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In a significant judgment delivered on June 2, 2025, the Supreme Court of India clarified the interpretation of "void" transactions concerning land charged to cooperative societies under the Maharashtra Co-operative Societies Act, 1960. The ruling in Machhindranath S/o. Kundlik Tarade (D) through LRS. & Others v/s Ramchandra Gangadhar Dhamne & Others addressed a long-standing land dispute, emphasizing that an alienation made in contravention of the Act's provisions is not automatically void ab initio against the member-loanee, but rather voidable at the instance of the aggrieved society.

The Genesis of the Dispute:

The case originated from a dispute over agricultural land in Village Kendal Bk., Taluka Rahuri, Ahmednagar, Maharashtra, which was the ancestral property of the original plaintiff, Machhindranath. In 1956, Machhindranath became a member of the Kendal Bk. Vividh Karyakari Seva Sahakari Sanstha Limited (the 'Society'), a registered Co-operative Society. He subsequently obtained a loan from the Society, creating a charge on the suit land as security, a declaration of which was recorded in a Mutation Entry in 1969.

Facing financial difficulties, the plaintiff approached his nephew and son-in-law, defendant no. 1, for a loan of Rs. 5,000. As security, the plaintiff executed a Registered Sale Deed of the suit land in favor of defendant no. 1 on November 2, 1971. On the same day, defendant no. 1 executed a 'Reconveyance Deed,' agreeing to re-convey the land upon repayment of Rs. 5,000.

Subsequently, on July 15, 1972, defendant no. 1 executed another Registered Sale Deed, selling 10 acres of the suit land to defendant no. 2 for Rs. 30,000. Upon learning of this sale, the plaintiff filed a Special Civil Suit in 1973, seeking possession and reconveyance of the land. The Society later released the charge on the land on August 27, 1973, after the plaintiff repaid the loan.

Journey Through the Lower Courts:

The Trial Court, in 1980, held that the initial Sale Deed of November 2, 1971, was void under Section 48 of the Act, and that defendant no. 2 was not a bona fide purchaser. It decreed possession of the land to the plaintiff, directing defendant no. 1 to execute a reconveyance deed.

This decision led to a series of appeals. The High Court, in the first round, remanded the matter, and after reconsideration, the learned Single Judge set aside the decree of possession and dismissed the plaintiff's suit. The Division Bench, through the Impugned Order, upheld this decision, leading the original plaintiff's legal representatives (the appellants) to approach the Supreme Court.

Appellants' and Respondents' Contentions:

The appellants argued that the transfer of land without the prior sanction of the Society was void under Sections 47(2), 47(3), 48(d), and 48(e) of the Maharashtra Co-operative Societies Act, 1960. They contended that the subsequent removal of the charge by the Society was inconsequential and did not retrospectively validate the void sale deeds. They also highlighted that defendant no. 2 was not a bona fide purchaser.

The respondents (defendants no. 3 and 4) countered that the plaintiff failed to prove the transaction was a loan or reconveyance. They asserted that the plaintiff, being aware of the Society's charge, could not benefit from his own wrong by claiming the sale was void. They emphasized the validity of the subsequent registered Sale Deed of July 15, 1972, asserting that it was executed after proper consideration.

Supreme Court's Analysis and Conclusion:

The Supreme Court, after considering the arguments, delved into the interpretation of Section 48 of the Act. The Court acknowledged that Section 48(d) creates an embargo on alienating charged property until the loan and interest are fully repaid, and Section 48(e) states that any alienation in contravention of clause (d) "shall be void."

However, the Court undertook a "deeper probe" into the extent to which the "void ab initio" theory should apply. It noted that the primary purpose of Section 48(e) is to safeguard the interest of the society that advanced the loan. Therefore, the right to sue or seek a declaration of nullification for such an alienation rests solely with the society, not with the member-loanee who committed the breach. The Court emphasized the principle that "The law cannot, and does not, reward a person for his/her own wrongs."

Crucially, the Supreme Court observed that the Society in this case never challenged either of the Sale Deeds or sought to enforce its charge. Consequently, the Court held that Section 48(e), declaring alienations in contravention of clause (d) as "void," must be read as "directory." This means the alienation can only be acted upon at the instance of the aggrieved party (the society).

The Court distinguished between "void" and "voidable" actions, concluding that unless the society comes forward to seek nullification, such a transaction is "at best ... a voidable action and not void ab initio."

The Supreme Court, upholding the High Court's Impugned Order, dismissed the appeal. This judgment provides a crucial clarification that while the Maharashtra Co-operative Societies Act aims to protect societies, the member-loanee cannot unilaterally claim a sale is void ab initio if the society, the directly aggrieved party, has not sought to annul the transaction.