Janakalyan Sahakari Bank Limited v. State of Maharashtra

2011. Therefore, the Revisional Authority erred in holding that the order of attachment affected the ownership of respondent Nos. 4 and 5.

16. The Development Agreement dated 18 October 2011 is a registered and valid legal document. It clearly mentions that respondent Nos. 4 and 5, as owners, agreed to receive a fixed amount of Rs. 1,13,00,000 as consideration. However, according to respondent Nos.[4] and 5, they have received only the first installment amount of Rs.28,25,000 out of the total five installments agreed to be paid. The agreement also authorizes the developer to construct, sell, and transfer various tenements and units to third parties at such price and on such terms as the developer may decide. It further provides that the developer will be entitled to receive and retain all sale proceeds as his own.

17. When such terms are read together, it becomes evident that the agreement was not a mere permission to develop but a transfer of a valuable interest in the property. The developer obtained commercial and beneficial rights connected with the land. These rights were not temporary or revocable at the will of the owners. They were created under a registered instrument, supported by consideration, and acted upon by both sides.

18. Under settled principles of property law, once a registered agreement creates an interest in immovable property, such interest cannot be cancelled or withdrawn by issuing a unilateral notice or letter. The law recognizes that rights arising out of a registered instrument continue to exist until they are lawfully extinguished. Cancellation of such an agreement must be through mutual consent or by an order of a competent Civil Court declaring it void or rescinding it for specific legal reasons such as fraud, misrepresentation, or breach proved in evidence.

19. A mere notice through an Advocate does not have any legal force to nullify a registered instrument. It is only a private communication expressing one party’s intention. Unless that intention is confirmed by judicial declaration, the registered document continues to hold its binding effect.

20. Therefore, the Revisional Authority’s reliance on the notice dated 2 May 2023 is misplaced. The notice by itself cannot extinguish the rights created by a registered document. In the absence of any civil court decree or credible evidence of lawful termination, the Development Agreement must be treated as subsisting and operative in law.

21. Thus, on the basis of credible evidence and settled legal principles, it is clear that the developer continued to have an interest in the property on the date of attachment. The attachment order issued by the Special Recovery Officer against the developer’s rights was, therefore, valid and legal.

22. The Revisional Authority further observed that the developer had failed to comply with certain conditions of the Development Agreement and, therefore, had lost all rights in the property. This reasoning also travels beyond the scope of the revisional jurisdiction under the Maharashtra Cooperative Societies Act and Rules. The Revisional Authority was not required to examine contractual disputes between the parties.

23. The Revisional Authority ignored the legal position that the attachment under Rule 107(11) was confined only to the rights and interests of the judgment-debtor. The property did not stand attached in its entirety. Hence, the residual ownership of respondent Nos. 4 and 5 was never affected. The Revisional Authority’s conclusion that the order of attachment was invalid is, therefore, contrary to record and unsustainable in law.

24. The objection under Rule 107(19) filed by respondent Nos. 4 and 5 was rightly rejected by the Special Recovery Officer. Rule 107(19) permits an objection only on limited grounds that the property attached does not belong to the judgment-debtor or that the objector has a prior right, title or interest therein. In the present case, the objection did not fall within the said parameters. The residual ownership of respondent Nos. 4 and 5 was never attached. What was attached were the rights derived by respondent No. 6 under the Development Agreement.

25. The contention of respondent Nos. 4 and 5 that the Development Agreement dated 18 October 2011 created only an “inchoate right” in favour of respondent No. 6 and not a full ownership or proprietary interest requires careful examination in light of the document itself and the legal position governing such transactions.

26. An “inchoate right” means an incomplete or imperfect right which does not create any enforceable interest in property. It is a mere expectation of a future benefit, dependent upon certain conditions being fulfilled. However, whether a development agreement creates such an incomplete right or a substantive interest depends entirely on the language of the agreement and the intention of the parties as expressed therein.

27. The Development Agreement in the present case is a registered document executed between the lawful owners, respondent Nos. 4 and 5, and the developer, respondent No. 6. It records payment of consideration of Rs. 1,13,00,000 by the developer and expressly authorizes the developer to sell, transfer, and dispose of tenements and other units in the proposed development at prices determined by the developer. It further allows the developer to receive and retain all such sale proceeds as his own beneficial receipts. These clauses are not incidental or preparatory in nature. They confer clear and valuable commercial rights connected with the property.

28. When such rights are created under a registered and stamped instrument, supported by consideration, they cannot be treated as incomplete or inchoate. The agreement does not merely permit development on behalf of the owner. It goes further and grants independent rights of sale, collection of consideration, and full authority to deal with the developed property. This shows that the developer acquired a beneficial and transferable interest in the immovable property.

29. If the intention of the parties had been to create only a limited or revocable permission, the agreement would have expressly provided that the developer’s rights were subject to the owner’s approval or revocable upon breach. No such clause appears in the document. Instead, the language of the agreement gives the developer complete autonomy to sell and receive payments, which indicates transfer of a valuable proprietary interest.

30. The contention that the right was inchoate is also inconsistent with the conduct of the parties. Respondent Nos. 4 and 5 accepted payment of consideration as per clause 11 and granted irrevocable licence for ingress, egress, and regress to the developer for carrying out the project. Once such rights are granted and acted upon, the transaction cannot be reduced to a mere incomplete or expectant right.

31. Moreover, under settled law, when a development agreement is registered and confers authority to transfer or create third-party interests in property, it results in the creation of an interest in that property. The developer becomes entitled to enforce such rights unless the agreement is lawfully cancelled by a Civil Court.

32. Therefore, the claim that the Development Agreement created only an inchoate right is not supported by either the contents of the document or by credible evidence on record. The rights created in favour of the developer were definite, enforceable, and supported by consideration. Such rights amount to a legal interest in the immovable property and cannot be unilaterally extinguished by a mere notice.

33. Hence, the argument that respondent No. 6 had only an inchoate or incomplete right in the property must be rejected. The evidence clearly shows that the Development Agreement created a valid, subsisting, and enforceable proprietary interest in favour of the developer.

34. The submission of respondent Nos. 4 and 5, relying on Rule 107(2) of the Maharashtra Cooperative Societies Rules, 1961, requires close examination. The language of Rule 107(2) does not support the interpretation that the creditor is mandatorily required to first proceed against the mortgaged immovable property before proceeding against any other property of the borrower or guarantor.

35. Rule 107(2) provides that the applicant may indicate whether he wishes to proceed against the immovable property mortgaged to him or other immovable property, or to secure the attachment of immovable property. The key expression used in this provision is “may indicate.” The rule, therefore, gives a discretion to the applicant-creditor. It does not impose any compulsion or sequence of priority that the creditor must first exhaust recovery from mortgaged property before proceeding against other properties.

36. The legislative intent behind Rule 107(2) is procedural. It prescribes the form, the manner of application, and the requirement of depositing process costs. The concluding portion enables the creditor to specify in the application the property against which recovery proceedings are to be initiated. It is only an enabling clause to guide the Recovery Officer in identifying the property against which the recovery process is to be executed.

37. If the Legislature intended to create a mandatory sequence of recovery, it would have used words such as “shall first proceed against” or “shall not proceed against other property unless.” No such words appear in the rule. Instead, the use of the permissive term “may indicate” clearly shows that the choice is left to the discretion of the creditor.

38. The attachment made under Rule 107(11) was confined to the rights and interest of one of the Guarator’s (respondent No. 6) in the property. The Recovery Officer acted strictly within the scope of the recovery certificate issued under Section 101 of the MCS Act.

39. Hence, the reliance placed by respondent Nos. 4 and 5 on Rule 107(2) is misplaced. The said rule neither restricts the creditor’s right to attach the guarantor’s property nor imposes any procedural hierarchy. The Recovery Officer, therefore, committed no illegality in proceeding against the property in which the judgment-debtor had a legal and beneficial interest.

40. This interpretation is supported by the plain wording of the rule and the scheme of Rule 107 as a whole, which is intended to facilitate efficient recovery of dues and not to restrict the creditor’s remedies by unnecessary procedural limitations.

41. The Revisional Authority also committed an error in holding that the order of the Special Recovery Officer was not a reasoned order on merits. The Special Recovery Officer had examined the objection and found it not maintainable in law. Once the objection itself did not satisfy the conditions under Rule 107(19), there was no further question of entering into factual adjudication.

42. The argument of respondent Nos. 4 and 5, relying on the decision of the Supreme Court in Bhartiya Seva Samaj Trust (supra), does not hold merit when examined in the facts of this case.

43. In that judgment, the Supreme Court held that where setting aside one illegal order results in reviving another illegal order, the Court should refrain from exercising its jurisdiction, as the outcome would serve no legal purpose. The doctrine aims to prevent a situation where the Court, by quashing one wrong order, indirectly restores another wrong order.

44. However, that principle applies only when both the orders in question suffer from legal infirmities or are passed without authority of law. In the present case, the situation is entirely different. The order passed by the Special Recovery Officer on 18 May 2024 was well within his statutory powers under Rule 107 (19) of the Maharashtra Cooperative Societies Rules, 1961. The Special Recovery Officer examined the objection filed by respondent Nos. 4 and 5 and found that it was not maintainable because ‘rights and interest in the attached property have already been assigned in favour of developer by development agreement’. That order was in accordance with the law and within the authority vested in the officer.

45. On the other hand, the Revisional Authority, while exercising powers under Section 154 of the Maharashtra Cooperative Societies Act, went far beyond its jurisdiction. It examined the validity of a registered Development Agreement and recorded findings on the alleged cancellation of the said agreement based on a private notice issued by an Advocate. These questions are civil in nature and can be decided by a Civil Court after proper evidence is led. The Revisional Authority had no power to pronounce upon the validity or subsistence of a registered instrument creating an interest in immovable property.

46. By doing so, the Revisional Authority assumed a jurisdiction which the law does not confer upon it. The impugned order, therefore, suffers from a patent jurisdictional error. Once the Revisional Authority exceeded its statutory powers and interfered with a lawful order passed by the competent authority, its decision cannot be sustained.

47. Therefore, this Court is not faced with two illegal orders. The order of the Special Recovery Officer is legally valid, and the order of the Revisional Authority is patently illegal. The principle laid down in Bhartiya Seva Samaj Trust cannot apply because there is no question of reviving an illegal order. Restoring the Special Recovery Officer’s order would, in fact, restore legality and uphold the rule of law.

48. The consistent judicial view is that when a subordinate authority acts within its powers and follows due procedure, its order cannot be set aside merely because the revisional authority takes a different view without legal foundation. The supervisory jurisdiction of this Court under Article 227 of the Constitution is precisely meant to correct such overreach and restore lawful exercise of authority.

49. Accordingly, the reliance on Bhartiya Seva Samaj Trust is misplaced. The proper course is to quash the illegal order of the Revisional Authority and restore the lawful order of the Special Recovery Officer, which was passed in due exercise of jurisdiction and supported by credible evidence on record.

50. The Revisional Authority was not competent to go into questions relating to alleged breach or cancellation of the Development Agreement. Such issues are contractual and can only be decided by the Civil Court in appropriate proceedings. It is clarified that civil proceeding or civil suit includes arbitration proceedings. The Revisional Authority exceeded its jurisdiction in recording findings which have the effect of declaring the registered Development Agreement cancelled.

51. Respondent Nos. 4 and 5 have sought permission to file an additional affidavit to bring subsequent events on record, claiming that this Court can consider those events while deciding the petition. They have argued that even in light of the judgment of the Supreme Court in Mohinder Singh Gill (supra), the Court is not precluded from taking note of later developments and moulding the relief accordingly.

52. This submission requires careful examination. The law laid down in Mohinder Singh Gill is clear and has been consistently followed by the courts. The Supreme Court held that the legality of an administrative or quasi-judicial order must be judged on the reasons recorded in the order itself. Authorities cannot later supplement or improve their reasoning through affidavits or oral submissions. In other words, an order must stand or fall on the reasons mentioned in it, and subsequent justifications cannot cure a defect that existed at the time of its making.

53. In the present case, the impugned order of the Revisional Authority dated 21 January 2025 is under challenge. Its legality must be determined only on the basis of the reasons contained in that order. The Revisional Authority allowed the revision primarily on the ground that the Development Agreement stood cancelled by a notice issued through an Advocate. There was no other finding or material forming the basis of that decision. Hence, while exercising supervisory jurisdiction, this Court must confine itself to examining whether the Revisional Authority acted within its jurisdiction and whether its reasons are legally sustainable.

54. Allowing respondent Nos. 4 and 5 to file an additional affidavit at this stage, introducing new facts or subsequent events, would effectively amount to permitting them to supplement or alter the reasoning of the impugned order. That would be contrary to the ratio in Mohinder Singh Gill. The Supreme Court has made it clear that the validity of an order must be judged on the reasons that existed when the order was passed, not on what is later sought to be added or justified.

55. Further, respondent Nos. 4 and 5 have not produced any credible evidence showing that the subsequent events sought to be brought on record have any direct bearing on the legality of the order under challenge. The dispute before this Court concerns the jurisdictional correctness of the Revisional Authority’s order, not the merits of the Development Agreement or subsequent transactions. Therefore, additional affidavits or later events cannot alter the legal position already determined by the impugned order.

56. Courts exercise discretion to consider subsequent events only when such events have a direct impact on the relief sought and when ignoring them would result in injustice. In this case, the relief sought by the petitioner is to quash the impugned order of the Revisional Authority and restore the lawful order of the Special Recovery Officer. The question is purely legal and jurisdictional. Subsequent events do not affect this issue.

57. Therefore, the request of respondent Nos. 4 and 5 to file an additional affidavit cannot be accepted. The scope of this writ petition is confined to examining the legality of the impugned order dated 21 January 2025 based on the material and reasons existing at the time of its passing. Allowing new materials now would not only be contrary to the principle laid down in Mohinder Singh Gill but would also prejudice the fairness of judicial review.

58. Hence, this Court holds that there is no justification to permit respondent Nos. 4 and 5 to file any additional affidavit or rely upon subsequent events. The case must be decided strictly on the basis of the record as it stood before the Revisional Authority and the reasons contained in the impugned order.

59. Respondent Nos. 4 and 5 have submitted that the petitioner– Bank is ready to make a statement before this Court that it will not transfer, alienate, or create any third-party rights in the property until the arbitration proceedings between the parties are concluded. Based on this assurance, they have requested that the present matter be remanded to the Special Recovery Officer for a fresh consideration of their objections on merits.

60. This submission needs to be assessed in light of the nature of the proceedings, the powers of the authorities involved, and the evidence available on record.

61. Firstly, the present dispute arises out of recovery proceedings initiated under Section 101 of the Maharashtra Cooperative Societies Act, 1960, and the steps taken under Rule 107 of the Maharashtra Cooperative Societies Rules, 1961. The Special Recovery Officer, in such proceedings, performs a limited statutory function. His jurisdiction is confined to enforcing the recovery certificate issued by the Registrar. He is empowered to attach and sell the property of the judgment-debtor to satisfy the outstanding dues.

62. While considering objections under Rule 107(19), the Recovery Officer cannot decide complex civil disputes such as ownership rights, validity of registered agreements, or contractual breaches. His power is restricted to examining whether the property attached belongs to the judgment-debtor or to a third person. If the residual ownership of the objector is not affected and the attachment is confined to the rights and interest of the judgment-debtor, the objection cannot be entertained.

63. In the present case, the Special Recovery Officer had already examined the objection filed by respondent Nos. 4 and 5 and found that it was not maintainable because the attachment was limited to the rights and interests of respondent Nos. 6 in the property and did not affect the residual ownership rights of respondent Nos. 4 and 5. This finding is based on the wording of the attachment order and is supported by the record. There is no new material or credible evidence brought on record to show that this finding is incorrect.

64. The submission regarding the petitioner’s undertaking not to transfer or create third-party rights, does not affect the legality of the attachment or the correctness of the order passed by the Special Recovery Officer. An undertaking of this nature does not cure or alter the legal foundation of the proceedings. It may protect the interest of petitioner temporarily, but it cannot be a ground to remand the matter.

65. Remanding the matter to the Special Recovery Officer would serve no purpose because the issue raised by respondent Nos. 4 and 5 is purely legal and has already been decided in accordance with law. The objection under Rule 107(19) was rightly held to be not maintainable. The Revisional Authority, while allowing the revision, exceeded its jurisdiction by entering into issues of validity and cancellation of the Development Agreement, which can be adjudicated by a Civil Court.

66. Furthermore, the arbitration proceedings referred to by respondent Nos. 4 and 5 are independent of the statutory recovery process under the MCS Act. Arbitration concerns contractual disputes between the parties, whereas recovery proceedings are concerned with enforcement of a certified debt. The pendency of arbitration proceedings does not prevent the Recovery Officer from exercising statutory powers to recover dues from the guarantor’s property.

67. Therefore, the offer made by the petitioner–Bank, cannot form the basis for remand. The jurisdictional correctness of the Special Recovery Officer’s order must be judged on the record and reasons already existing, not on subsequent assurances.

68. On an overall consideration, there is no credible ground to interfere with or remit the matter for fresh consideration. The Special Recovery Officer’s order dated 18 May 2024 is lawful, complete, and based on proper interpretation of Rule 107. The request of respondent Nos. 4 and 5 for remand, therefore, deserves to be rejected.

69. The impugned order, therefore, suffers from jurisdictional error, legal infirmity, and non-application of mind to the scope of Rule 107. It amounts to interference with a lawful attachment order passed by the competent authority.

70. Accordingly, the impugned order dated 21 January 2025 Mumbai in Revision Application No. 190 of 2024 is quashed and set aside. The order dated 18 May 2024 passed by the Special Recovery Officer rejecting the objection of respondent Nos. 4 and 5 is restored. It is further clarified that the attachment reinstated by the Special Recovery Officer shall be subject to outcome of arbitration proceedings.

71. Rule is made absolute in the above terms. No order as to costs.

72. At this stage, Mr. Godbole, senior Advocate appearing on behalf of respondent Nos.[4] and 5 requests for stay of this judgment.

73. However, for the reasons stated in the judgment, the request for stay is rejected. (AMIT BORKAR, J.) Note: This Judgment & Order is corrected as per order dated 10 November 2025 and order passed in Review Petition (St.) No.35230 of 2025. The corrections are shown in italicize.