02 September 2024 Property Law >> Personal Law  

This case involves a dispute between a Co-operative Credit Society and the legal heirs of a deceased borrower concerning the sale and subsequent confirmation of property. The petitioner, a Co-operative Credit Society, challenged an order issued by the Divisional Joint Registrar, Co-operative Societies, Kolhapur, which had annulled a Sale Certificate dated December 31, 2016. This Sale Certificate was issued following an auction of the borrower’s property to recover a loan that was not repaid.

Case:

1. Loan and Recovery Proceedings

Malgonda Ramgonda Bedkihale borrowed Rs. 2,85,000 from the society on March 30, 2001. The borrower defaulted, leading to the initiation of recovery proceedings under Section 101 of the Maharashtra Co-operative Societies Act, 1960. A Recovery Certificate was issued, and the property was auctioned on January 16, 2007, with a Sale Confirmation Certificate granted on March 21, 2007.

2. Challenges and Appeals

Respondent Nos. 4 to 7, who are the legal heirs of the deceased borrower, contested the Sale Certificate through Petition No. 181 of 2009. The Divisional Joint Registrar annulled the Sale Confirmation Certificate and remanded the matter for reconsideration, citing procedural lapses, including failure to provide a hearing opportunity to the heirs and to allow them to deposit the bid amount as required by Rule 107(13) of the Maharashtra Cooperative Societies Rules, 1961.

3. Subsequent Orders

After the remand, Respondent No. 3 reexamined the case and issued a fresh Sale Confirmation Certificate on December 31, 2016. However, this was again contested through Revision Application No. 20 of 2017, which led to the Divisional Joint Registrar’s order dated April 3, 2019, setting aside the Sale Certificate and its confirmation.

Disputed Points:

1. Knowledge of the Borrower’s Death

Respondents argued that the auction was conducted despite their knowledge of the borrower's death on March 9, 2005. They claimed that the petitioners should have been aware of this fact and should have canceled the sale or provided an opportunity to settle the dues.

2. Procedural Compliance

The core of the dispute revolves around the compliance with Rule 107 of the Maharashtra Cooperative Societies Rules, 1961. Respondents asserted that the sale should be set aside due to procedural irregularities and the alleged failure of the Sale Officer and the society to act in accordance with the rules.

3. Legal Arguments and Submissions

Petitioners contended that the Sale Certificate should not have been challenged without first contesting the auction sale itself. They argued that the revisional authority erred in setting aside the Sale Certificate, as no fraud was alleged or proved, and the sale followed the statutory procedures correctly. The petitioners relied on judicial precedents to support their stance that a Sale Certificate could only be contested on grounds of fraud or procedural irregularity if substantial injury was proven.

Court’s Analysis:

1. Rule 107 as a Complete Code

The court emphasized that Rule 107 of the Maharashtra Cooperative Societies Rules, 1961 is comprehensive concerning the attachment and sale of properties. It was found that the auction sale had complied with the requirements, including proper notice and procedural adherence, and no challenge to the auction itself was raised in the earlier proceedings.

2. Proof of Knowledge and Procedural Compliance

The court noted that there was insufficient evidence to prove that the petitioners had prior knowledge of the borrower’s death. Without such proof, claims of procedural irregularity were deemed unsupported. Additionally, the court found that the contesting respondents had failed to act promptly or within the stipulated period to challenge the sale or make a proper offer as per Rule 107(13).

3. Final Decision

Given that the revisional authority had erred in its interpretation of the rules and facts, the court found that the setting aside of the Sale Certificate was unjustified. The order by the Divisional Joint Registrar was therefore reversed, and the Sale Certificate was upheld.

Conclusion:

The court’s decision underscores the importance of adhering to procedural rules in property sales conducted under cooperative society regulations. It also highlights the necessity of timely and substantiated challenges to such proceedings to ensure that all parties' rights are adequately protected. In this case, the petitioners were found to have acted within their legal rights, and the revisional authority’s decision to annul the Sale Certificate was deemed erroneous.

  MAHARASHTRA CO-OPERATIVE SOCIETIES ACT, 1960