[Rule 83 Co-Operative Societies Rules] Registrar Can Set Aside Sale Of Property On Grounds Other Than Those Raised By Decree Holder: Kerala HC

The Court stated that when the sale is not challenged within 30 days from the date of sale of the property, the sale stands confirmed and the Registrar is duty-bound to issue a certificate of sale.

Analysing Rules 81 to 83 of the Kerala Co-operative Societies Rules, Justice N Nagaresh held thus,

“When any immovable property is sold under the Kerala Co-operative Societies Rules, the sale shall be subject to the prior encumbrances on the property, if any. Within 30 days from the date of sale of immovable property, the decree holder or any person entitled to share in a rateable distribution of the assets or whose interests are affected by the sale, may apply to the Registrar to set aside the sale on the ground of material irregularity or mistake or fraud in publishing or conducting the sale. A decree holder or any other interested person can challenge the sale only on the ground of material irregularity or mistake or fraud in publishing or conducting the sale. However, the Registrar has power to set aside a sale on grounds other than those alleged in any application.”

Background Facts

The West Chalakudy Service Co-operative Bank Limited, a Primary Agricultural Credit Society is the petitioner. A woman availed of a credit facility with her husband as a guarantor, mortgaging their land. The husband also mortgaged the same land to avail of more credit facilities. They failed to repay the loan, execution proceedings were initiated and the property was put to sale. The petitioner society purchased the property in a public auction.

The Joint Registrar issued a communication stating that sale confirmation could be granted only when Tahsildar issues a no-objection certificate certifying that the property has no outstanding dues.

The Society approached the High Court challenging the communication issued by the Tahsildar and seeking direction on the Joint Registrar to issue sale confirmation.

The petitioner argued that the registrar or joint registrar could demand a No objection certificate from the Tahsildar for sale confirmation of property under the Co-operative Societies Act or the Kerala Co-operative Societies Rules. It was argued that Section 36A of the Act creates a special charge over the property of a mortgaged property with the Society.

The Joint Registrar submitted that there are attachments over the property and the sale cannot be confirmed without No objection certification from Tahsildar.

Observations

Court noted that Section 36A of the Co-operative Societies Act provides for a charge on movable or immovable property of borrowers by creating Gehan. Gehan is a special charge created on movable or immovable property created in favour of the Society through a mere declaration in writing by the borrower, for securing the payment of money loaned or to be loaned and it has all the characteristics of a valid mortgage.

Court said, “When Section 36A provides for a special charge, it is obvious that a charge created by a decree cannot prevail over Gehan / mortgage / hypothecation.”

The Court stated that Rule 81 of Kerala Co-operative Societies Rules provides for procedure in attachment and sale of immovable property. It noted that Rule 81 (f) state that sale shall be subject to existing encumbrances on the property and it does not prohibit or prevent sale of encumbered immovable properties mortgaged to a Society.

The Court stated a decree-holder or any individual whose interests are affected by the sale shall approach the Registrar within 30 days from the date of sale of property challenging the sale on grounds of material irregularity, mistake or fraud as per Rule 83 of Kerala Co-operative Societies Rules.

The Court went on to state that the Registrar can also set aside the sale on grounds other than those alleged by the decree-holder on the interested person. It stated that the Registrar shall record his reasons in writing before setting aside sale on other grounds.

The Court went on to state that if the sale was not challenged within 30 days, then the Registrar shall make an order confirming the sale under Rule 83.

“After the confirmation of sale, the Registrar shall grant a Certificate of Sale bearing his seal signature to the purchaser in Form No.39”, added the Court.

In the present case, the Court noted that the Registrar or Joint Registrar has not set aside the sale under Rule 83. It thus noted that the sale was confirmed and that the Registrar was duty-bound to issue a certificate of sale. The Court clarified that the Registrar cannot demand a No objection certificate from Tahsildar for issuance of a sale confirmation certificate.

As such, the petition was allowed, and the communication issued by the Joint Registrar seeking a no-objection certificate from the Tahsildar was set aside.

Counsel for Petitioner: Advocates Arjun Raghavan, T.R.Harikumar, Pooja Pankaj

Counsel for Respondent: Senior Government Pleader Sheeja C S

Case Number: W.P.(C) No.23060 of 2024

Case Title: The West Chalakudy Service Co-Operative Bank Ltd V The Special Sale Officer

Citation: 2024 LiveLaw (Ker) 614

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