The Allahabad High Court has stayed an order by a Sub-Divisional Magistrate (SDM) that had directed ‘status quo’ on the management of a co-operative housing society, effectively halting the functioning of its newly elected members. While granting interim relief to the elected office-bearers, the Court made strong observations about corruption within co-operative societies and ordered a high-level police investigation into the alleged illegal sale of society lands and siphoning of funds.
The order was passed by Justice Pankaj Bhatia at the Lucknow Bench in a writ petition filed by the Bahujan Nirbal Varg Sahkari Grih Nirman Samiti Ltd. and its elected secretary.
Background of the Case
The petitioners were declared elected as office-bearers of the Bahujan Nirbal Varg Sahkari Grih Nirman Samiti Limited in an election result declared on March 18, 2023. Subsequently, the respondents filed an application under Section 70 of the U.P. Cooperative Societies Act before the concerned SDM, challenging the election. In response, the SDM passed orders on March 10, 2025, and May 12, 2023, directing the parties to maintain ‘status quo’. This prevented the newly elected committee from taking charge of the society’s affairs.
The petitioners approached the High Court, challenging these orders. They also alleged that during this period, respondents who were not legitimate office-bearers executed sale deeds for the society’s properties, and the proceeds were never deposited into the society’s bank account.
Arguments of the Parties
The counsel for the petitioners, Shri Sharad Pathak, argued that while election disputes are maintainable under Section 70 of the U.P. Cooperative Societies Act, the manner in which the interim ‘status quo’ order was passed had resulted in staying the election itself, which is not legally permissible.
It was further contended that respondent no. 10, who was not an elected member of the society, had executed sale deeds for society properties. The sale consideration, which the sale deeds indicated was paid through cheques and demand drafts, was never credited to the society’s account.
Court’s Analysis and Observations
Justice Pankaj Bhatia began his order by observing that the “Present case demonstrates a deep malaise of corruption that is rampant in the Co-operative Housing Societies in the State of Uttar Pradesh.”
The Court noted that the society, initially incorporated for the benefit of Scheduled Castes, was embroiled in “huge inconsistencies and bungling.” An inquiry report dated August 27, 2024, conducted by seven officers of the Lucknow Development Authority (LDA), had highlighted illegal land allotments to ineligible persons and violations of restrictions on the quantum of land that could be allotted. The Court found it “disturbing to notice that despite there being a detailed report… no action has been taken.”
Addressing the illegal sale of land, the Court pointed to a sale deed on record where respondent no. 10 was the executant. The counsel for respondent no. 10, Shri Nirankar Singh, stated on instructions that “none of the said amounts have been credited to the account of respondent no. 10.” The counsel was “unable to give any statement as to what happened to the cheques which were admittedly collected by respondent no.10 and have not been credited to the account of society.”
The Court also took on record another sale deed executed by respondent no. 10 on December 12, 2024, for a consideration of Rs. 5,05,000, which was also not reflected in the society’s accounts. An examination of the society’s bank statement revealed “huge siphoning off of the funds,” with money from sale deeds being withdrawn in cash by respondent nos. 9 and 10.
The Court concluded that the SDM’s impugned orders “do not reflect any application of mind prior to passing of the said orders which results in staying the election.”
Decision and Directions of the Court
As an interim measure, the High Court stayed the operation and effect of the SDM’s orders dated March 10, 2025, and May 12, 2023. The Court directed that “the petitioners shall be permitted to continue as the office bearers of the society and the record shall be handed over to the petitioners who are the elected office bearers.”
Furthermore, the Court issued the following directions for a comprehensive investigation:
- High-Level Supervision: The entire investigation pursuant to the First Information Report (FIR), which the Additional Advocate General informed was being registered, shall be supervised by an officer of the level of Superintendent of Police.
- Land Audit: The police authorities shall take steps to conduct a “land audit of the society which shall include the total land owned by the society and the number of the sale deeds executed by the society in the last ten years and the deposit of sale proceeds in society’s account.”
- Recovery of Funds: The Court directed that if deemed appropriate, “steps shall also be taken for recovery of the money including action, if necessary, under The Prevention of Money Laundering Act.”
- Report on Revenue Code: The State government was directed to submit a report on the action taken under the U.P. Revenue Code, which bars the execution of sale deeds in favour of persons not belonging to the Scheduled Caste and Scheduled Tribe for such lands.
The Court stayed further proceedings before the SDM and listed the matter for the next hearing on September 16, 2025.
