Mandatory Timeline For Public Auction Deposit Inviolable; Waiver Requires Consent Of All Parties: Supreme Court
Auction sale conducted in violation of the 15-day deposit window is a nullity
Justice Pamidighantam Sri Narasimha, Justice Manoj Misra, Supreme Court
The Supreme Court has reaffirmed that the timeline prescribed for depositing the balance purchase money in a public auction is mandatory and cannot be extended at the discretion of the Recovery Officer. On the principle of procedural sanctity, the Court held that any auction sale concluded in breach of the statutory period for payment is void ab initio.
The Court while clarifying the scope of waiver in statutory auctions, distinguished between purely contractual arrangements and those governed by rigid regulatory frameworks like the Maharashtra Co-operative Societies Rules, 1961.
As per the judgment the 15-day window for depositing the remainder of the auction price is intended not just for the benefit of the creditor, but to ensure transparency and fairness for the borrower. Consequently, the acceptance of delayed payments by a bank does not cure the inherent nullity of the sale unless the borrower has explicitly consented to such a deviation from the law.
Justice Pamidighantam Sri Narasimha and Justice Manoj Misra while agreeing with the Bombay High Court that the sale was void, modified the relief and directed a fresh auction and refund with interest.
While referring to Shilpa Shares & Securities and others vs. National Co-operative Bank Ltd. and others (2007) 12 SCC 165, the Bench observed “…the view taken by the High Court that confirmation of the auction sale was void as the remainder payment was not made within the period prescribed by the 1961 Rules cannot be faulted. Moreover, provisions of the nature as incorporated in Rule 107(11)(h) are not only for the benefit of the creditor but they serve a public purpose to maintain the sanctity of public auctions else non-serious bidders would participate to manipulate the price to be discovered in a public auction, which may, ultimately, delay the whole process. For the aforesaid reasons, we are of the considered view that clauses (g) and (h) of sub-rule (11) of Rule 107 of 1961 Rules are mandatory and serve a larger purpose not limited to the interest of the creditor. We further hold that there is nothing on record to indicate that the benefit of the said provision has been waived by the borrower including his heirs. In view of the discussion above, we do not find any fault in the order passed by the High Court holding the sale confirmation as null and void”.
Senior Advocates Vijay Hansaria, V. Mohana appeared for the appellant and Senior Advocate Vinay Navare appeared for the respondent.
In the present matter, a plot of land in Chembur, Mumbai, belonging to a partner of the firm M/s. Borse Brothers, was auctioned to recover dues of approximately ₹ 24.19 lakhs plus interest owed to Mahanagar Co-operative Bank.
The auction took place on 29-01-2005, where M/s. Adishakti Developers emerged as the highest bidder at ₹ 1.51 crore. Although 35% of the amount was deposited on the day of the auction, the remaining balance was paid in installments over the next three months, concluding only on 17-03-2005. The Special Recovery and Sale Officer (SRO) subsequently confirmed the sale and issued a sale certificate.
The legal heirs of the deceased partner challenged the auction after several years, primarily during mutation proceedings. They filed a revision under Section 154 of the Maharashtra Co-operative Societies Act before the Divisional Joint Registrar.
Pursuant to which, the Joint Registrar condoned the delay and set aside the auction sale on the grounds that the full payment was not made within the mandatory 15-day period as per Rule 107(11)(h). This order was challenged before the Bombay High Court, which upheld the Registrar's decision, leading to the present appeals before the Supreme Court.
The Court observed that Rule 107(11)(h) explicitly requires the remainder of the purchase money to be paid within 15 days from the date of sale. It noted that while the Recovery Officer has limited discretion to extend the time for paying stamp duty costs, no such power exists to extend the deadline for the purchase money itself.
Regarding the plea of waiver, the Court held that the "parties" whose consent is required for any extension include the secured creditor, the auction purchaser, and the borrower. Since the legal heirs of the borrower had not consented to the delayed payment, the Bank’s unilateral acceptance of the money did not validate the sale. The Court also dismissed objections regarding the maintainability of the revision, stating that an order confirming a void sale can be scrutinized for its legality and propriety.
Accordingly, the Bank was ordered to refund the amount deposited by M/s. Adishakti Developers along with interest at the rate of 6% per annum from the date of deposit until repayment. The Court also clarified that this order would not prejudice the right of the parties to arrive at a settlement before the Recovery officer.
Cause Title: M/S. Adishakti Developers Versus The State Of Maharastra & Ors. CIVIL APPEAL Nos. 002545 - 002548 OF 2026
Appearances:
Appellant: Vijay Hansaria, Sr. Adv., M. Y. Deshmukh, AOR, Manjeet Kirpal, Shiv Kumar, Ashvathaman Dinesh, V. Mohana, Sr. Adv., Dinesh Chandra, Ravindra Keshavrao Adsure, AOR, Sagar N.pahune-patil, Yash Prashant Sonavane, Advocates.
Respondent: Vinay Navare, Sr. Adv., Yashodhan Chandurkar, Mansni Jain, Abha R. Sharma, AOR, Samrat Krishnarao Shinde, Siddharth Dharmadhikari, Aaditya Aniruddha Pande, AOR, Advocates.