Litigation Costs Not Part of Recovery Certificate Cannot Be Awarded in Writ Petition Under Article 227: Bombay High Court - 2025-07-21

High Court: Litigation Costs Beyond Recovery Certificate Cannot Be Awarded in Writ Petition

Aurangabad: In a significant ruling on the scope of recovery proceedings under co-operative law, the Bombay High Court at Aurangabad has held that a co-operative society cannot claim litigation expenses, travelling costs, and other ancillary charges through a writ petition under Article 227 of the Constitution, especially when such costs were not part of the original recovery certificate.

Justice Prafulla S. Khubalkar dismissed two cross-petitions arising from a prolonged, 17-year-long legal battle between Shri Mumbadevi Zilla Sahakari Pat Sanstha Maryadit (the "Society") and the legal heirs of a borrower. The court upheld a Divisional Joint Registrar's order that set aside an auction but directed the payment of a "surcharge" by the borrowers, clarifying that while the Society may have a separate cause of action to claim its litigation expenses, a writ petition challenging the registrar's order is not the appropriate forum for it.

Background of the Dispute

The case originates from a Rs. 6 lakh loan taken in 2003 by the late Smt. Indumati Shamrao Bhokare from the Society, secured by a mortgaged property. Following her death in 2005, the Society initiated recovery proceedings against her legal heirs under Section 101 of the Maharashtra Co-operative Societies (MCS) Act, 1960.

This led to a complex and protracted series of legal challenges initiated by both sides, spanning over a decade and involving multiple civil suits, writ petitions, and appeals. The core of the present matter was a challenge to an order dated May 20, 2014, by the Divisional Joint Registrar (DJR), Co-operative Societies, Nashik. The DJR had set aside a re-auction proclamation for the mortgaged property but simultaneously directed the borrower's heirs to pay a surcharge of Rs. 2,46,000 to the Society.

The Society filed a writ petition (WP No. 6887/2014) challenging the DJR's order, seeking to recover over Rs. 16 lakh in accumulated litigation costs. The borrower's heirs filed a separate petition (WP No. 9663/2014), challenging only the direction to pay the surcharge.

Arguments of the Parties

The Society's Stance: Advocate S. V. Adwant, representing the Society, argued vehemently that it was forced into extensive litigation to recover its legitimate dues. He contended that the Society was entitled to recover all costs incurred—including court fees, advocate's fees, travel, and auction expenses—as part of the recovery proceedings. He cited various provisions of the MCS Act, the Code of Civil Procedure, and numerous judgments to argue that the party compelling litigation should bear the costs.

The Borrowers' Heirs' Stance: Advocate Sanket S. Kulkarni, for the heirs, countered that a writ petition under Article 227 could not be converted into a recovery suit for money. He pointed out that the Society's petition only prayed to quash the DJR's order and contained no prayer for the recovery of money. He argued that since the borrowers had paid the entire amount as per the recovery certificate, and the DJR had found irregularities in the auction sale, no further amounts, including the surcharge, could be claimed.

Court’s Analysis and Ruling

Justice Khubalkar, after examining the extensive litigation history, focused on the limited scope of the writ petitions. The court observed that the core issue was the legality of the DJR's order, not a fresh adjudication of costs.

In a pivotal excerpt from the judgment, the Court noted:

"The case in hand being the writ petitions under Article 227 of the Constitution of India, cannot be considered to be appropriate forum to award costs, expenses, that too, in absence of any prayer in that regard... Although it may be true that the Society was required to contest series of litigations for the purposes of recovering its own dues, most crucial issue arises, as to whether while entertaining the petition under Article 227 of the Constitution of India, claim for costs, which is not even prayed, need to be granted."

The Court acknowledged that the DJR had correctly observed that the Society’s claims for litigation expenses were never part of the original recovery certificate and were raised for the first time in the revision proceedings. While the DJR left it open for the Society to "approach the appropriate forum/Court" for these costs, the High Court clarified that this could not be done through the present writ petition.

Regarding the surcharge, the court found it to be legally tenable. It noted that the government, under Section 156 of the MCS Act, has issued resolutions empowering societies to levy a surcharge. The court concluded that the challenge to this part of the order was unsubstantiated.

Final Decision

The High Court dismissed both writ petitions. It ruled that the Society's claim for litigation costs was unsustainable within the scope of its writ petition. It also dismissed the heirs' challenge to the surcharge, finding it legally valid. The Court concluded that since the amount under the recovery certificate had been paid, the heirs were entitled to seek the release of their attached property through appropriate proceedings.