Case Note & Summary
The petitioner, Suresh Narayan Rege, had obtained a loan of approximately Rs. 22,00,000 from respondent no.1, The Saraswat Coop. Bank Ltd., for his concern M/s. Mohan Printery. As security for repayment, he mortgaged his immovable property situated at Unit Nos. 105, 106 and 107 in Udyog Mandir No.1, Bhagoji Keer Marg, Mahim, Mumbai. Upon default in repayment, the Bank initiated recovery proceedings under the Maharashtra Cooperative Societies Act, 1960, and the property was sold in auction. The petitioner filed a revision application before the Divisional Joint Registrar, Cooperative Societies, Mumbai Division, challenging the sale. The Registrar dismissed the application, holding that there was no material irregularity or fraud in the conduct of the sale. Aggrieved, the petitioner filed the present writ petition under Article 226 of the Constitution of India. The main legal issue was whether the sale of the mortgaged property was vitiated by material irregularity or fraud, and whether the petitioner was entitled to have the sale set aside. The petitioner argued that the sale was conducted without proper notice and that the property was sold at a grossly inadequate price. The respondents contended that the sale was conducted in accordance with the Act and Rules, and that the petitioner failed to prove any irregularity. The Court analyzed the provisions of Section 101 of the Maharashtra Cooperative Societies Act, 1960, and held that the sale cannot be set aside unless the borrower demonstrates substantial injury caused by material irregularity or fraud in the conduct of the sale. The burden of proof lies on the borrower to show that the sale price was inadequate due to material irregularity or fraud. The Court found that the petitioner failed to discharge this burden. The Court also clarified that the principle of 'once a mortgage always a mortgage' does not apply to sales conducted under the Act, as they are not mortgage sales but sales in exercise of power of sale under the Act. The Court dismissed the writ petition, upholding the order of the Divisional Joint Registrar.
Headnote
A) Cooperative Law - Sale of Mortgaged Property - Section 101 of the Maharashtra Cooperative Societies Act, 1960 - Setting Aside Sale - The petitioner challenged the sale of his property mortgaged to the respondent Bank for recovery of loan. The Court held that the sale cannot be set aside unless the borrower demonstrates substantial injury caused by material irregularity or fraud in the conduct of the sale. The burden of proof lies on the borrower to show that the sale price was inadequate due to material irregularity or fraud. The Court found no such irregularity or fraud and dismissed the petition. (Paras 1-10) B) Cooperative Law - Power of Registrar - Section 101 of the Maharashtra Cooperative Societies Act, 1960 - Confirmation of Sale - The Registrar or his nominee has the power to confirm or set aside a sale under the Act. However, this power is to be exercised only when there is a clear case of material irregularity or fraud causing substantial injury. The Court upheld the order of the Divisional Joint Registrar refusing to set aside the sale. (Paras 3-8) C) Cooperative Law - Mortgage - Principle of 'Once a Mortgage Always a Mortgage' - The Court clarified that this principle does not apply to sales conducted under the Maharashtra Cooperative Societies Act, 1960, as they are not mortgage sales but sales in exercise of power of sale under the Act. The sale was conducted in accordance with the Act and Rules, and the petitioner failed to prove any irregularity. (Paras 9-10)
Issue of Consideration
Whether the sale of the mortgaged property conducted by the respondent Bank under the Maharashtra Cooperative Societies Act, 1960 was vitiated by material irregularity or fraud, and whether the petitioner was entitled to have the sale set aside.
Final Decision
The writ petition is dismissed. The order of the Divisional Joint Registrar, Cooperative Societies, Mumbai Division, dated 12.3.2012, refusing to set aside the sale of the mortgaged property, is upheld.
Law Points
- Sale of mortgaged property under Section 101 of the Maharashtra Cooperative Societies Act
- 1960 cannot be set aside unless the borrower demonstrates substantial injury caused by material irregularity or fraud in the conduct of the sale
- Burden of proof lies on the borrower to show that the sale price was inadequate due to material irregularity or fraud
- The Registrar or his nominee has the power to confirm or set aside a sale under the Act
- but the power is to be exercised only when there is a clear case of material irregularity or fraud causing substantial injury
- The principle of 'once a mortgage always a mortgage' does not apply to sales conducted under the Act as they are not mortgage sales but sales in exercise of power of sale under the Act.
