Auction Sale Declared Void For Failure To Deposit Balance; Property Ordered For Fresh Auction

A bench of Justices Pamidighantam Sri Narasimha and Manoj Misra heard six appeals arising from a Bombay High Court order that set aside an auction sale and its confirmation and directed refund and conditional deposits. The appeals challenged the High Court’s decision to annul an auction under Rule 107 of the Maharashtra Co-operative Societies Rules, 1961 and tested the scope of revisional power under Section 154 of the Maharashtra Co-operative Societies Act, 1960.

The Supreme Court held that the confirmation of the auction sale was void because the purchaser did not deposit the entire balance purchase price within the period prescribed by the Rules and that clauses (g) and (h) of Rule 107(11) were mandatory. The Court observed that revision under Section 154 was maintainable to test the legality of confirmation orders. The Court, in its reasoning, observed: “For the aforesaid reasons, we are of the considered view that clauses (g) and (h) of sub-rule (11) of Rule 107 of 1961 Rules are mandatory and serve a larger purpose not limited to the interest of the creditor.” The Court reproduced the consequence in clear terms and held that, as a result, “the confirmation of the auction sale was void as the remainder payment was not made within the period prescribed by the 1961 Rules.” The Supreme Court modified the High Court’s directions and directed that the property be put to a fresh auction in terms of Rule 107(11)(j) and ordered the Bank to refund the amount deposited by the auction purchaser with interest at 6% per annum from the date of deposit until repayment.

Background
The dispute arose from recovery proceedings instituted by Mahanagar Co-operative Bank against M/s Borse Brothers and its partners, culminating in an ex parte award (04.04.1994) and a recovery certificate. A plot (810 sq. m., Chembur) was auctioned by the Special Recovery and Sale Officer (SRO) on 29.01.2005; M/s Adishakti Developers was the highest bidder at Rs.1.51 crore. The purchaser paid parts of the price by several cheques, with the full amount being deposited only by 17.03.2005, beyond the 15-day period then prescribed under Rule 107(11)(h) for payment of the balance.

The heirs and legal representatives of a deceased partner, Panditrao Borse, challenged the sale. The Divisional Joint Registrar condoned delay and set aside the auction, holding that the mandatory rule for depositing the entire amount within 15 days had been breached and that the auction and its confirmation were void. The High Court upheld cancellation and, while accepting an offer to pay outstanding dues by the heirs, directed deposit of Rs.79,44,042 and ordered the Bank to refund Rs.1.51 crore to the purchaser with interest on the surplus, giving the purchaser liberty to seek damages.

On appeal to the Supreme Court the parties contested several issues: whether revisional jurisdiction under Section 154 was available against confirmation orders; whether the Rule 107 payment conditions could be waived by the creditor; and what relief was appropriate where confirmation was rendered void. The Court held that Section 154 conferred wide revisional power and could be invoked to examine the legality of confirmation orders; that Rule 107(11)(g)–(h) required timely payment and that failure to pay the balance within the prescribed time rendered the sale a nullity; and that there was no evidence of waiver by the judgment-debtor or heirs. The Court therefore set aside the confirmation of sale, declared it null and void, directed a fresh auction under Rule 107(11)(j), and ordered repayment to the auction purchaser with 6% interest, without prejudice to any settlement between parties to be presented to the Recovery Officer. The appeals were disposed accordingly and pending applications were closed; there was no order as to costs.

Case No.: 2026 INSC 197; Civil Appeal Nos. 002545–002550 of 2026 (Arising out of SLP (C) Nos. 12343–12346/2018; 12617/2018; 12591/2018)
Case Title: M/s. Adishakti Developers v. The State of Maharashtra & Ors. with Mahanagar Co-operative Bank Ltd. v. The Divisional Joint Registrar, Co-operative Societies & Ors. and Mahanagar Co-operative Bank Ltd. v. The State of Maharashtra & Ors.
Appearances:
For the Petitioner(s): Advocates not specified in the reported judgment excerpt
For the Respondent(s): Advocates not specified in the reported judgment excerpt

Source: 2026 CaseBase(SC) 179