1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE, BENCH AT AURANGABAD WRIT PETITION NO. 5958 OF 2010 Deeplaxmi Nagari Sahakari Pat Sanstha Maryadit, Sangamner, through its Chairman Shri Eknath Dagadu Rahane, Age 64 years, Occupation Agriculture, Resident of Pune-Nasik Road, Market Yard, Sangamner, District Ahmednagar Petitioner V E R S U S 1 The State of Maharashtra, Through its Secretary, Co- operative Department, Mantralaya, Mumbai. Respondents 2 Deputy Registrar Co-operative Societies, Sangamner, Taluka Sangamner, District Ahmednagar 3 Pandit Dindayal Nagari Sahakari Pat Sanstha Maryadit, Sangamner, Near Tahsil Ofice, Sangamner, Through its Chairman 4 Smt Padma w/o Vitthal Ambare, Age Major, Occupation Agriculture, Resident of Ganore, Taluka Akole, District Ahmednagar 5 Vishal s/o Vitthal Ambare, Age Major, Occupation Agriculture, Resident of Ganore, Taluka Akole, District Ahmednagar 6 Nanasaheb Nabaji Gunjal, Resident of Khandgaon, Taluka Sangamner, District Ahmednagar Mr. V.D. Sapkal, Advocate, holding for Mr. D.D. Pokharkar, Advocate for the petitioner Mr. S.V. Kurundkar, AGP for respondent Nos. 1 & 2 / State Mr. D.M. Pardeshi, Advocate for respondent No.3 Respondent Nos. 4 & 5 though served, absent Mr. R.S. Shinde, Advocate for respondent No.6 CORAM : A.V. NIRGUDE, J. DATED : 29th April, 2011 2 ORAL JUDGMENT : 1. By consent of the parties, writ petition is taken up for final hearing, at the stage of admission. 2. Rule. Rule returnable forthwith. 3. This Writ Petition filed under Articles 226 and 227 of the Constitution of India seeks to challenge issuance of a certificate issued under Section 100 of the Maharashtra Co-operative Societies Act, 1960 (hereinafter referred to as ‘MCS Act’) dated 16th May, 2008, and the events that occurred pursuant to it, namely; dismissal of the review application filed by the petitioner against the issuance of the certificate and subsequent sale of the property dated 30th December, 2008. Facts leading to this litigation, in short, can be narrated as under : 4. The petitioner is the Co-operative Credit Society (henceforth be referred to as the ‘petitioner-society’. Respondent No. 3 is also a similar society, which shall be referred to as the ‘respondent-society’. Respondent No.6 is the purchaser of the disputed plot of land, who shall be referred to as the ‘purchaser’. Respondent No. 2 is the Deputy Registrar Co-operative Society, Sangamner, who has issued the impugned certificate, referred to above. Respondent Nos. 4 and 5 are the legal heirs of one Vitthal Ambare, who admittedly was indebted to both the above mentioned societies. Both the societies admittedly filed disputes against Vitthal in the Co-operative Court for recovery of defaulted loans. During pendency of the disputes, Vitthal died on 25th January, 2005. Both the societies then added Vitthal’s legal representatives (respondent Nos. 4 and 5) to the proceedings and ultimately obtained awards against them. The petitioner-society obtained two awards on 2nd February, 2011 and 3 4th, February, 2006, respectively. All along the petitioner-society sought creation of charge on Vitthal’s property namely the disputed plot of land situated at Sangamner. This plot admeasures about 252 square meter and is a vacant piece of land. (henceforth this property would be referred to as the ‘disputed plot’). The Co-operative Court in both the cases issued awards in favour of the petitioner-society and specifically mentioned in the award that "charge" on the disputed plot was created. A few days thereafter, on 15th February, 2006, the respondent-society also obtained their award against respondent Nos. 4 and 5 being legal representatives of their deceased member Vitthal. In their award, the Co-operative Court did not mention specifically that there would be charge on the disputed plot. 5. Both the societies obtained certificates pursuant to the awards under Section 98 of the MCS Act from the Co-operative Court. It was the respondent-society who initiated execution proceeding of the certificate first. They approached the Special Recovery Officer of the Federation of the Co- operative Credit Societies for the execution of the certificate and for recovery of the award amount. Since the said Officer was specifically empowered under Section 156 of the MCS Act to initiate proceedings for execution under Rule 107 of the Maharashtra Co-operative Societies Rules, 1961, he first issued demand notice to respondent Nos. 4 and 5, and when they failed to respond positively, he proceeded to attach the disputed plot on 19th July, 2007. It seems, at that time, the executing officer was not aware of the charge which the Co-operative Court had created in favour of the petitioner- society on the disputed plot. The attachment order does not mention existence of any charge on the property. Thereafter, the petitioner-society approached the City Survey Officer of Sangamner and got an entry of charge recorded on the P.R. Card of the disputed plot. Such entry was 4 taken on 28th July, 2007. Similar entry on the same day was also taken in respect of charge of the respondent-society. 6. The executing officer proceeded further in the execution, and, on 31st August, 2007, he issued proclamation of sale of the disputed plot and appointed ‘21st September, 2007’ as the date of the auction-sale of the disputed plot. On this day, at least the respondent-society was aware that there was charge of the petitioner-society on the disputed plot. The executing officer tried to effect auction-sale of the disputed plot on number of occasions, but he failed to effect the same. The last attempt of auction-sale of the property was made on 18th December, 2007. There after, the executing officer requested respondent No. 2 to issue certificate under Section 100 of the MCS Act in favour of the respondent-society. But, respondent No. 2 pointed out to him that an application for issuance of certificate under Section 100 of the MCS Act was required to be made by the concerned society, which in this case was the respondent-society. The respondent-society then made such an application for issuance of certificate under Section 100 of the MCS Act. On that day also, the respondent-society was aware that there was charge of the petitioner-society on the disputed plot and the same was even recorded on the P.R. Card. It seems, respondent No. 2 was also aware of this fact. In view of this impediment, respondent No. 2 issued a notice to the petitioner-society probably to find out as to whether they had any objection for issuance of the certificate in favour of the respondent-society. The petitioner-society did not respond to the said notice. They remained absent. Respondent No. 2 issued the impugned certificate on 16th May, 2008. It appears that this certificate was annexed with a copy of P.R. Card. The importance of certificate issued under Section 100 of the MCS Act can be realized by perusing the 5 provisions of Section 100 of the MCS Act. Section 100 of the MCS Act reads as under : 100. Transfer of property which cannot be sold (1) When in any execution of an order sought to be executed under section 98, [or the recovery of any amount under section 101 or section 137], any property cannot be sold for want of buyers, if such property is in occupancy of the defaulter, or of some person in his behalf, or of some person claiming under a title created by the defaulter subsequently to the issue of the certificate of the Registrar, [Court], Liquidator or the Assistant Registrar, under clause (a) or (b) of section 98, [or under section 101 or 137], the Court or the Collector or the Registrar, as the case may be, may, notwithstanding anything contained in any law for the time being in force, direct that the said property or any portion thereof shall be transferred to the society which has applied for the execution of the said order, in the manner prescribed. (2) Where property is transferred to the society under the foregoing sub-section or where property is sold under section 98 [101 or 137], the Court, the Collector, or the Registrar, as the case may be, may, in accordance with the rules, place the society or the purchaser, as the case may be, in possession of the property transferred or sold. 6 (3) Subject to such rules as may be made in this behalf, and to any rights encumbrances, charges or equities lawfully subsisting in favour of any person, such property or portion thereof shall beheld under sub-section (1) by the said society on such terms and conditions as may be agreed upon between the Court, the Collector or the Registrar, as the case may be, and the said society. Subject to the general or special orders of the State Government, the Collector or the Registrar may delegate to an officer, not below the rank of an Assistant or the Deputy Registrar under the section.” Even the title of the Section makes it clear that on issuance of this certificate a property gets 'transferred' permanently to a creditor society. This provision thus is a very drastic one and the officer who issues such certificate is expected to take utmost care before issuing the same. 7. In view of the certificate, the respondent-society apparently became owner of the disputed plot. They thereafter sought permission of respondent No. 2 to further sale the disputed plot by an auction-sale. Respondent No. 2 then fixed an upset price for the disputed plot and permitted auction-sale. The respondent-society thereafter effected sale of the property in favour of the purchaser on 30th December, 2008. 8. It appears that the respondent-society was aware that the entry in respect of charge of the petitioner-society on the disputed plot would be an impediment for them and so they made an application to the Taluka Inspector of Land Records seeking removal of the entry in respect of the charge of the petitioner-society. It seems, even the learned Taluka Inspector 7 of Land Records favoured the respondent-society and ordered removal of the said entry on 15th July, 2008. It seems, this provoked the petitioner- society for taking some evasive action. They filed appeal against the order of the Taluka Inspector of Land Records, and on 8th October, 2009, obtained an order of remand of the case back to the Taluka Inspector of Land Records. Before the Taluka Inspector of Land Records could decide the fate of the impugned entry, on 7th January, 2010, the petitioner-society approached respondent No. 2 seeking review of issuance of the impugned certificate under Section 100 of the MCS Act, but respondent No. 2 rejected the application on 31st March, 2010. On the other hand, even the Taluka Inspector of Land Records refused to change his view and confirmed his earlier order of removal of the entry of the petitioner-society on 31st March, 2010. Thereafter, the petitioner-society filed this writ petition. 9. As said above, respondent-society as well as respondent No. 2 both were aware that there was a judicial order passed creating "charge" in favour of the petitioner-society on the disputed plot of land prior to the issuance of the impugned certificate on 16th May, 2008. They both were aware of the provisions of Section 47 of the MCS Act which prevents transfer of such property without consent of the society in whose favour the charge is already created in respect of the disputed property. Section 47 of the MCS Act reads as under : Section 47. Prior claim of society (1) Notwithstanding anything in any other law for the time being in force, but subject to any prior claim of Government in respect of land revenue or any money recoverable as land revenue and to the provisions of sections 60 and 61 of the Code of Civil Procedure, 8 1908, (a) any debt or outstanding demand, owing to a society by any member or past member or deceased member, shall be a first charge,- (i) upon the crops or other agricultural produce raised in whose or in part whether with or without a loan taken from the society by such member or past member or deceased member, - (ii) upon any cattle, fodder for cattle, agricultural or industrial implements or machinery, or raw materials for manufacture, or worship, godown or place or business supplied, to or purchased by such member or past member or deceased member, in whole or in part, from any loan whether in money or goods made to him by the society, and (iii) upon any movable property property which may have been hypothecated, pledged or otherwise mortgaged by a member with the society, and remaining in his custody; (b) any outstanding demands or dues payable to a society by any member or past member or deceased member, in respect of rent, shares, loans or purchase money or any other rights or amounts payable to such society, shall be a first charge upon his interest in the immovable property of the society. 9 Explanation, - The prior claim of Government in respect of dues other than land revenue, shall be restricted for the purpose of sub- section (1) to the assets created by a member out of the funds in respect of which the Government has a claim. (2) No property or interest in property, which is subject to a charge under the foregoing sub-section, shall be transferred in any manner without the previous permission of the society; and such transfer shall be subject to such conditions, if any, as the society may impose. (3) Any transfer made in contravention of sub-section (2) shall be void. (4) Notwithstanding anything contained in sub-sections (2) and (3), a society, which has as one of its objects the disposal of the produce of its members, may provide in its by-laws, or may otherwise contract with its members,- (a) that every such member shall dispose of his produce through the society, and (b) that any member, who is found guilty of a breach of the by-laws or of any such contract, shall reimburse the society for any loss, determined in such manner as may be specified in the by- laws. Clause (b) of sub-section (1), mentioned above, is squarely applicable to the 10 facts of this case. The petitioner-society thus had first charge on the disputed plot. Respondent No. 2, it seems, because of this, thought it fit to issue a notice to the petitioner-society. As said above, the petitioner-society did not respond to his call and did not go before him. 10. The question is, whether their silence at that stage had permitted respondent No. 2 to issue the impugned certificate? The answer is in negative. Respondent No. 2 was aware that the charge was created by a judicial order in favour of the petitioner-society. Even though the petitioner- society had not gone before him, he could not have assumed that the order creating charge in favour of the petitioner-society would come to an end and would be set at naught only because the petitioner-society had not come to him and had not filed objection to the proposed action. It was incumbent upon respondent No. 2 to get a clear order from the concerned authority who had issued the order creating the "charge". In this case, this was the Co-operative Court who had passed the order creating "charge". No attempt was made either by the respondent No. 2 or by the respondent-society to get the judicial order creating charge set aside. Such order remained in force and is still in force. Such order could not have been ignored by respondent No. 2. There was no justification for respondent No. 2 to issue the certificate. The learned A.G.P. Mr. Kurundkar could not show any law to defend the action of the respondent No. 2, but to my surprise refused to concede that the action was unlawful. When rather belatedly in 2010, the petitioner-society approached respondent No. 2 for review of his decision to issue the impugned certificate, he erroneously said that since the petitioner- society had not responded his notice issued prior to issuance of the certificate, they are unable to raise objection to the legality of the certificate. In fact, even at that stage, respondent No. 2 could have/ought to have 11 reviewed and recalled his order of issuance of the certificate. 11. Learned Advocate appearing for the purchaser tried to suggest that his client had bonafide purchased the property. He pointed out that on the day when the sale-deed was effected, the entry in respect of charge in favour of the petitioner-society had stood removed from the P.R. Card. He urged the Court to direct the respondent-society to refund consideration amount with interest. I am afraid, I am not inclined to enter into the question whether the purchaser-respondent No. 6 bonafide entered into the transaction, but the respondent-society since beginning was aware of the petitioner-society’s charge on the disputed plot. They ought not to have sold the same to the purchaser. Since the said transaction was void, it would be in the interest of justice to direct the respondent-society to refund the amount of consideration of Rs.6,00,000/- to the purchaser and order to that effect is required to be passed in this writ petition only. In view of this, the writ petition succeeds. Rule made absolute, in terms of following order : ORDER 1. The impugned certificate dated 16th May, 2008 stands quashed and set aside. 2. The order passed by respondent No. 2 on the review application dated 31st March, 2010 also stands set aside. 3. The sale deed dated 30th December, 2008 of the disputed plot executed by the respondent-society in favour of the purchaser (respondent No.6) is declared void and stands set aside. 4. The respondent-society shall refund the consideration amount of Rs.6,00,000/- (Rupees Six Lac) to respondent No.6. 12 5. Respondent Nos. 1 and 2 shall pay costs of Rs.5,000/- to the petitioner-society. ( A.V. NIRGUDE, J. ) SRM/wp/5958/10/29/4/11/ok