bona fide. Rajapakse v Fernando the Privy Council applied rule of
estoppels as Where a grantor has purported to grant an interest in land which he did not, at
the time, possess, but subsequently acquires, the benefit of his subsequent acquisition goes
automatically to the earlier grantee, or as it is usually expressed, feeds the estoppels
CASE STUDY---
Ramsen v. Dyson Court held that: - If a stranger begins to build on my land supposing it to
be his own land in good faith and I perceiving his mistake abstain from setting him right and
leave him to persevere in his error, a court of equity will not allow me afterwards to assert
my title to the land on which he had expended money on the supposition that the land was
his own. Jahangir Begum v. Gulam Alim Ahmad In this noted case there was on the record a
letter of the plaintiff to the defendant that he was agreeable to sell the land for Rs. 1335 to
Naseer Yar Jung saying that the agreement was only nominal in his name and the sale was to
be in his favour of the defendant. It was held by the court that the defendant did believe in
good faith that he was entitled to the property. Lachmi Prasad v. Lachmi Narain In the instant
case a Hindu father, both on his account and also as guardian of his son, executed a sale of
joint family property. The son brought a suit to recover the property and the court found that
there was no necessity for the sale. By the application of section 51 courts interpreted that
bona fide and good faith also includes the honesty and thus the plaintiff was held liable to pay
the compensation. Kedar Nath v. Mathu Lal , In this matter a Hindu widow sold property, in
which she had only a widows estate, without legal necessity. The reversionary, at whose
instance, the sale was set aside, was put on terms to compensate the vendee for the
improvements he had made. Hiralal v. Gordhan , Court specifically said that this right only
makes entitled to transferee for any compensation trespassers are out of the purview of this
section. In this case, A purchased the property of a minor from his de facto guardian in the
belief that he is entitled to sell. When A was evicted by the minor, the purchaser was entitled
to the
CASE STUDY--- Faiyaz Hussain Khan v. Prag Narain The plaintiff was a purchaser in
execution of a decree based on a first mortgage of the property in suit. The defendant was in
a possession as a purchaser in execution of a decree or a second mortgage of the same
property, passed in a suit to which the first mortgagee was not made a party. The second
mortgage was executed after the institution of the suit of the first mortgage but before the
summons had been served. It was held by the Privy Council, that the doctrine lis pendens
applied, and that the plaintiff had a better title. Mulchand v. Ganga Jal In the instant case
during the pendency of a pre-emption suit, the vendee sold the property which was the
subject matter of the litigation to a person possessing a right of pre-emption equal to that of
the pre-emptor in recognition of that persons right of pre-emption. This re-sale took place
before the expiry of the period of limitation for instituting a pre-emption suit with respect to
the original sale. The full bench held that the doctrine of lis pendens applied to the pre-
emption suits but in that case, the re-sale in question has no conflict with the doctrine of lis
pendens.
CONCLUSION
Thus, we can see that the present project has clearly laid down the rights and remedies of
the bonafide purchasers very much detail. We can see that a good faith transfer by a bona
fide person without any notice of its real title is a valid transfer and acceptance but subject to
the rule enumerated in Section 52. Section 52 which says that no one can transfer a disputed
property regarding which proceeding or suit is pending before the court of the law is also a
principle enumerated for the protection of the interest of public and as a public policy Also
many of the rights provided above are an exception mainly to the maxim nemo qoud dat
non habet, but are justifiable under the law as based on the principle of justice, equity and
estoppels. Thus, the ways are given above by which bona fide purchasers can be protected.
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suresh
Wrote on 20 February 2013
Thanks Anand, Excellent article
JAISANKAR
Wrote on 18 June 2011
thanks
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