How does a comparative analysis of transfers by ostensible ownership differ from those by an unauthorized person who subsequently acquires interest?

Sections 41 and 43 of the Transfer of Property Act, 1882, protect transferees in good faith, focusing on ostensible ownership and unauthorized transfers, respectively, emphasizing reasonable care and representation.

Yousuf Khan

Nov 14, 2024 • 8 min read

Introduction

After going through the perusal of Sections 41 (Transfer by ostensible owner) and 43 (Transfer by unauthorized person who subsequently acquires interest in property transferred) of the Transfer of the Property Act, 1882 we find that there are similarities between the two as both the Sections are based on the principle of estoppels where on a representation made by one party and acted upon by another, the rights of the latter are affected. Section 41 requires- (a) good faith, and (b) exercise of reasonable care on the part of the transferee.

But under Section 43 mere belief on the part of the transferee and acting upon the representation is enough. The Section does not cast on the transferee the duty to make inquiry as regards the power of the transferor to transfer the property.

Transfer by Ostensible Owner: Section 41 of TPA^[1]

The Section 41 of TPA, 1882, reads as: “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.”

The principle underlying this Section seems to be that when two innocent persons are defrauded or cheated by one, who after transferring the property of one without his consent, to other, is no longer present, and the two person enter into the litigation with respect to the property transferred, then out of these two apparently innocent persons, the one who by his conduct or consent, enable the fraud to take place will suffer.

The key term used in the Section can be explained as:

1. Ostensible Owner:

‘Ostensible’ literally means ‘apparent’ or ‘seeming’. An ostensible owner is a person who apparently or seemingly appears to be the owner, though in reality he is not. He is a person having all indicia of ownership having being real ownership.^[2]
His behavior and conduct appears to be that of owner of the property with the consent or conduct of the real owner.^[3]
Illustration: A woman owning a property and at the same time permitting her husband to deal with it as if he is the owner would be illustration for ostensible owner.

The possession and ostensible ownership must be with the consent of the real owner of the property. The real owner must be capable of giving consent^[4] to the transfer and should have given it with freewill.^[5]
Transferor should be shown to have been the ostensible owner with the expressed or implied consent of the true owner but the transfer itself need not be with the consent of the true owner.^[6]
However the real owner may be innocent in allowing the world at large to think that someone else is the owner, but if the transferee has made proper inquiries and has acted in good faith, his interest is to be protected^[7].

3. Transfer for consideration:

The principle of protecting a transferee applies only where the transfer if for consideration. A gratuitous transferee is not protected. Thus the principle does not apply in case of gifts and other transaction effected without monetary consideration.^[8]

4. Transferee to take reasonable care:

What is absolutely essential to show is that the transferee had taken such reasonable care^[9] as an ordinary man of business would take^[10]. A duty is imposed upon transferee to make inquiries into the title of the transferor.^[11]
The transferee must show that he had made such enquiries as a reasonable man would have taken to safeguard his own interests.^[12]

5. The transferee to act honestly and in good faith:

In order to protect his own interest it is important that the transferee not only act honestly and in good faith but he must also establish that he inquiries^[13] to confirm his faith^[14]. He cannot be allowed to true facts such as defect in title^[15] or be guided by misconceptions.^[16]
It is necessary that transaction be a genuine one and not a sham transaction^[17].

Transfer by unauthorized person who subsequently acquires interest in property transferred: Section 43 of TPA^[18]

Section 43 of TPA, 1882, reads as:

“Transfer by unauthorized person who subsequently acquires interest in property transferred:

Where a person fraudulently or erroneously represents that he is authorized to transfer certain immovable 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.”

The principle underlying this Section is that transfers where the transferor, to begin with, has no capacity to transfer the property, yet entered into a transaction with a misrepresentation with respect to the title of the property. He makes the other party act on this representation, and then acquires a good title to the same property in future. In such cases, if the contract is subsisting and the property is available, then it gives the transferee the option to go either go ahead with the transfer, or rescind the same.^[19]
An imperfect title may be rendered complete by the doctrine of feeding the grant by estoppel under Section 43 of the Act.
By the virtue of this doctrine, where a grantor has purported to grant an interest in land which he did not at that time possess, but subsequently acquired, the benefit of the subsequent acquisition goes automatically to the grantee. The grantor is estopped from pleading that his grant was imperfect.^[20]
According to the Supreme Court in Hardev Singh v. Gurmail Singh^[21] if the transferee still wants the transferor to perform his part of the contract, he can exercise his option to validate this transfer that was imperfect to begin with and the transfer shall become valid on the exercise of such option by the transferee.

The key concepts related to the Section 43 are as following:

1. Representation, Fraudulent or Erroneous:

The representation under the Act may be fraudulent or even erroneous. It may involve a case where the transferor genuinely believed that he has the competency to transfer the property. Even in such cases if due to his representation, for which he is not maliciously responsible, the other party has been made to act on it, Section 43 would apply.^[22] In absence of representation, this Section does not apply.^[23]

2. Transfer must not be otherwise prohibited:

For the validation of the transfer made by an unauthorized person under a representation, this contract in the first place should not have been against any law in any form whatsoever, i.e., not only the parties should be competent to contract, but the purpose of the contract should be lawful,^[24] and not opposed to public policy. Thus if the transferor’s incompetency was owing to his minority^[25] or insanity^[26] , Section 43 would not confer an option in favor of the transferee to validate the transfer on minor’s attaining majority or curing of insanity.

3. Roll of consideration:

It is of immense importance for the purpose of applying Section 43 is that the transfers should be for consideration^[27]. The Section does not apply to gratuitous transfers like gifts etc.^[28]

4. Subsequent Acquisition of Interest by the transferor:

The transferee is entitled to the benefit of this doctrine only when the transferor subsequently acquires an interest in the property that he originally represented as his.^[29]

If the transferor does not acquire further interest in the property transferred or if such further interest is acquired not by the transferor but by his successor in interest, this Section won’t apply.^[30]

5. Contract Subsisting:

An essential condition for application of Section 43 is that for the validation of the transfer at the option of the transferee the contract must be subsisting. It should not have been rescinded or otherwise brought to an end by the act of the parties. When the contract is brought to an end it is ‘not subsisting’. The original contract must be subsisting in order for the transferee to exercise the option.^[31]

The transferee obtains a decree on the contract^[32] or the property has been sold^[33] or the charge has been assigned^[34] the doctrine would have no application.

Comparative study between the Section 41 and Section 43

Criteria	Section 41	Section 43
Principle	Based on estoppel; protects the transferee when representation is made by an ostensible owner with consent of the real owner.	Based on estoppel; protects transferee when an unauthorized person, who later acquires interest, makes a fraudulent or erroneous representation.
Ostensible Ownership	Transferor is the ostensible owner with consent from the real owner, appearing as the de jure owner.	No ostensible ownership required; transferor lacks ownership at the time of transfer but represents that they have a title.
Good Faith and Reasonable Care	Requires transferee to act in good faith and exercise reasonable care to verify transferor’s power to transfer.	No requirement of inquiry or reasonable care; mere belief in transferor’s representation is enough.
Representation Type	Transferor appears to be the owner, backed by the real owner’s consent.	Transferor fraudulently or erroneously represents authority to transfer.
Role of Consideration	Protection applies only to transfers for consideration; does not apply to gratuitous transfers like gifts.	Same as Section 41; applies only to transfers for consideration.
Subsequent Acquisition of Title	Not applicable; transferor is an ostensible owner with consent at the time of transfer.	Applicable; transferor gains title after the transfer, allowing transferee to claim property under the doctrine of feeding the grant by estoppel.
Requirement for Subsisting Contract	Not specified.	Requires that the contract remains subsisting for the transferee to exercise their option to validate the transfer.
Application of Estoppel Doctrine	Estoppel applies based on the transferor’s ostensible ownership and the transferee’s good faith action.	Estoppel applies when a transferor without title gains title later; transferee relies on representation, not inquiry.
Protection Scope	Protects transferee’s interests when ostensible ownership is evident.	Protects transferee's interests when transferor gains actual ownership after transfer based on original representation.