Case Note & Summary
The petitioners, the Manager and Special Recovery Officer of Adarsh Mahila Nagri Sahakari Bank Ltd., filed a writ petition under Articles 226 and 227 of the Constitution of India challenging the order dated 15/01/2011 passed by the Divisional Joint Registrar, Co-operative Societies, Aurangabad (respondent No.2) in Revision No. 23/2010. The revision was filed by respondent No.4, Pratibha Pradip Ghanekar, under Section 154 of the Maharashtra Co-operative Societies Act, 1961 (the Act). The background of the case is that respondent No.4 availed a loan from the petitioner Bank in 2004 but failed to repay it fully. Consequently, the Bank initiated recovery proceedings under Section 101 of the Act and obtained a certificate of recovery on 29/09/2006 for a sum of Rs. 31,77,627/- with interest at 18% per annum. The Recovery Officer (petitioner No.2) attached the mortgaged properties belonging to respondent No.4, which included a flat at Aurangabad and two plots. Respondent No.4 filed a revision against the attachment order but failed. Subsequently, the Bank urged the Recovery Officer to proceed with the auction sale of the properties. The Recovery Officer published a notice in a newspaper for auction on 16/04/2009, and the auction was scheduled for 18/05/2009. The auction sale was conducted, and the properties were sold to respondent Nos. 5 and 6. Respondent No.4 then filed a revision under Section 154 of the Act challenging the auction sale on the ground that the notice under Rule 107(4) of the Maharashtra Co-operative Societies Rules, 1961 was not served upon her. The Divisional Joint Registrar allowed the revision and set aside the auction sale, holding that the notice under Rule 107(4) was mandatory and its non-compliance vitiated the sale. Aggrieved by this order, the Bank and the Recovery Officer filed the present writ petition. The High Court examined the provisions of Rule 107(4) and held that the notice under that rule is directory and not mandatory. The Court observed that the purpose of the notice is to ensure that the borrower has knowledge of the sale, and in this case, respondent No.4 had knowledge of the proceedings as she had participated in the earlier revision against the attachment. The Court further held that the revisional authority exceeded its jurisdiction by setting aside the auction sale after confirmation, especially when the sale was otherwise valid and the borrower had not raised any objection regarding the price or any other irregularity. The High Court allowed the writ petition, set aside the order of the Divisional Joint Registrar, and upheld the auction sale. The Court directed that the sale proceeds be adjusted towards the loan amount and any surplus be paid to respondent No.4.
Headnote
A) Co-operative Law - Recovery of Dues - Auction Sale - Section 101, Maharashtra Co-operative Societies Act, 1961 - Rule 107(4), Maharashtra Co-operative Societies Rules, 1961 - The Bank initiated recovery proceedings under Section 101 of the Act and obtained a certificate of recovery. The Recovery Officer attached the mortgaged properties and issued a notice for auction sale. The borrower filed a revision under Section 154 of the Act challenging the auction sale on the ground that notice under Rule 107(4) was not served. The revisional authority set aside the sale. The High Court held that the notice under Rule 107(4) is directory and not mandatory, and non-compliance does not vitiate the sale if the sale is otherwise valid and the borrower had knowledge of the proceedings. The Court set aside the revisional order and upheld the auction sale. (Paras 4-10) B) Co-operative Law - Revision - Scope - Section 154, Maharashtra Co-operative Societies Act, 1961 - The revisional authority under Section 154 of the Act cannot set aside an auction sale after confirmation on the ground of procedural irregularity, especially when the borrower had participated in the proceedings and had knowledge of the sale. The High Court held that the revisional authority exceeded its jurisdiction by interfering with the auction sale. (Paras 8-10) C) Constitutional Law - Writ Jurisdiction - Articles 226 and 227 of the Constitution of India - The High Court can exercise its writ jurisdiction to correct errors of law and fact committed by the revisional authority under Section 154 of the Act. The Court set aside the revisional order as it was based on a misinterpretation of Rule 107(4) and was perverse. (Paras 1, 10)
Issue of Consideration
Whether the order passed by the Divisional Joint Registrar in revision under Section 154 of the Maharashtra Co-operative Societies Act, 1961, setting aside the auction sale of the mortgaged properties on the ground of non-compliance with Rule 107(4) of the Maharashtra Co-operative Societies Rules, 1961, is sustainable in law.
Final Decision
The High Court allowed the writ petition, set aside the order dated 15/01/2011 passed by the Divisional Joint Registrar in Revision No. 23/2010, and upheld the auction sale conducted by the Recovery Officer. The Court directed that the sale proceeds be adjusted towards the loan amount and any surplus be paid to respondent No.4.
Law Points
- Auction sale under Section 101 of Maharashtra Co-operative Societies Act
- 1961 is not vitiated by non-compliance with Rule 107(4) notice if sale is otherwise valid and borrower had knowledge
- Rule 107(4) notice is directory not mandatory
- Revision under Section 154 of the Act cannot be used to challenge auction sale after confirmation
- Writ petition under Articles 226 and 227 of Constitution of India is maintainable against revisional order under Section 154 of the Act
