Kiran Raj

The Supreme Court of India, Division Bench of Justice P.S. Narasimha and Justice Manoj Misra, has held that an auction sale conducted under Maharashtra's co-operative societies framework is void from the outset if the full purchase price is not deposited within the period prescribed under the applicable rules. The dispute arose from the auction of an immovable property to recover outstanding loan dues of a partnership firm, where the auction purchaser paid the balance consideration in installments spread over nearly two months beyond the stipulated deadline. While the Court affirmed the Bombay High Court's finding that the auction was void, it directed the co-operative bank to refund the entire bid amount to the auction purchaser along with interest, holding that the purchaser could not be penalized for lapses on the part of the Recovery Officer. The Court further ordered a fresh auction of the subject property.

The appeals arose from a common judgment of the Bombay High Court concerning an auction sale of immovable property conducted to recover dues of a co-operative bank from a partnership firm. The firm had availed a cash credit facility and defaulted in repayment, leading to proceedings under the Maharashtra Co-operative Societies Act, 1960. An ex parte award was passed against the firm and its partners, including a deceased partner whose legal representatives later contested the proceedings.

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Pursuant to the award, a recovery certificate was issued and the property was auctioned. The highest bid was accepted and the purchaser deposited part of the amount on the date of auction, with the balance deposited subsequently. The sale was confirmed and a sale certificate and conveyance deed were executed.

The legal representatives of the deceased partner challenged the auction before the revisional authority under Section 154 of the Act, contending that the entire sale consideration had not been deposited within the period prescribed under Rule 107(11)(h) of the Maharashtra Co-operative Societies Rules, 1961. The revisional authority set aside the sale. The High Court upheld that decision, holding the sale void. The auction purchaser and the bank challenged the High Court’s decision before the Supreme Court.

On the mandatory nature of the deposit requirement under Rule 107(11)(h) of the Maharashtra Co-operative Societies Rules, 1961, the Court observed that there is no discretion vested in the Recovery Officer to extend the period for deposit of the remainder of the purchase money. It further recorded that "if the remainder of the purchase money is not deposited, the amount already deposited may be forfeited" and that the property would have to be re-sold through a fresh proclamation.

On the consequence of non-deposit of the balance purchase money, the Court, relying on its earlier decision in Shilpa Shares & Securities v. National Co-operative Bank Ltd. (2007) 12 SCC 165, stated that failure to deposit the full purchase money within the prescribed period renders the auction a nullity and not a mere irregularity. Affirming the High Court's conclusion, the Court observed that "the view taken by the High Court that confirmation of the auction sale was void as the remainder payment was not made within the period prescribed by the 1961 Rules cannot be faulted."

On the purpose served by the deposit conditions, the Court stated that provisions of the nature 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 to be discovered in a public auction, which may, ultimately, delay the whole process."

On the question of waiver, the Court observed that "there is nothing on record to indicate that the benefit of the said provision has been waived by the borrower including his heirs." It further distinguished the precedent relied upon by the auction purchaser, noting that unlike the Enforcement Rules considered in that case, Rule 107 of the 1961 Rules contains no provision enabling extension of time to deposit the balance amount.

On the maintainability of the revision under Section 154 of the 1960 Act, the Court stated that "revisional powers conferred by the Statute are not subject to any Rules made under the Statute" and that such power "cannot be limited by the Rules framed under the Statute." It further observed that merely because the applicant had not taken recourse to the remedy available under sub-rules (13) and (14) of Rule 107, the revisional authority was not denuded of its power to examine the legality and propriety of the proceeding.

On the position of the auction purchaser and the consequential relief, the Court recorded that "the auction purchaser cannot be penalized for the fault of the Recovery Officer" and directed that "the Bank shall refund the amount deposited by" the auction purchaser "along with interest at the rate of 6% per annum from the date of deposit till the date of repayment."

On the finality of the award, the Court observed that since the order rejecting the prayer to set aside the ex parte award had attained finality, "the validity of the award is not open to challenge" and that the property of the judgment-debtor was liable to be subjected to auction sale for realizing the amount payable under the award.

The Court ordered, “The auction sale held on 29.01.2005 is set aside. Consequently, the confirmation of sale, dated 18.03.2005, is declared null and void. The subject property shall be put to a fresh auction in terms of Rule 107(11) (j) of 1961 Rules for realization of the amount payable under the award. The Bank shall refund the amount deposited by M/s Adishakti Developers along with interest at the rate of 6% per annum from the date of deposit till the date of repayment.”

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“However, it is clarified that subject to the right of M/s Adishakti Developers to get a refund under this order, this order shall be without prejudice to the right of the Bank (decree /award holder) and the judgment debtor(s) including their legal representatives to arrive at a settlement/ compromise regarding the dues payable under the award and file such compromise/ settlement before the recovery officer for discharge of the recovery proceedings.”

 “These appeal(s) are disposed of in the above terms.” and “There shall be no order as to costs.”

Advocates Representing the Parties

For the Petitioners: Mr. Vijay Hansaria, Sr. Adv. Mr. M. Y. Deshmukh, AOR Ms. Manjeet Kirpal, Adv. Mr. Shiv Kumar, Adv. Mr. Ashvathaman Dinesh, Adv. Mrs. V.Mohana, Sr. Adv. Mr. Dinesh Chandra, Adv. Mr. Ravindra Keshavrao Adsure, AOR Mr. Sagar N.pahune-patil, Adv. Mr. Yash Prashant Sonavane, Adv.

For the Respondents: Mr. Vinay Navare, Sr. Adv. Mr. Yashodhan Chandurkar, Adv. Ms. Mansni Jain, Adv. Ms. Abha R. Sharma, AOR Mr. Samrat Krishnarao Shinde, Adv. Mr. Siddharth Dharmadhikari, Adv. Mr. Aaditya Aniruddha Pande, AOR

Case Title: M/s. Adishakti Developers v. State of Maharashtra & Ors.
Neutral Citation: 2026 INSC 197
Case Number: Civil Appeal Nos. 002545–002550 of 2026
Bench: Justice P.S. Narasimha and Justice Manoj Misra