Member-Loanee Cannot Seek to Void His Own Sale for Breach of Charge Conditions: Supreme Court

"The law cannot, and does not, reward a person for his/her own wrongs" — Supreme Court on alienation of charged land under Maharashtra Co-operative Societies Act. On June 2, 2025, the Supreme Court of India delivered a significant ruling interpreting the implications of Sections 47 and 48 of the Maharashtra Co-operative Societies Act, 1960. The Court rejected an appeal by the legal heirs of the original plaintiff seeking reconveyance of agricultural land, holding that the original plaintiff, having breached statutory embargoes on sale, could not approach the court for relief based on his own illegal actions.

The case involved agricultural land (Survey No. 30, Village Kendal Bk., Taluka Rahuri, Maharashtra), originally belonging to the plaintiff Machhindranath. The plaintiff had taken a loan from a registered co-operative society and created a statutory charge on the land as required under the Maharashtra Co-operative Societies Act.

Subsequently, the plaintiff, due to financial difficulties, executed a registered sale deed on 02.11.1971 in favor of his son-in-law and nephew (defendant no.1) and simultaneously executed an unregistered "Ram Ram Patra" (reconveyance deed) implying that the land would be reconveyed upon repayment of Rs. 5,000. Later, defendant no.1 sold a portion of this land to defendant no.2.

The plaintiff filed a suit in 1973 seeking reconveyance and possession of the land. The Trial Court decreed in his favor, holding the sale void under Sections 47 and 48. However, the High Court overturned this verdict, and the Supreme Court was called upon to adjudicate the legal questions.

Whether the Sale Deeds Violated Sections 47 and 48 of the Maharashtra Co-operative Societies Act?

Section 48(d) of the Act bars alienation of land on which a charge has been created in favor of a co-operative society until the entire loan is repaid. Section 48(e) declares such alienation as void.

The Court acknowledged that both sale deeds (dated 02.11.1971 and 15.07.1972) were executed during the subsistence of the statutory charge, without prior permission from the society, and hence were technically in violation of the law.

“Alienation of any such property on which a charge is created in favour of the concerned cooperative society… is totally beyond the capacity of the owner/member who has declared it as a charged property…” — Supreme Court

Can the Member-Loanee (Plaintiff) Seek Relief Based on His Own Wrong?

A central issue was whether the plaintiff, having breached the statutory bar by executing the sale, could seek to invalidate the transaction.

“It would, therefore, not be within the domain of the member-loanee who himself commits a breach to take a stand that the act done by him should be declared void… The law cannot, and does not, reward a person for his/her own wrongs.”

The Court ruled that the statutory right to challenge such alienation rested solely with the co-operative society, not with the defaulting member.

Effect of Subsequent Removal of Charge by the Society

Though the Society removed the charge on 27.08.1973 after receiving repayment, the appellants argued that this did not cure the earlier illegality.

However, the Court held that once the Society accepted repayment and resolved to release the charge, the purpose of protection under the Act stood fulfilled:

“For all practical purposes, the interest of the Society has not suffered.”

• The Court rejected the theory that the transaction was a loan with a conditional sale, finding that the reconveyance deed ("Ram Ram Patra") was unregistered, unsigned by the same scribe, and lacked crucial commercial terms (like interest, time-frame, or penalty for default).

• It ruled that defendant no.2 was a bona fide purchaser for value without notice, noting that he relied on a registered title and the plaintiff had declared the property unencumbered.

• Regarding the difference between void and voidable transactions, the Court emphasized:

“…unless the society comes forward to seek its nullification/setting aside, the same would at best be a voidable action and not void ab initio.”

• The Court further applied the maxim “ex injuria sua nemo habere debet” — no one can benefit from his own wrong — to deny relief to the plaintiff.

“It would not be proper for a Court of law to assist or aid such person who states that the wrong he committed be set aside and a relief be granted…”

The Supreme Court concluded that the appeal had no merit and upheld the High Court's decision to dismiss the suit for reconveyance. It clarified the interpretation of Sections 47 and 48 of the Maharashtra Co-operative Societies Act, asserting that the protective provision cannot be misused by the very party who violates it.

Date of Decision: June 2, 2025