The Ahmednagar District Central Cooperative Bank Limited has recently challenged the judgment of the Bombay High Court regarding an auction sale of immovable property belonging to the Mula Sahakari Soot Girni Ltd., which was under liquidation. This case raises significant questions about valuation processes, auction procedures, and the rights of creditors in cooperative societies.

The bank sanctioned a cash credit loan of Rs. 95 lakh to the Mula Sahakari Soot Girni Ltd., which subsequently defaulted on repayment. The bank lodged a dispute case for recovery, which was resolved in its favor, leading to a claim of Rs. 1.05 crore. Following liquidation proceedings initiated against the society, the District Collector was appointed as the Liquidator.

Initial valuations of the society's property estimated it at Rs. 4.10 crore in 2012. However, subsequent valuations significantly decreased, leading to an auction sale notice with an upset price of Rs. 2.47 crore. Despite an initial interest from the Agricultural Produce Market Committee (respondent no. 6), the auction could not proceed due to a lack of bidders, ultimately resulting in the property being sold to respondent no. 6 for Rs. 2.51 crore.

   

The appellant raised two main concerns regarding the auction sale:

Undervaluation of Property: The bank argued that the property had been significantly undervalued compared to earlier estimates and current market conditions.

Auction Participation: The bank contended that the auction did not comply with the procedural requirements of the Maharashtra Cooperative Societies Act, which mandates a minimum of three bidders.

The High Court dismissed these claims, noting that the auction purchaser was a statutory body, and there were no allegations of mala fides against the auction process.

The respondents, including the state officials and respondent no. 6, defended the auction process as fair and legal. They highlighted that three bidders initially expressed interest, although only two participated on the auction day. They maintained that there was no wrongdoing and that the process followed the High Court’s directive to liquidate the society's assets effectively.

Upon appeal, the Supreme Court examined whether the appellant had grounds for relief. Despite acknowledging potential procedural flaws in the auction process, the Court found that the appellant had delayed in raising objections until after the sale was finalized. The Court emphasized the importance of prompt action in legal matters and noted that the auction notice had been adequately published.

The Court pointed out that the appellant had previously been aware of the valuation issues yet chose not to act promptly. The decision to question the auction after the fact weakened the bank's position. Moreover, while acknowledging the society's debt to the bank, the Court emphasized the importance of stability in concluded transactions.

The Supreme Court upheld the High Court’s judgment regarding the auction sale. However, it invoked Article 142 of the Constitution, directing respondent no. 6 to pay the appellant Rs. 1.05 crore (without interest) as a full settlement of the dues. This sum is to be paid within three months, with interest accruing thereafter if not settled.

This ruling highlights the delicate balance between protecting creditor rights and ensuring the integrity of auction processes in cooperative liquidation scenarios. It underscores the necessity for timely legal action and adherence to procedural norms to safeguard interests in similar cases. The civil appeal was thus disposed of with both parties bearing their own costs.