X purchased a car from Y, believing that Y was the legitimate owner. Although X paid the full purchase price and took possession of the car, he did…

CA Intermediate · Corporate and Other Laws · RTP · January 2025
X purchased a car from Y, believing that Y was the legitimate owner. Although X paid the full purchase price and took possession of the car, he did not check the Registration Certificate (RC) of the car to verify the authenticity of Y's ownership. Later, it was discovered that Y was not the rightful owner, and the car had been stolen. In the context of "good faith" as defined in the General Clauses Act, 1897, determine the validity of X's ownership claim over the car.
(A) X holds valid ownership of the car because he paid the full price and believed Y to be the legitimate owner.
(B) X does not hold valid ownership because his purchase was made without due care and attention, even though he acted honestly.
(C) X holds valid ownership because he had no knowledge of the car being stolen, showing he acted in "good faith."
(D) X's ownership is valid because he did not act negligently, and his actions were deemed "in good faith."

Suggested Answer and Working Notes:

Correct Answer: Option (B)

X does not hold valid ownership because his purchase was made without due care and attention, even though he acted honestly.

Topics: The Foreign Exchange Management Act, 1999, The General Clauses Act, 1897

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