High Court of Karnataka Quashes Karnataka Appellate Tribunal Order in Cooperative Society Dispute, Restoring Dismissal. Tribunal Violated Natural Justice by Proceeding Ex Parte During COVID-19 Lockdown; Dispute Over Validity of Registered Sale Deed Not Maintainable Under Section 70 of Karnataka Co-operative Societies Act, 1959.

Writ petition under Articles 226 and 227 of the Constitution of India seeking to quash the judgment of the Karnataka Appellate Tribunal which set aside the dismissal of a cooperative dispute and cancelled a registered sale deed.

Petitioner sought a writ of certiorari quashing the judgment dated 09.07.2020 passed by the Karnataka Appellate Tribunal in Appeal No.253/2018 (Co-op) and declare it illegal and contrary to natural justice.

The tribunal passed the impugned order without hearing the petitioner, who was unaware of the hearing date during the COVID-19 lockdown, and thereby violated principles of natural justice; additionally, the dispute itself was beyond the jurisdiction of the Registrar under Section 70.

The Additional Registrar of Cooperative Societies dismissed the dispute filed by the Society, holding that the authority had no power to cancel a registered sale deed. The Karnataka Appellate Tribunal, in appeal, reversed the dismissal, allowed the appeal ex parte, and directed cancellation of the sale deed and payment of money.

Whether the Karnataka Appellate Tribunal’s order dated 09.07.2020 is liable to be quashed for violation of natural justice, having been passed ex parte during the COVID-19 lockdown without adequate notice to the petitioner? Whether the Registrar under Section 70 of the Karnataka Co-operative Societies Act, 1959, has jurisdiction to adjudicate upon the validity of a registered sale deed and cancel it, or whether such power resides only with the civil court?

Petitioner argued that the tribunal passed the order without hearing him, in violation of natural justice, especially since the COVID-19 lockdown prevented him from appearing and he was unaware of the posting date. Relying on Siddamma vs. Bhavani Housing Cooperative Society, petitioner contended that once a sale deed is executed and registered, the purchaser becomes absolute owner, and neither the society nor the Registrar can negate the deed; only a civil court can cancel it. Citing G. Parameshwara vs. Vittalnagar House Building Cooperative Society, it was submitted that disputes relating to the validity of a registered sale deed are not contemplated under Section 70 of the Act, and the Registrar lacks jurisdiction to entertain such a dispute. Referring to Mir Ubaidullah vs. Jaraganahally House Building Cooperative Society, it was argued that a proceeding under Section 70 is in the nature of arbitration and can only decide personal rights (rights in personam), not rights in rem such as cancellation of a sale deed. Additionally, it was highlighted that the petitioner was a bona fide purchaser for value from the allottee and as a non-member, the dispute under Section 70 was not maintainable against him.

Under the Karnataka Co-operative Societies Act, 1959, Section 70, the Registrar's jurisdiction is limited to disputes touching the business of the society that involve rights in personam among members or between a member and the society. It does not extend to adjudicating the validity or cancellation of a registered sale deed, which is a right in rem; such power is exclusively vested in the civil court. Further, a non-member bona fide purchaser for value cannot be subjected to a Section 70 dispute. An order passed in violation of natural justice, such as an ex parte decision without proper notice during a lockdown, is liable to be set aside.

The dispute came to be dismissed on the ground that the allegation made by the Society was not true and that Respondent No.1 did not have the Authority to cancel the sale deed. It is claimed that post such dismissal, the Petitioner started construction and was close to completing the construction of a building by investing more than Rs. 2 crores. (Para 8) At that stage, an appeal in Appeal No.253/2018 was filed before the Karnataka Appellate Tribunal, where an application had been filed seeking an injunction restraining the Petitioner and Respondent No.6 from putting up any construction. The matter having been taken up for final arguments on 26.3.2020, the same could not be so conducted on account of the Covid-19 lockdown. It was subsequently taken up on 11.6.2020 and was adjourned to 25.6.2020. On that day, arguments were heard of Respondent No.2 in the absence of the Petitioner, and the matter was reserved for Judgment and Judgment was pronounced. The Petitioner was not aware of the posting of the case but came to know about the impugned Order only in the second week of November 2020. (Para 9) Even if such a liberal view is to be taken in the present case on hand, the Authority vested in the Additional Registrar of Cooperative Societies would stop short of deciding whether an allotment made by a society in favour of its member was valid. But when once a sale deed is executed and registered, the purchaser becomes the absolute owner and neither the Authority nor the Society would have the power to negate the registered deed unless it is cancelled by a competent Civil Court. (Siddamma case, Para 7 as quoted) Thus even if there is a dispute which can be said to impinge upon or touching upon the constitution, management or business of the cooperative Society it would have to be seen whether the Registrar could have granted a relief of declaration in terms of Section 34 of the Specific Relief Act, 1963 since it is only a Civil Court which is empowered to grant such declaration and the Registrar not being so empowered there would be no purpose which would be served by referring the matter to the Registrar. (Mir Ubaidullah case, Para 13 as quoted)

The petitioner purchased a residential site from Respondent No.5 (allottee) via registered sale deed dated 11.03.2013. Respondent No.2-Society filed a dispute under Section 70 of the Karnataka Co-operative Societies Act before the Additional Registrar of Co-operative Societies seeking cancellation of the sale deed and recovery of Rs.62,05,300 with interest. The Additional Registrar dismissed the dispute, holding that the authority had no power to cancel the sale deed. The Society appealed to the Karnataka Appellate Tribunal in Appeal No.253/2018. During the COVID-19 lockdown, the tribunal took up the matter on 25.06.2020, heard the Society in the absence of the petitioner, reserved judgment, and later pronounced an order allowing the appeal and cancelling the sale deed. The petitioner then filed the present writ petition under Articles 226 and 227 of the Constitution of India challenging the tribunal’s order.

• Karnataka Co-operative Societies Act, 1959: 70, 117
• Specific Relief Act, 1963: 34
• Arbitration and Conciliation Act, 1996: 11
• Constitution of India: 226, 227