Court’s Decision
The Bombay High Court (Justice Milind N. Jadhav) set aside orders passed by the Assistant Registrar and the Divisional Joint Registrar of Co-operative Societies that had rejected the petitioners’ membership applications in a housing society. The Court ruled that a sale certificate issued by a Recovery Officer in a public auction is a valid and complete conveyance of ownership, even if unregistered, as such certificates are expressly exempt from compulsory registration under Section 17(2)(xii) of the Registration Act, 1908.
Holding that the co-operative society’s conduct was “arbitrary, mala fide, and in wilful defiance of settled law,” the Court directed the society to admit the petitioners as members, restore water and electricity supply, issue duplicate share certificates, and permit necessary repairs. The Court declared, “Once a property is sold in a court auction and sale confirmed, ownership passes to the purchaser — no procedural delay such as non-registration can divest that title.”
Facts
The case revolved around two flats (Nos. B-38 and B-39) in a housing society at Mumbai originally owned by a borrower who had mortgaged them to Union Bank of India for a business loan. Upon default, the Debt Recovery Tribunal (DRT) issued a recovery certificate in 2002 and directed attachment and auction of the mortgaged properties in Recovery Proceedings No. 1 of 2003.
Both flats were sold in a public auction in January 2007, with the petitioners declared highest bidders, paying ₹13 lakhs for each flat along with poundage fees. The Recovery Officer confirmed the sale on 20 April 2007 and handed over physical possession on 1 November 2007 after evicting unauthorized occupants, including office bearers of the housing society who had trespassed.
However, despite having paid stamp duty and holding valid sale certificates, the petitioners faced repeated obstruction from the society, which refused membership and denied utilities for over a decade. The society alleged that one of the two flats (B-38) was never mortgaged and thus could not have been auctioned.
Applications for membership before the Assistant Registrar were rejected in 2019 on the ground that the sale certificate was not registered. Revision petitions before the Divisional Joint Registrar met the same fate in June 2024, prompting the present writ petition before the High Court.
Issues
- Whether a sale certificate issued by a Recovery Officer under DRT proceedings requires registration under the Registration Act, 1908.
- Whether the society could refuse membership to bona fide auction purchasers citing technical objections such as non-registration or missing share certificates.
- Whether the society’s conduct amounted to mala fide obstruction of lawful ownership.
Petitioners’ Arguments
The petitioners argued that they were lawful auction purchasers, having acquired title through a judicial sale confirmed by the DRT. The sale certificate, though sealed and stamped in 2017, related back to the sale confirmation of 2007 and was exempt from registration under Section 17(2)(xii) of the Registration Act.
They asserted that all stamp duty and penalties were duly paid and that both authorities erred in treating the unregistered sale certificate as invalid. The sale had never been challenged by any party, and thus attained finality.
The petitioners emphasized that public auction sales conducted by Recovery Officers are “sales in law” — once confirmed, they automatically transfer title, and no separate registration deed is required. They further alleged that the society acted maliciously and high-handedly, having previously attempted to occupy the flats illegally, and continued to frustrate their rights by denying membership, obstructing repairs, and issuing threats of eviction.
Respondents’ Arguments
The State supported the registrar’s decision, asserting that both authorities acted within their limited jurisdiction and had rightly refused membership for non-compliance with registration formalities.
The housing society, on the other hand, claimed that the petitioners’ purchase was fraudulent, contending that only Flat No. B-39 was mortgaged, while Flat No. B-38 was outside the DRT’s jurisdiction. It also pointed to the non-availability of original title documents and share certificates, arguing that the society was justified in refusing membership. It maintained that the DRT could not auction property not secured under mortgage and that the sale certificate was issued “after ten years,” showing procedural irregularities.
Analysis of the Law
The Court meticulously reviewed the provisions of the Registration Act, 1908 and the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, reaffirming that sale certificates issued by public authorities are exempt from registration.
Section 17(2)(xii) of the Registration Act explicitly excludes from compulsory registration any “certificate of sale granted to any purchaser of any property sold by public auction by a Civil or Revenue Officer.” The sale certificate is merely evidence of title, not an instrument creating it. Ownership vests upon confirmation of sale, not upon registration.
The Court observed that the DRT proceedings, sale proclamation, and recovery orders clearly included both flats, and no challenge to the sale was ever made. Thus, the society’s objection after fifteen years was both frivolous and legally untenable.
Further, the Court held that once a sale is confirmed, neither non-registration nor absence of original share certificates can defeat the purchaser’s ownership. The society’s obligation was to recognise the lawful buyer and facilitate membership, not to question judicially confirmed sales.
Precedent Analysis
The Court relied on several authoritative rulings:
- State of Punjab & Anr. v. Ferrous Alloy Forgings Pvt. Ltd. (2024 SCC OnLine SC 3372) — Held that a sale certificate issued under DRT proceedings is not compulsorily registrable, and the transfer of ownership occurs on sale confirmation, not certificate issuance.
- Municipal Corporation of Delhi v. Pramod Kumar Gupta (AIR 1991 SC 401) — Clarified that title passes upon confirmation of sale; the sale certificate is only declaratory.
- Smt. Shanti Devi L. Singh v. Tax Recovery Officer (AIR 1991 SC 1880) — Reaffirmed exemption of sale certificates from registration under Section 17(2)(xii).
- B. Arvind Kumar v. Govt. of India (2007) 5 SCC 745 — Confirmed that a sale certificate is evidence of ownership; no separate transfer deed is necessary.
- Inspector General of Registration v. G. Madhurambal (2022 SCC OnLine SC 2079) — Observed that filing a copy of the sale certificate with the Registrar under Section 89 of the Act suffices for record purposes.
Court’s Reasoning
Justice Jadhav found that both the Assistant and Divisional Joint Registrars “completely misdirected themselves” by relying on technicalities and ignoring the finality of the DRT sale. The Court categorically held that:
“The reasoning adopted by both Authorities reflects complete non-application of mind to settled legal principles governing auction sales conducted by Recovery Officers.”
The judge further observed that the society’s office bearers attempted to grab the flats after failing to win the auction and later used their official position to block the petitioners’ membership. Their conduct, the Court said, “violated settled legal principles and amounted to wilful abuse of power.”
The society’s demand for vacation of the flats was held to be “wholly without authority of law.”
Conclusion
The Bombay High Court allowed the writ petition, quashing the orders of the Divisional Joint Registrar (27 June 2024) and Assistant Registrar (16 December 2019). It declared the petitioners lawful owners of Flat Nos. B-38 and B-39 and directed the housing society to:
- Grant membership and complete all formalities within two weeks.
- Restore water and electricity supply within 72 hours of the order’s upload.
- Issue duplicate share certificates and accept maintenance dues without interest.
- Permit repairs to the flats and refrain from any interference.
The Court also granted liberty to the petitioners to pursue appropriate proceedings against the society for its fraudulent and illegal acts.
Implications
This judgment reaffirms that auction purchasers under DRT or court sales acquire valid title without registration. Housing societies cannot obstruct membership on hyper-technical grounds. The ruling underscores the supremacy of judicial sales over private transactions and discourages arbitrary conduct by co-operative societies seeking to undermine such sales. It ensures protection for genuine auction purchasers and promotes the sanctity of recovery proceedings under financial statutes.