Case Note & Summary
The dispute arises from recovery proceedings initiated by Mahanagar Co-operative Bank against a partnership firm, M/s. Borse Brothers, for defaulting on a cash credit facility. The bank obtained an ex parte award on 04.04.1994 from the Co-operative Court for Rs. 24,19,904.92 plus interest under the Maharashtra Co-operative Societies Act, 1960. After a recovery certificate was issued, possession of the disputed property was taken on 16.04.2004. The property was auctioned on 29.01.2005, with M/s. Adishakti Developers emerging as the highest bidder at Rs. 1.51 crore. The entire auction amount was not deposited within 15 days as required by Rule 107(11)(h) of the Maharashtra Co-operative Societies Rules, 1961; the balance was paid in installments and accepted by the bank. The sale was confirmed on 18.03.2005, and conveyance executed. The legal heirs of a deceased partner, Panditrao Borse, challenged the auction initially by writ petition, which was dismissed for alternative remedy, and later filed a revision under Section 154 of the Act before the Divisional Joint Registrar. The Joint Registrar condoned the delay and set aside the auction on the ground that the mandatory deposit rule was violated, rendering the sale void. The auction purchaser and the bank filed writ petitions before the Bombay High Court, which were dismissed by the impugned judgment dated 26.03.2018. The High Court held that the deposit condition is mandatory and its violation vitiates the sale, rejecting the waiver plea. It also upheld the condonation of delay and directed the legal heirs to deposit the outstanding dues, ordered refund to the auction purchaser with interest, and permitted the purchaser to seek damages. The auction purchaser and the bank appealed to the Supreme Court, raising issues of maintainability, delay, and the effect of waiver. The Supreme Court's final decision is not yet available in the excerpt.
Headnote
A) Co-operative Societies - Auction Sale - Mandatory Deposit Rule - Maharashtra Co-operative Societies Rules, 1961, Rule 107(11)(h) - The High Court held that the requirement to deposit the entire auction amount within 15 days is mandatory and non-compliance renders the sale void, relying on Manilal Mohanlal Shah v. Sardar Sayed Ahmed, AIR 1954 SC 349 and other precedents. The argument that the creditor bank waived the condition was rejected as there was no waiver by the borrower. (Paras 11-12)
B) Co-operative Societies - Revision Jurisdiction - Maharashtra Co-operative Societies Act, 1960, Section 154 - The High Court upheld the Joint Registrar's condonation of delay in filing revision, observing that the auction sale came to the notice of the legal heirs only during mutation proceedings and there was no deliberate delay. The maintainability challenge based on alternative remedy was not accepted. (Para 13)
C) Co-operative Societies - Relief and Restitution - Maharashtra Co-operative Societies Act, 1960 - The High Court balanced equities by directing the legal heirs to deposit the outstanding amount with the bank and ordered refund of the auction price to the auction purchaser with interest, granting liberty to seek damages. (Para 14)
Issue of Consideration
Whether violation of Rule 107(11)(h) of Maharashtra Co-operative Societies Rules, 1961 (mandatory deposit within 15 days) renders auction sale void despite creditor's acceptance of late payment; Whether revision under Section 154 of Maharashtra Co-operative Societies Act, 1960 was maintainable; Whether delay in filing revision was correctly condoned; Whether High Court's direction for refund and liberty to claim damages was appropriate
Law Points
- Violation of mandatory auction deposit rule renders sale nullity
- creditor's waiver does not affect borrower's right to challenge
- delay condonation if no deliberate delay
Case Details
2026 LawText (SC) (02) 74
Civil Appeal Nos. 002545-002548 of 2026 (Arising out of SLP (C) Nos. 12343-12346/2018), Civil Appeal No. 002549 of 2026 (Arising out of SLP (C) No. 12617/2018), Civil Appeal No. 002550 of 2026 (Arising out of SLP (C) No. 12591/2018)
M/S. Adishakti Developers, Mahanagar Co-operative Bank Ltd.
The State of Maharashtra & Ors., The Divisional Joint Registrar, Co-operative Societies & Ors.
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Nature of Litigation
Challenge to auction sale of property for recovery of co-operative bank dues, involving procedural compliance and limitation issues.
Remedy Sought
Appellants (auction purchaser and bank) sought to overturn High Court order that upheld Joint Registrar's decision setting aside auction sale and confirmed sale as void, seeking affirmation of the auction sale.
Filing Reason
Alleged violation of Rule 107(11)(h) of 1961 Rules regarding deposit timeline rendered sale void; High Court upheld cancellation; auction purchaser and bank appealed.
Previous Decisions
Co-operative Court ex parte award 04.04.1994; auction sale confirmed 18.03.2005; Joint Registrar condoned delay and set aside auction sale 29.12.2009; High Court upheld Joint Registrar's order on 26.03.2018.
Issues
Whether violation of Rule 107(11)(h) of 1961 Rules (deposit within 15 days) is mandatory and renders sale void despite creditor's acceptance?
Whether revision under Section 154 of 1960 Act was maintainable given alternative remedy?
Whether delay in filing revision was correctly condoned?
Whether High Court's direction for refund and liberty to claim damages appropriate?
Submissions/Arguments
Rule 107(11)(h) violation is not fatal if creditor waives; Bank accepted late payment, so no ground to set aside sale.
Revision not maintainable due to alternative remedy under Rule 107(13) and earlier writ dismissal; delay not properly explained.
High Court correctly held mandatory condition and sale nullity; no waiver by borrower; delay condoned rightly.
Auction purchaser argued that sale was complete and title vested, and substantial compliance existed.
Judgment Excerpts
the auction sale was cancelled on the ground that the entire auction amount was not deposited within 15 days from the date of sale which violated Rule 107 (11) (h) of 1961 Rules.
High Court held that condition to deposit within 15 days is mandatory and a violation thereof would render sale a nullity.
there was no waiver on part of the owner (including the borrower or legal heirs of one of the partners of the borrower) of its right to challenge the auction on the ground of non - deposit of auction price within the stipulated period
Procedural History
04.04.1994: Co-operative Court passed ex parte award for Rs.24,19,904.92 plus interest. 04.07.1996: Recovery certificate issued. 16.04.2004: Possession of disputed property taken by SRO. 06.09.2004: Application to set aside ex parte award rejected. 24.12.2004: Notice inviting bids published. 29.01.2005: Auction held; Adishakti Developers highest bidder at Rs.1.51 crore. 18.03.2005: SRO confirmed sale and handed possession; sale certificate issued 21.03.2005; registered conveyance deed executed 13.06.2005. 26.09.2005: Legal heirs' writ petition dismissed for alternative remedy. 2008: Revision Application No.326/2008 filed under Section 154. 20.03.2009: Joint Registrar condoned delay. 29.12.2009: Joint Registrar set aside auction sale. 2009-2010: Auction purchaser and Bank filed Writ Petition Nos.1543/2009, 6544/2009, 393/2010, 1779/2010. 26.03.2018: High Court passed common judgment dismissing petitions and upholding cancellation. 2026: Appeals filed in Supreme Court; leave granted.
Acts & Sections
- Maharashtra Co-operative Societies Act, 1960: Section 91, Section 98, Section 154
- Maharashtra Co-operative Societies Rules, 1961: Rule 107, Rule 107(11)(g), Rule 107(11)(h), Rule 107(13)
