A long-running disagreement over the auction sale of the real estate held by a defunct cooperative society was recently resolved by the Supreme Court in Ahmednagar District Central Cooperative Bank Ltd. vs. The State of Maharashtra & Ors. The cooperative bank that filed the challenge claimed that the auction was undervalued and that there were procedural flaws. The Court ultimately affirmed the sale even though it acknowledged certain procedural errors. However, it granted the appellant some relief by using its authority under Article 142 of the Constitution.
The Appellant’s Contentions
The appellant, Ahmednagar District Central Cooperative Bank, sanctioned a cash credit loan of ₹95 lakh to Mula Sahakari Soot Girni Ltd., a cooperative society under liquidation. After the society defaulted, the bank looked for recuperation of ₹1,05,98,710/- furthermore intrigued. The bank's essential grievance was that the property, at first esteemed at ₹4.10 crore in 2012, was inevitably unloaded for a simple ₹2.51 crore. The bank contended that the property was horribly underestimated which the sell off prepare was vitiated by misbehaviors.
The appealing party encourage fought that the liquidation and sell off strategies commanded beneath the Maharashtra Agreeable Social orders Act, 1960 were not appropriately taken after. Outstandingly, the sell off date was put off numerous times without satisfactory open notice, coming about in constrained cooperation. As it were two bidders were present at the ultimate sell off, though the law requires at slightest three members. In spite of these issues, the Tall Court rejected the appellant's challenge, provoking the bank to approach the Preeminent Court.
The Respondents’ Defense
They also highlighted that three bidders had initially expressed interest, but only two participated in the final auction. The successful bidder, Agricultural Produce Market Committee, Rahuri, defended its purchase, emphasizing that it had lawfully emerged as the highest bidder.
The Supreme Court’s Observations
Justice Dipankar Datta, writing for the bench, noted that while the auction process had certain procedural shortcomings, the appellant's conduct raised concerns. The bank had ample notice of the auction and the upset price but failed to challenge the process in a timely manner. The Court observed:
"The appellant was fairly and squarely aware of the upset price for the auction sale. The appellant, so to say, was sitting on the fence and watching which direction the auction process proceeds."
The delay, coupled with the fact that the property had already changed hands, led the Court to conclude that the bank could not challenge the auction process at this stage.
Relief Granted
Although the Court upheld the auction, it recognized the appellant’s financial concerns, especially given the significant difference between the initial valuation and the final sale price. In a bid to do complete justice, the Court invoked Article 142 to direct the respondent no. 6, Agricultural Produce Market Committee, Rahuri, to pay the appellant ₹1,05,98,710/- (without interest) towards full and final settlement of its dues. The Court further ordered that if the amount is not paid within three months, it will accrue simple interest at 6% per annum
Conclusion
While the Court did not overturn the auction sale, it balanced the equities by ensuring that the appellant would recover its dues. This case underscores the importance of timely legal intervention and adherence to procedural requirements in auction sales under liquidation proceedings. The ruling also highlights the Supreme Court’s willingness to invoke its extraordinary powers under Article 142 to deliver complete justice when necessary.
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TAGS: auction sale liquidation undervaluation Maharashtra Cooperative Societies Act Supreme Court of India Article 142 procedural irregularities cooperative bank.
