A transfer is an act of transferring something from one person to another. Any physical or virtual entity possessed by a person or group of people is considered property. A property asset can be transferred from one person to another through transferring rights, interests, ownership, or possession. Either or all of the ingredients can be satisfied. It can happen in two ways: by the parties’ acts and by law.
Section 5 of the Transfer of Property Act of 1882 defines the term “transfer of property.” It describes an activity in which a live person transfers property to one or so more people, or to himself or to one or so more living people, in the present or future. A living person is defined as a corporation, an association, or a group of individuals, whether or not they are incorporated.
Some important concepts in this act are as follows:
- Immovable property involves land, benefits resulting from the land, and goods linked to the land, according to the General Clauses Act of 1897. Immovable property can be defined as including all property that is not standing wood, growing crops, or grass in the context of property transfer.
- Mortgage debt was omitted from actionable claims following the amendment of 1900. Wallis C.J. held in Peruma animal vs. Peruma Naicker that mortgage debts might be transferred as actionable claims before 1900, but that they were excluded from the actionable claims because the legislature meant that the mortgage debt is transferred in the mortgagee’s interest through an instrument that is registered.
- Instrument: The instrument is defined as a non-testamentary instrument according to the 1882 Transfer of Property Act. It serves as proof of a property transfer between living parties. An instrument is a formal legal document, according to the legal terminology.
- Attested: A formal document signed by someone acting as a witness is referred to as attested. The executors are the persons who are in charge of transferring the property. In 1926, the amendment legislation was passed, stating that two or more witnesses must sign the document in the presence of the executant, not necessarily at the same time, and they must not be parties to the transfer.
- Registered: According to the 1882 Transfer of Property Act, “registered” refers to any property that is registered in a jurisdiction where the Act is in effect. Various registration procedures must be followed.
a. The property’s description should be stated.
b. Avoid being a victim of fraud.
c. A competent person should present the deeds.
d. The property must be listed in the very jurisdiction as the registered office.
- Actionable claims: A claim to any debt, except a debt acquired by a mortgage of immovable property or pledge o or hypothecation of movable property, or to any equitable interests in movables, not in the claimant’s possession, either actual or constructive possession, which the civil courts recognize as providing grounds for relief, whether such debt or advantageous interest is existent, accusing, or conditional.
- Notice: The term “notice” refers to being aware of a fact. The individual is well-versed in a variety of scenarios. The Transfer of Property Act of 1882 settled 2 kinds of notices.
Other important concepts are actual or implied notice means the one who is aware of a specific truth and constructive notice means that reality is discovered as a result of circumstances.
- Transfer of property must be done by a competent person: For a legitimate transfer, the person transferring the property must be of sound mind, not intoxicated, a major, or not a person prohibited by law from entering into a contract of transfer of property with another person.
- The transfer must be made in the following format: Property transfers do not have to be in writing, but if there is a specific property to transfer, it should be in writing:
a) Over a hundred rupees was spent on the sale of the transportable property.
b) The sale of intangibles must be done in writing.
c) All mortgages with a value of more than a hundred rupees must be transferred in writing.
d) A documented transference of actionable claims is required.
e) Immovable property is given as a gift.
f) A lease of more than one year on immovable property.
The provision is founded on the idea of proportionality. No one can confer a higher right on a property than what he owns, and alium transferee potest quam ipsa habet and nemo plus juris, which means that no one may transfer a right or title larger than what he owns. The ostensible owner’s transfer emphasizes the notion of holding out.
To make use of this section, you must meet specific qualifications, according to the law for its application. They are as follows:
- The most important need is that the individual transferring the property is the ostensible owner.
- The property owner’s permission should be given either implicitly or explicitly.
- The transfer ought to be in exchange for something.
- The transferee must exercise reasonable caution in determining the transferor’s authority to complete the transaction and whether he acted in good faith.
- The idea of ostensible owner transfer is founded on the doctrine of estoppel, which states that when a genuine owner of property makes someone appear to be the owner to third parties and they engage on that representation, he cannot retract his representation.
- This clause and its rules apply only to immovable property but not to movables.
However, the ostensible owner is really not the true owner, but he can pretend to be the real owner in such transactions. By the purposeful neglect or acquiescence of the genuine owner of the land, he has obtained that right, rendering him an ostensible owner. A guy who has been away for a number of years has donated his property to a close cousin to utilize for agricultural purposes and whatever else he sees suitable.
In this situation, the ostensible owner is a family member, and if he transfers the property to a third party during that time, the true owner cannot claim his property and claim that the person was not permitted to transfer it. Another scenario is when the property is in the wife’s name but the husband used to handle the finances and other aspects of the property. If the husband sells the property as a result, the wife will be unable to reclaim it.
In Ram Coomar v. MacQueen, the privy council declared that when it comes to transfers by apparent owners, somewhere along that lines that it is a principle of natural equity that where one man allows another to hold himself out as the owner of an estate and a third person buys it for value from the obvious owner believing that he is the real owner, the third person shall not be allowed to recover on a secrete title until he can overthrow that of notice, or something that adds up to constructive that ought to have put him on an inquiry, which, if put on trial, would have led to a discover.
There are essentials that need to be meant to be an ostensible owner of any property. Like the term itself, the word ‘ostensible’ denotes ‘seeming’ or ‘apparent’. An ostensible owner is a person who poses as the one who owns that immovable property but is not the true owner.
- A person must be the property’s ostensible owner.
- That person must be such an owner with the genuine owner’s express or implied approval.
- The one who is transferring must buy the property for consideration from the ostensible owner.
- The transferee must take reasonable care before accepting the transfer to ensure that the transferor has the authority to make the transition; in other words, it should be done in good faith.
Reasonable care can be defined as the level of care that a reasonable and average person would take. It is his responsibility to check the transferor’s title.
As in the case of Nageshar Prasad v. Raja Pateshri, where the name of the proprietor was incorrectly recorded in the revenue records. The name was written was that of someone else, and the rightful owner had already complained about the mistake. The individual whose name was on the revenue records later sold it to a third party, who took possession of the property without making required investigations, and the rightful owner later objected. The third party is obligated to provide all available documents that may provide more information on the property’s title, which may include police registers, municipal registers, and other documents.
Also, there is a safety net in place for the true owner. As in the case of Mathura v. Ambika, in which the actual owner had disposed of the property to another person and had it registered prior to the ostensible owner’s transfer could even be registered, it was held that the real owner’s transfer would be valid because he has a greater title to the property than the ostensible owner, and that the rights of a third party who had purchased the property from the ostensible owner will not be protected under this section.
Only if the foregoing necessary conditions for the section’s applicability are met does the true owner lose his rights in the property here under the section.
There are steps to register an ostensible owner. Firstly, the documentation pertaining to the property must be examined to see if the transferor’s name appears as the owner.
Second, if the individual whose name appears on the records for the property in issue intends to buy it or not. Thirdly, look into “who has ownership of the site property and who is using it.” If the individual is the owner of the property according to the records and documents in the case at hand, the chances of it being a property of an ostensible owner or him being an ostensible owner are slim. However, “enjoying the property” doesn’t merely mean “being in possession of the property,” but also “selling rights,” “right to enjoy the benefits of the said property,” “right to lease out the stated property and receive compensation,” and “right to enjoy the benefits of the said property,” among other things. In this scenario, the term “enjoyment” has now been given a larger meaning.
Finally, the reason for it being given the ostensible ownership element, i.e. why the true owner has not bought it in his own name.
The transfer must be made without considering some factors:
- The ostensible owner’s transaction is always for consideration. There should be some sort of exchange. Gratuitous transfers are not covered in this section.
- When there is a transfer by an ostensible owner, care must be taken. He is unable to give the property away as a gift. As stated in the Indian Contract Act of 1872, consideration is a required component of every contract, and an ostensible owner’s property can only be transferred via contract. In addition, section 4 of the act states that anything that’s not expressly specified in this act must be determined from the basic definitions set forth in the Indian Contract Act of 1872.
THE BURDEN OF PROOF
The transferee bears the burden of proof in demonstrating that the transferor was the ostensible owner and also had permission to sell the property.
He must also demonstrate that he behaved in good conscience and took all reasonable precautions while obtaining possession of the property. It’s because he needs to show that he wasn’t at fault when he took the property and that the burden of proof should be shifted to the rightful owner. To shift his burden of proof, he can show that the transferor did not permit the transferee to know the true facts and went to great lengths to conceal them.
The Act’s Section 41 has done a good job of safeguarding the interests of the said innocent third party. However, this section may appear to be prejudiced in favor of the third party, this is only the case if the genuine owner is at fault. No one else can simply claim that he now owns the property and can no longer be evicted. The third party must exercise extreme caution when purchasing the property, and these criteria have been imposed by law to prevent the apparent owner and the third party from abusing this section. In a way, this also protects the genuine owner’s interests.
This article is written by Tingjin Marak, a BA/LLB student at Ajeenkya DY Patil University Pune.