Holding

An auction sale under Rule 107 is a nullity if the purchaser does not pay the balance purchase money within the prescribed 15‑day period.

Summary

The appellant, Shilpa Shares and Securities, had taken a loan from the National Co-operative Bank Ltd. and defaulted on repayment. Under the Maharashtra Co-operative Societies Rules, 1961, the bank initiated recovery proceedings and conducted an auction of the appellant's immovable property pursuant to Rule 107, which requires the purchaser to pay 15% of the price immediately and the remaining 85% within 15 days. The purchaser failed to pay the balance within the stipulated period, and the appellant challenged the validity of the sale. The Supreme Court held that non‑payment of the balance purchase money within the prescribed time is a mandatory condition, and its breach renders the auction sale a nullity, not merely an irregularity. Consequently, the Court set aside the lower court’s order, allowed the appeals, and directed that the property be re‑auctioned after proper advertisement and compliance with Rule 107.

Issues considered

Whether the failure to pay the balance purchase money within 15 days under Rule 107 of the Maharashtra Co-operative Societies Rules makes the auction sale void.
Whether such non‑compliance is a mere irregularity or a complete nullity of the sale.

Legislation cited

Subjects

auction saledefaultco-operative bankMaharashtra Co-operative Societies ActRule 107sale nullitypurchase moneyre‑auction

Judgment

A MIS. SH!LPA SHARES AND SECURITIES AND ORS
v.
THE NATIONAL CO-OPERATIVE BANK LTD. AND ORS

MAY2, 2007

B [S.B. SINHA AND MARKANDEY KA TJU, JJ.]

Maharashtra Co-operative Societies Act, 1960/Maharashtra Co-
operative Societies Rules, 1961; Rule 107:

C Loan-Default in payment by borrower-Recovery by Auction sale of
the property of borrower-85% of the purchase money not paid by the
purchaser-Effect of-Held: Sale was not valid-Under the circumstances,
the bank is directed that the property be again auction sold after proper
advertising and complying with the procedure under R.107 of the Rules-
D Sale of Goods Act, 1930---Sale.

Appellant had borrowed a loan from respondent No.I, a co-operative
bank. Since the appellant was in default in payment of the loan, recovery
proceedings were initiated against it by the bank under the Maharashtra Co-
operative Societies Rules, 1961. In pursuance of the recovery in terms of
E R.107 of the Rules farmed under the Act, an auction was held for sale of the
appellants' properties. Under Rule 107(ll)(g) of the Rules, 15% of the price
of the immovable property has to deposited by the auction purchaser at the
time of the purchase and the remaining 85% of the purchase money has to
be paid within 15 days from the date of such sale. Admittedly, in the present
F case, the aforesaid 85% of the purchase money required to be paid within 15
days from the date of such sale was not paid nor even paid thereafter. Aggrieved,
the appellant challenged the sale as not valid. The petition was dismissed by
the High Court. Hence the present appeal.

Allowing the appeals, the Court
G HELD: I.I. In the decided case of Bairam v. ilam Singh and others, this
Court held that the obligation of the purchaser to deposit the full purchase
money within time is a mandatory requirement and non-compliance of the rule
'
renders the sale a nullity and not a mere irregularity. In view of the above,
the auction sale of the appellants' property was a nullity, and there was no
H 1128
SHILPA SHARES AND SECURITIES '· NATIONAL CO-OPERATIVE BANK LTD. (MARKANDEY KATJU,l. J J129
valid auction sale. [Paras 6 and 7) (1130-C, DI A
' Manila! Mohan/al Shah and Ors v. Sardar Sayed Ahmed Sayed Mahmad
and Anr., AIR (1954) SC 349 and Bairam v. Jlam Singh and Ors., [1996[ 5
... sec 705, relied on .
1.2. It is directed that the said property be again auction sold after B
advertising it in at least two well-known newspapers having wide circulation,
mentioning therein the date, time and place of the auction sale and after
complying with the procedure under Rule 107 of the Maharashtra Co-
I operative Rules. [Para 9) (1130-E)

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 6760-6761 of c
2004.

From the Final Judgment and Order dated 16.01.2003 & 07.03.2003 of the
High Court of Judicature at Bombay in Writ Petition No. 105 of2003 & Review
Petition No. 31 of2003, respectively.
D
Dr. Rajeev B. Masodkar and Anil Kumar Jha for the Appellants.

E.C. Agrawala, Mahesh Agrawal, Gaurav Goel, Amit Kumar Sharma,
Neha Aggarwal, Varun Mathur and Mridula Ray Bharadwaj for the
Respondents.
E
The Judgment of the Court was delivered by

MARKANDEY KATJU, J. I. These appeals have been filed against the
impugned judgment and order dated 16.1.2003 of the Bombay High Court in
writ petition No. 105/2003.
.,. F
' 2. Heard learned counsel for the parties and perused the record.

3. The appellant had taken a loan from respondent No. 1, which is a co-
operative bank registered under the Maharashtra Co-operative Societies Act,
1960 (hereinafter referred to as the 'Act'). Since the appellant was in default G
in payment of the loan, recovery proceedings were taken under the Maharashtra
Co-operative Societies Rules, 1961 (hereinafter referred to as the 'Rules').

4. In pursuance to the recovery, recourse was taken to the procedure
for attachment and sale of the property of the appellant prescribed in Rule
107 of the Rules, framed under the Act. An auction was held for sale of the H
1130 SUPREME COURT REPORTS [2007] 5 S.C.R.

A appellants' properti.es. Under Rule 107(1 l)(g) of the Rules, 15% of the price
of the immovable property has to be deposited by the auction purchaser at
the time of the purchase, and the remaining 85% of the purchase money has
to be paid within 15 days from the date of such sale. Admittedly, in the
present case, the aforesaid 85% of the purchase money was not paid within
B 15 days from the date of the sale nor even thereafter.

5. In Manila/ Mohan/a/ Shah and Ors. v. Sardar Sayed Ahmed Sayed
Mahmad and Anr., AIR (1954) SC 349, it has been held that in such
circumstances there is no sale at all if the balance purchase money is not paid
within 15 days. It is not a mere irregularity. Non-payment of the said amount
C renders the sale proceedings a complete nullity.

6. In Bairam v. !lam Singh and Ors., [I 996] 5 SCC 705, it has been held
that the obligation of the purchaser to deposit the full purchase money within
time is a mandatory requirement and non-compliance of the rule renders the
sale a nullity and not a mere irregularity.
D
7. In view of the above, we are of the opinion that the auction sale of
the appellants' property was a nullity, and there was no valid auction sale.

8. In view of the above, the appeals are allowed. The impugned judgment
is set aside and it is held that there was no valid sale of the appellant's
E property.

9. We, therefore, direct that the said property be again auction sold after
advertising it in at least two well-known newspapers having wide circulation,
mentioning therein the date, time and place of the auction sale and after
complying with the procedure under Rule 107 of the Rules. No costs.
F y
S.K.S. Appeals allowed.

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