Section 48(e) Of Co‑operative Societies Act Is Treated As Directory; Bonafide Purchaser Upheld Where Society Does Not Challenge

A bench of Justices Sudhanshu Dhulia and Ahsanuddin Amanullah heard an appeal arising from competing claims over agricultural land in Ahmednagar and examined whether transfers executed by a borrower in breach of the Maharashtra Co‑operative Societies Act, 1960 could be treated as void ab initio or only voidable. The appeal challenged a Division Bench judgment of the Bombay High Court (Aurangabad Bench) which had affirmed a Single Judge's order setting aside a trial decree for reconveyance and possession.

The Court dismissed the appeal and affirmed the High Court’s order, holding that while Section 48 of the Act imposes an embargo on alienation of land charged in favour of a society, the protection afforded thereby is primarily for the society and, where the society did not move to set aside the alienation, such transactions operated at best as voidable and third‑party rights could be sustained. The Court emphasised that a plaintiff who committed the breach could not be allowed to “take advantage of his own wrong.” The Court, in its reasoning, observed: “In the present case, it is also not in dispute that the Society, in whose favour the charge was created on the land in question, never moved before any forum for enforcing its charge over the suit land or raised any grievance with regard to either of the Sale Deeds. Thus, the situation which emerges is that Section 48(e) of the Act which says that any alienation made in contravention of the provisions of clause (d) shall be void has to be read as directory to the extent that the same can be acted upon only at the instance of the party aggrieved (viz. the society concerned) upon whom the right has been created under the statute. In other words, with regard to a transaction, unless the society comes forward to seek its nullification/setting aside, the same would at best be a voidable action and not void ab initio.” The Court also recorded that “defendant no.2 was a bonafide purchaser from respondent no.1/defendant no.1, on the date the Sale Deed was executed on 15.07.1972,” and refused to assist a claimant who sought to benefit from his own breach.

Background The dispute concerned 15 acres and 17 guntha of ancestral agricultural land in Village Kendal Bk., Rahuri, Ahmednagar. The original plaintiff (Machhindranath) had declared the land as charged in favour of a local cooperative society after taking a loan; a mutation recording that charge preceded a registered sale deed executed by the plaintiff in favour of his nephew/son‑in‑law on 2 November 1971. A contemporaneous document styled “Ram Ram Patra” purported that the sale was conditional and that reconveyance would follow repayment of Rs.5,000. The vendee sold a portion to defendant no.2 by registered deed dated 15 July 1972 for Rs.30,000. The plaintiff filed Special Civil Suit No.49/1973 seeking reconveyance, possession and mesne profits.

The Trial Court found the 1971 sale void under Section 48 and decreed reconveyance and possession. The Single Judge, after remand and additional issues, set aside that decree and dismissed the suit. A Division Bench of the High Court later dismissed the plaintiff’s letters patent appeal, a decision now affirmed by the Supreme Court. The central legal questions were construction of Sections 47 and 48 of the Maharashtra Co‑operative Societies Act, 1960 (embargo on transfer where a declaration of charge exists), the effect of subsequent release of charge by the Society (Resolution dated 27.08.1973), and whether voidness under Section 48(e) operated against third‑party purchasers.

The Supreme Court analysed the distinction between “void” and “voidable,” relying on precedents including Sindav Hari Ranchhod and authorities on void/voidable acts, and concluded that Section 48(e) protects the society’s interest and, in practice, operates as a right enforceable by the society; absent the society’s challenge, the transaction could be treated as voidable. The Court observed defects in the alleged reconveyance document (unregistered, unstamped and lacking terms like time‑limit or escalation), found no evidence of market valuation to support the plaintiff’s claim of gross undervaluation, and held defendant no.2 to be a bona fide purchaser without notice. The appeal was dismissed and no costs were awarded; the Registry was directed to prepare the decree sheet.

Case Details: Case No.: 2025 INSC 795 Case Title: Machhindranath S/O Kundlik Tarade (deceased) through LRs v. Ramchandra Gangadhar Dhamne & Ors. Appearances: (List advocates if available, for both sides using the format) For the Petitioner(s): Advocates not specified in the reported judgment For the Respondent(s): Advocates not specified in the reported judgment