New Delhi, June 7, 2025
In an interpretation of the Maharashtra Co-operative Societies Act, the Supreme Court has ruled that the sale or transfer of a property over which a co-operative society holds a statutory charge is not automatically void. Such a transaction can only be invalidated if the society itself initiates action to challenge it.
The ruling comes in the context of a long-standing civil dispute where a borrower had created a charge in favor of a co-operative society and later sold the same property to a relative. The apex court clarified that the relevant provision Section 48(e) of the Maharashtra Co-operative Societies Act, 1960 does not render such a transaction void from the outset, unless the society that holds the charge objects through proper legal channels.
Court’s View: Voidable, Not Void
A bench comprising Justice Sudhanshu Dhulia and Justice Ahsanuddin Amanullah underscored that while the statute provides protection to co-operative societies, it does not empower individual parties to benefit from transactions they themselves executed, especially when the society has not raised any grievance.
The Court stated that “the law cannot be interpreted to allow a borrower to misuse the protective intent of the legislation,” and emphasized that only the society has the legal standing to contest such a transaction.
Background of the Case
The case concerned a landowner who had borrowed funds from a registered co-operative society by creating a statutory charge on his land. Despite this, he executed a sale deed to a relative, and subsequently, that relative sold part of the land to a third party. Years later, the original borrower approached the courts, arguing that the sale was illegal under Section 48 of the Act.
However, neither the co-operative society nor its officials raised any objection to the transfer at any stage. In this context, the Court found that unless the society challenges the alienation of the property, the transaction cannot be invalidated merely on the existence of a charge.
Significance of the Judgment
This judgment sets a vital precedent in co-operative banking and property law. It clarifies that while charges created under Section 48 are binding and protect the interests of societies, they do not operate as an absolute bar on transactions unless specifically enforced by the society.
The decision also aims to prevent litigation misuse, where parties seek to undo transactions for personal benefit long after the fact, often when property values increase.
Case Information
• Case Title: Machhindranath S/o Kundlik Tarade (Deceased) Through LRs v. Ramchandra Gangadhar Dhamne & Ors.
• Case No.: Civil Appeal No. 7728 of 2020
• Bench: Justice Sudhanshu Dhulia and Justice Ahsanuddin Amanullah
• Court: Supreme Court of India
