2025 Supreme(Online)(Bom) 351136

HIGH COURT OF BOMBAY
Amit Borkar, J
Janakalyan Sahakari Bank Limited – Appellant
Versus
State of Maharashtra – Respondent
WRIT PETITION NO.5354 OF 2025

A registered agreement conferring commercial interests in real property creates an enforceable interest that cannot be unilaterally terminated by private notice. Such contractual disputes regarding the subsistence of rights fall outside the statutory jurisdiction of recovery authorities and must be determined by a competent civil court.

Headnote:(A) Maharashtra Cooperative Societies Act, 1960 - Section 101 - Maharashtra Co-operative Societies Rules, 1961 - Rule 107(2), 107(11), 107(19) - Constitution of India - Article 227 - Recovery proceedings - Attachment of interest in immovable property - Jurisdiction of revisional authority.

(B) Registered agreement - Unilateral cancellation - Private notice issued by an advocate is insufficient to nullify a registered instrument creating a legal interest in property - Cancellation of such agreements must be through mutual consent or a declaration by a competent civil court. (Paras 18, 19, 20)

(C) Jurisdictional scope - Revisional authority acting under statutory recovery rules lacks the jurisdiction to adjudicate upon contractual disputes, the validity of registered instruments, or complex questions of title and property rights - Such matters are exclusively reserved for civil courts. (Paras 22, 45, 50)

(D) Recovery procedure - Creditors possess the discretion to identify properties against which to initiate recovery proceedings; there is no mandatory rule requiring the exhaustion of remedies against mortgaged property before proceeding against other assets of the judgment-debtor. (Paras 35, 37) (E) Supervisory jurisdiction - High Court under Article 227 is mandated to correct patent jurisdictional errors committed by inferior authorities and restore the lawful execution of orders that are compliant with statutory provisions. (Paras 48, 49)

Facts of the case:
A financial institution initiated recovery proceedings against a debtor/developer and guarantors, obtaining a recovery certificate. The appointed recovery officer attached the debtor’s rights and interest in a property derived from a registered development agreement. The original property owners filed an objection under the relevant recovery rules, claiming that the development agreement had been cancelled via a private notice issued through an advocate. The recovery officer rejected this objection, finding it not maintainable. Subsequently, the revisional authority set aside the recovery officer’s order, concluding that the developer no longer held rights in the property due to the purported cancellation. The financial institution challenged this revisional order in the High Court.

Findings of Court:
The High Court held that the revisional authority grossly exceeded its jurisdiction by evaluating the validity of a registered contract and accepting a private notice as a valid instrument of cancellation. The court clarified that the attachment of the debtor’s interest in the property during recovery proceedings was limited to the rights held by the debtor and did not affect third-party residual ownership. The impugned order of the revisional authority was deemed legally unsustainable due to a lack of jurisdictional competence.

Issues: 1. Whether a unilateral legal notice is legally sufficient to extinguish rights created via a registered development agreement. 2. Whether a revisional authority in recovery proceedings has the jurisdiction to adjudicate the validity and subsistence of registered contracts. 3. Whether the attachment of a debtor's interest in property by a recovery officer is valid when based on a registered agreement.

Ratio Decidendi: A registered instrument creating an interest in immovable property cannot be nullified by a unilateral legal notice; only a judicial decree can lawfully extinguish such rights. Authorities exercising statutory recovery powers lack the jurisdiction to determine contractual validity or property title disputes, as these constitute issues solely for resolution by a competent civil court. An attachment restricted to the interests of a judgment-debtor remains within the ambit of lawful recovery execution.

Result: Petition allowed. Impugned order of the revisional authority is quashed and set aside. Order of the recovery officer rejecting the objection is restored.