Court’s Decision
The Bombay High Court, per Justice Amit Borkar, allowed a writ petition filed by a cooperative bank and quashed the order passed by the Divisional Joint Registrar, Cooperative Societies, Mumbai, which had set aside the attachment order issued by the Special Recovery Officer under Rule 107(19) of the Maharashtra Cooperative Societies Rules, 1961 (“MCS Rules”).
The Court ruled that the Revisional Authority had exceeded its jurisdiction by declaring a registered Development Agreement cancelled based solely on an advocate’s notice. The High Court restored the Special Recovery Officer’s order, holding that a registered and acted-upon Development Agreement cannot be annulled unilaterally without a civil court’s declaration.
Justice Borkar remarked:
“A registered instrument creating an interest in immovable property cannot be cancelled by a unilateral notice or letter. Such rights subsist until lawfully extinguished by mutual consent or judicial declaration.”
The Court further clarified that the Revisional Authority’s findings were jurisdictionally flawed, and that the Special Recovery Officer had rightly limited the attachment to the rights and interests of the developer, without affecting the ownership rights of the landowners.
Facts
The dispute arose from a Development Agreement dated 18 October 2011, executed between the landowners and a developer firm for consideration of ₹1.13 crore. Under the agreement, the developer was granted the right to construct, sell, and dispose of units in the redevelopment project and to retain the sale proceeds as its own.
The petitioner-bank had extended credit facilities to the developer (M/s APT Infratech Solutions LLP) and its partners, who defaulted, leading to recovery proceedings under Section 101 of the Maharashtra Cooperative Societies Act, 1960. The Registrar issued a Recovery Certificate on 8 July 2022, followed by an attachment order dated 7 September 2022 under Rule 107(11), attaching the developer’s rights in the property at Matunga, Mumbai.
The landowners filed objections under Rule 107(19), claiming ownership and stating that the Development Agreement had been cancelled via a notice dated 2 May 2023. The Special Recovery Officer rejected the objection as non-maintainable, but the Revisional Authority allowed their appeal, holding the attachment illegal since the development rights had been terminated.
The cooperative bank challenged the Revisional Authority’s decision before the High Court under Article 227 of the Constitution of India.
Issues
- Whether a registered Development Agreement creating an interest in immovable property can be unilaterally cancelled by an advocate’s notice.
- Whether the Revisional Authority had jurisdiction to declare such cancellation valid while exercising revisional powers under Section 154 of the Maharashtra Cooperative Societies Act.
- Whether the attachment under Rule 107(11) of the MCS Rules was confined only to the developer’s rights and interests or extended to the landowners’ ownership.
Petitioner’s Arguments
Senior Advocate for the petitioner-bank argued that the attachment was lawful and limited to the developer’s rights and interests arising from the registered Development Agreement. The landowners’ ownership was never affected.
He submitted that once a Development Agreement is registered and consideration is paid, it creates a legal and beneficial interest in the property. Such interest can be extinguished only through a civil court decree, not by a unilateral cancellation notice.
He further contended that the Revisional Authority lacked jurisdiction to examine the validity or termination of a registered instrument, which falls exclusively within the domain of civil courts. The revisional power under Section 154 does not include adjudication of complex property rights.
The counsel emphasized that the Revisional Authority’s reliance on the advocate’s notice was erroneous, and its conclusion that the developer’s rights stood extinguished was contrary to law and evidence.
Respondent’s Arguments
The respondents, represented by senior counsel, maintained that under Rule 107(2) of the MCS Rules, the bank was required to proceed first against the mortgaged property before attaching other assets. They argued that the Special Recovery Officer violated procedural norms and that the objection under Rule 107(19) was improperly dismissed.
They claimed that the Development Agreement conferred only an inchoate right — a mere permission to develop, not ownership or transfer of proprietary interest. The alleged non-performance by the developer justified its cancellation, making the attachment illegal.
Relying on B. Jeejeebhoy Vakharia & Associates v. Sahara India Commercial Corporation Ltd. (2008 SCC OnLine Bom 536) and Suhas Damodar Sathe v. State of Maharashtra (2025 SCC OnLine Bom 576), they contended that a development agreement that does not confer proprietary rights remains an inchoate arrangement.
They also invoked the Supreme Court ruling in Bhartiya Seva Samaj Trust v. Yogeshbhai Ambalal Patel (2012) 9 SCC 310, arguing that setting aside the Revisional Authority’s order would revive an earlier illegal one.
Analysis of the Law
The Court emphasized that a Development Agreement, once registered, creates an enforceable interest in immovable property when it grants the developer authority to construct, sell, and receive consideration. Such rights are beneficial and transferable, and not revocable unilaterally.
Justice Borkar observed that Rule 107(19) permits objections only if the property does not belong to the judgment debtor or if the objector has a prior legal interest. Since the attachment was confined to the developer’s rights, the landowners’ objections fell outside the permissible grounds.
On Rule 107(2), the Court held that it is merely directory, not mandatory. The use of the phrase “may indicate” gives discretion to the creditor; it does not compel proceeding first against mortgaged property.
The Court reiterated that recovery under the MCS Act is procedural and designed to ensure efficient enforcement, not to restrict creditor remedies through technical limitations.
Precedent Analysis
- Bhartiya Seva Samaj Trust v. Yogeshbhai Ambalal Patel (2012) 9 SCC 310 — The Supreme Court held that courts should not quash one illegal order only to revive another. The High Court clarified that this principle did not apply here, as the Special Recovery Officer’s order was lawful and within jurisdiction.
- Mohinder Singh Gill v. Chief Election Commissioner (1978) 1 SCC 405 — The Court applied this precedent to hold that the legality of an administrative order must be judged on the reasons it contains. Hence, the Revisional Authority could not justify its order through subsequent affidavits or later events.
- B. Jeejeebhoy Vakharia & Associates v. Sahara India Commercial Corporation Ltd. (2008 SCC OnLine Bom 536) — Distinguished. The Court held that the agreement in the present case created definite proprietary rights, not a mere development permission.
- Suhas Damodar Sathe v. State of Maharashtra (2025 SCC OnLine Bom 576) — Referred to interpret inchoate rights but found inapplicable as the present agreement was fully executed and registered.
Court’s Reasoning
The High Court reasoned that the Revisional Authority had overstepped its jurisdiction by deciding issues of contractual breach and validity of the registered Development Agreement — matters exclusively within the civil court’s domain.
Justice Borkar stated:
“A mere notice through an advocate has no legal force to nullify a registered instrument. Unless confirmed by a competent court, the document continues to hold its binding effect.”
The Court further held that the developer’s rights were active on the date of attachment, and therefore, the Special Recovery Officer rightly proceeded against those rights. The Revisional Authority’s conclusion that the attachment affected ownership was factually and legally untenable.
The Court also rejected the respondents’ plea to file additional affidavits based on subsequent events, ruling that judicial review must be confined to the record and reasons existing when the impugned order was passed.
Conclusion
The Court allowed the writ petition and quashed the Revisional Authority’s order dated 21 January 2025, restoring the Special Recovery Officer’s order dated 18 May 2024 rejecting the landowners’ objections.
“The Revisional Authority assumed jurisdiction not vested in it and declared a registered Development Agreement cancelled on the basis of a private notice. Such a finding cannot be sustained.”
The High Court refused the respondents’ request for stay, holding that no interference was warranted.
Implications
- Unilateral cancellation of a registered development agreement by an advocate’s notice has no legal validity.
- The Special Recovery Officer’s jurisdiction under Rule 107 is limited but valid if attachment pertains only to the debtor’s rights.
- Revisional authorities cannot adjudicate civil property disputes or interpret registered contracts.
- Rule 107(2) is discretionary; creditors may attach any property linked to the debtor without first exhausting mortgaged assets.
- Strengthens jurisprudence protecting registered development rights from arbitrary cancellation.
