The Supreme Court of India has held that the requirement to deposit the balance purchase money within the stipulated 15-day period under the Maharashtra Co-operative Societies (MCS) Rules, 1961, is mandatory. A bench comprising Justice Pamidighantam Sri Narasimha and Justice Manoj Misra ruled that any infraction of these rules renders an auction sale a nullity rather than a mere irregularity.
The Court modified a Bombay High Court order to direct a fresh auction of the disputed property while ordering the Bank to refund the original auction purchaser’s deposit with 6% interest.
Background of the Case
The dispute centered on a plot of land in Chembur, Mumbai, which was auctioned to recover dues of Mahanagar Co-operative Bank from a firm, M/s. Borse Brothers. An ex-parte award was passed in 1994 for approximately ₹24.19 lakhs plus interest against the firm and its partners, including Panditrao Borse.
Following the death of Panditrao Borse, the Special Recovery and Sale Officer (SRO) conducted an auction on January 29, 2005. M/s. Adishakti Developers emerged as the highest bidder with a bid of ₹1.51 crores. While the purchaser deposited a portion of the amount on the day of the auction, the balance was paid in installments ending on March 17, 2005—well beyond the 15-day window prescribed by Rule 107(11)(h) of the 1961 Rules.
The legal heirs of Panditrao Borse challenged the auction. The Divisional Joint Registrar eventually set aside the sale in 2009, a decision upheld by the Bombay High Court in 2018. The Bank and the Auction Purchaser then moved the Supreme Court.
Arguments of the Parties
M/s. Adishakti Developers (Auction Purchaser): The appellant argued that the revision filed under Section 154 of the 1960 Act was not maintainable as the heirs had failed to utilize the specific remedy under Rule 107(13) and (14). They further contended that the 15-day deposit rule was for the benefit of the creditor (the Bank), and since the Bank accepted the late payments, the requirement was “waived.”
Legal Heirs of Panditrao Borse: The respondents argued that compliance with Rule 107(11)(g) and (h) is mandatory. They cited the Supreme Court’s decision in Shilpa Shares & Securities, asserting that any violation renders the auction void. They also alleged collusion between the Bank and the purchaser, noting that the purchaser’s representative was an advocate who was also the Chairman of the Bank.
Mahanagar Co-operative Bank: The Bank supported the auction purchaser, arguing that the heirs were aware of the proceedings and failed to act within the statutory 30-day window to set aside the sale. They characterized the revision as “forum shopping.”
Court’s Analysis and Observations
The Supreme Court identified several key legal issues, focusing on the maintainability of the revision and the mandatory nature of the deposit rules.
1. On Maintainability of Revision: The Court rejected the argument that the Joint Registrar lacked jurisdiction. It observed that the revisional power under Section 154 of the 1960 Act is “extremely wide” and not limited by the specific remedies available under the Rules. The Court held:
“The revisional power conferred by Section 154 is extremely wide which would include examining the legality and propriety of a proceeding qua confirmation of sale.”
2. On Mandatory Deposit Rules: The Court emphasized that Rule 107(11)(h) does not grant the Recovery Officer discretion to extend the time for depositing the remainder of the purchase money. It distinguished this from the Sri Siddheshwara Co-operative Bank Ltd. case (which involved the SARFAESI Act), noting that the MCS Rules do not provide for extensions by mutual agreement.
The Court observed:
“Provisions of the nature as incorporated in Rule 107(11)(h) are not only for the benefit of the creditor but they serve a public purpose to maintain the sanctity of public auctions else non-serious bidders would participate to manipulate the price… which may, ultimately, delay the whole process.”
The Bench reaffirmed the precedent set in Shilpa Shares & Securities and others vs. National Co-operative Bank Ltd., stating:
“If full purchase money is not deposited within the prescribed period, the sale is a nullity and not a mere irregularity.”
The Decision
The Supreme Court declared the confirmation of sale dated March 18, 2005, null and void.
The Final Directions:
- The auction sale held on January 29, 2005, is set aside.
- The property must be put to a fresh auction in terms of Rule 107(11)(j) of the 1961 Rules.
- The Bank is directed to refund the ₹1.51 crores to M/s. Adishakti Developers with 6% interest per annum from the date of deposit until repayment.
- The Court clarified that this order does not prevent the Bank and the judgment debtors from reaching a settlement or compromise regarding the dues before the recovery officer.
- Case Title: M/s. Adishakti Developers vs. The State of Maharashtra & Ors.
- Case Number: Civil Appeal Nos. 002545-002548 of 2026
