ALIENATION OF CHARGED PROPERTY NOT AUTOMATICALLY VOID UNDER SECTION 48(E) UNLESS CHALLENGED BY SOCIETY: SUPREME COURT CLARIFIES MAHARASHTRA CO-OPERATIVE SOCIETIES ACT:

The Supreme Court has ruled that the alienation (transfer) of property charged in favor of a Co-operative Society under Section 48(e) of the Maharashtra Co-operative Societies Act, 1960 is not void ab initio (invalid from the outset) but is voidable and only at the instance of the concerned Society. In essence, such a transaction remains valid unless the Society itself takes action to challenge and nullify it. A third party cannot independently claim that the transaction is void without the Society asserting its rights.

This decision came in a case where the original plaintiff had created a charge on his ancestral property in 1969 to secure a loan from a registered Co-operative Society. Later, in 1971, he borrowed ₹5,000 from his nephew (defendant No.1) and executed a registered sale deed for the same property in his nephew's favor. On the same day, a reconveyance deed was signed, agreeing to return the property once the amount was repaid. In 1972, defendant No.1 sold a part of the property to defendant No.2, prompting the plaintiff to file a suit seeking possession and reconveyance.

In 1973, the Society passed a resolution releasing its charge over the property, acknowledging repayment of dues by the plaintiff. However, the Trial Court ruled the 1971 sale deed void under Section 48 and ordered reconveyance. This was later overturned by the Bombay High Court, prompting the plaintiff’s appeal to the Supreme Court.

A bench of Justices Sudhanshu Dhulia and Ahsanuddin Amanullah held that Section 48(e), though stating that alienation in contravention of clause (d) is void, must be read in a directory sense. It means the section empowers only the aggrieved Society to challenge such alienation. If the Society does not raise an objection, the transaction cannot be declared void on its own or by another party, including the loanee.

The Court further clarified that even if the loan amount was not fully repaid before the 1971 sale, the Society’s subsequent release of its charge in 1973 meant its interest was ultimately protected. Section 48(c), which relates to variation of the charge, by necessary implication includes the full release of charge once dues are settled.

Importantly, the Court emphasized that a person cannot seek relief based on his own wrongdoing. In this case, the plaintiff had voluntarily executed the sale deed and later attempted to have it nullified. The Court refused to assist him, stating that allowing such relief would amount to endorsing an illegality.

It also doubted the authenticity of the reconveyance deed and found that defendant No.2 was a bona fide purchaser. Upholding the High Court’s decision, the Supreme Court concluded that only the Society had the standing to challenge the alienation, and since it had not, the transaction could not be considered void.

The judgment underscores that the protection granted under Section 48(e) exists primarily for the benefit of the Society and cannot be invoked by the borrower to reverse his own actions.