Introduction

• In the Transfer of Property Act, 1882 (TPA), the doctrine of holding out is covered under Section 41 and Section 43.
• These Sections deal with doctrine of holding out.

What is Transfer by Ostensible Owner?

• This is contained in Section 41 of TPA. This Section is an exception to the general principle nemo dat quod non habet, which means a person cannot transfer a better title than he himself has.
• Section 41 of TPA provides
  • 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.
• The requisites of transfer by ostensible owner are as follows
  • The transfer must be by ostensible owner
  • The transferor must have become the ostensible owner with the express or implied consent of the real owner
  • The transfer must be for consideration
  • The transferee must have acted in good faith with reasonable care in ascertaining that the transferor has the power to make the transfer.

Who is an ostensible owner?

• An ostensible owner is a person who has all the characteristics of a real owner on careful inquiry by a prudent person and the real owner himself does not dispel such impression.
• The doctrine of holding out protects the transferee from an ostensible owner. And comes into play when the rights of two innocent parties come into conflict.

What are Landmark Cases on Transfer by ostensible owner?

• Ram Coomar v. MacQueen (1872):
  • In this case the Court held that “It is a principle of natural equity which must be applicable where one man allows another to hold himself as the 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 not be permitted to recover upon his secrete title, unless he can overthrow that of the purchaser by showing a notice, or something which amounts to a constructive notice which ought to have put him upon an enquiry, that, if prosecuted would have led to a discovery of it.”

What is Benami Transactions (Prohibition) Act, 1988?

• The objective behind the Benami transaction is to hide the real property, sometimes to avoid creditors and sometimes merely from habit or superstition.
• Section 3 of Benami Transaction Act, 1988 provides for the prohibition of benami transaction while Section 41 of The Transfer of Property Act, 1882 allows such transfer.
• Thus, transfer by ostensible ownership under section 41 is subject to the provision of Benami Transaction under section 3 of Benami Transactions (Prohibition of the Right to Recover Property) Act, 1988.

What is Holding Out under Section 43?

• This is also known as the doctrine of feeding the grant by estoppel.
• Section 43 of TPA provides:
  • Where a person fraudulently or erroneously represents that he is authorised to transfer certain immoveable property and professes to transfer such property for consideration, such transfer shall, at the option of the transferee, operate on any interest which the transferor may acquire in such property at any time during which the contract of transfer subsists.
  • Nothing in this section shall impair the right of transferees in good faith for consideration without notice of the existence of the said option.

What is Landmark Case under Section 43 of TPA?

• Jumma Masjid v. Kodimaniandra Deviah (1962)
  • In this case the Supreme Court examined whether a transfer by a person holding spes successionis is protected by Section 43 of TPA.
  • The Apex Court held that if one transfers a property claiming that he has an interest in present although his actual interest is only spes successionis then section 43 applies.

Conclusion

The Doctrine of Holding out is contained in Section 41 and Section 43 of TPA. The main object of these provisions is to protect the interest of the parties that act in good faith and are not at fault.