“Void” or “Voidable”? – Supreme Court Re-defines Section 48(e) of the Maharashtra Co-operative Societies Act

1. Introduction

Civil Appeal (SLP (C) No. 7728 / 2020) Machhindranath (deceased) through L.Rs. v. Ramchandra Gangadhar Dhamne & Ors., decided on 02 June 2025 by the Supreme Court of India, involved a decades-long intra-family agricultural land dispute from Ahmednagar, Maharashtra.

Essential facts:

• The original plaintiff (Machhindranath) had created a statutory charge on his ancestral land (Survey No.30) in favour of a registered co-operative credit society for a crop loan, as required by Section 48 of the Maharashtra Co-operative Societies Act, 1960 (“MCS Act”).
• While the charge subsisted, he executed (02-11-1971) a registered sale deed in favour of his nephew/son-in-law (Defendant 1) for ₹5,000 and simultaneously wrote an unregistered “Ram-Ram Patra” promising reconveyance on repayment of the same amount.
• Eight months later Defendant 1 sold 10 acres out of the land (15-07-1972) to Defendant 2 for ₹30,000. Defendant 2’s successors (R-3, R-4) are presently contesting.
• The society later passed a resolution (27-08-1973) releasing the charge after the loan was cleared.
• The plaintiff sued (1973) for possession and reconveyance, alleging the two sale deeds were void under Sections 47 & 48 MCS Act and under the Prevention of Fragmentation and Consolidation of Holdings Act, 1947.

The Trial Court decreed in favour of the plaintiff, but a chequered appellate history in the Bombay High Court culminated in dismissal of the suit. The plaintiff’s heirs approached the Supreme Court.

2. Summary of the Supreme Court Judgment

Ahsanuddin Amanullah, J. (with Sudhanshu Dhulia, J. concurring) dismissed the appeal and affirmed the High Court, creating a significant doctrinal shift:

1. Violation of the embargo in Section 48(d) MCS Act does not automatically render a transfer “void ab initio”. The alienation is merely voidable at the option of the co-operative society, whose pecuniary interest the provision seeks to protect.
2. The debtor (member-loanee) who himself breaches the embargo cannot later invoke Section 48(e) to undo his own transfer; the maxim nemo ex injuria sua commodum capere potest applies.
3. Once the society voluntarily releases its statutory charge, the impediment disappears; such release retrospectively validates earlier transfers, absent society’s challenge.
4. The unregistered “Ram-Ram Patra” could not control or eclipse the duly registered sale deed: it lacked registration, time-limit and consideration escalation, and thus did not prove a conditional sale/mortgage by conditional sale (Section 58(c) T.P. Act).
5. The subsequent purchaser (Defendant 2) was protected as a bona fide purchaser for value without notice of any subsisting charge once the society had released it.

3. Analytical Commentary

3.1 Precedents Cited & Their Influence

• Sindav Hari Ranchhod v. Jadev Lalji Jaymal, (1997) 7 SCC 95 – held that only the society (not the debtor or heirs) can challenge a transfer made in violation of Section 49 Gujarat Co-operative Societies Act (pari materia to Section 48 MCS Act). Adopted verbatim to reinforce locus standi limitation.
• Dhurandhar Prasad Singh v. Jai Prakash University, (2001) 6 SCC 534 – detailed distinction between void and voidable. The Court quotes this case extensively to reason that Section 48(e) creates a voidable status pending action by the aggrieved society, not an inherent nullity.
• Ram Pyare v. Ram Narain, (1985) 2 SCC 162; Kusheshwar Prasad Singh v. State Of Bihar, (2007) 11 SCC 447 – for the equitable maxim preventing a party from benefitting from his own wrong.
• C.S. Venkatesh v. A.S.C. Murthy, (2020) 3 SCC 280 – cited by appellants on conditional sale/mortgage principles but distinguished by the Court as the Ram-Ram Patra lacked statutory formalities.

3.2 Legal Reasoning Unpacked

1. Statutory Purpose of Section 48
   • Protect the credit society, not to arm the debtor with a defence against his own alienation.
   • Hence, the sanction requirement is directory vis-à-vis third parties and absolute only in favour of the society.
2. Void vs. Voidable
   • “Void” in Section 48(e) is construed contextually; borrowing Dhurandhar, a transaction is “voidable” until the society elects to avoid it.
   • Without an action by the society, courts must treat the transfer as operative.
3. Subsequent Release of Charge
   • Society’s resolution (27-08-1973) extinguished the charge.
   • Once the underlying mischief (unpaid loan) vanished, no policy reason remained to invalidate the sale deeds.
4. Equitable Bar on Self-Help
   • A debtor cannot create a statutory breach and later seek equitable relief to reclaim property on that very breach.
5. Effect on Bona Fide Purchaser
   • Defendant 2 purchased through a registered instrument for value; in absence of a cautionary entry or suit by the society, his title cannot be disturbed.

3.3 Potential Impact of the Decision

• Shifts interpretation of “void” in co-operative credit statutes across India; borrowers can no longer automatically void transfers—they must wait for, or induce, action by the society.
• Enhances certainty in land markets: bona fide purchasers receive stronger protection once the charge is cleared, even if clearance occurs post-sale.
• Encourages societies to actively protect their security interests; passivity now amounts to waiver.
• May influence allied statutes (e.g., Section 31-B RDB Act, security interests under SARFAESI) where statutory or contractual charges exist.
• Underscores need for meticulous compliance with registration/stamp formalities in “conditional sales” and family arrangements.

4. Simplifying Complex Concepts

Statutory “Charge”

A legal encumbrance created by law (not by contract) giving the lender priority over the property for debt recovery.

Section 48(d) vs. 48(e)

48(d) prohibits the borrower from alienating charged land.
48(e) declares such alienations “void”; the judgment clarifies it means “voidable, at society’s instance”.

Void vs. Voidable

Void ab initio: a legal nullity; never has legal effect.
Voidable: valid until someone entitled (here, the society) successfully challenges it.

Ram-Ram Patra

Colloquial Maharashtrian document expressing future reconveyance—unenforceable unless registered and stamped duly under the Transfer of Property Act and Registration Act.

Equitable Maxim

Ex injuria sua nemo habere debet: no one should profit from his own wrong.

5. Conclusion

The Supreme Court has decisively held that transfers of land under statutory charge to a co-operative society are not automatically nullities; they remain effective unless and until the concerned society moves to set them aside. This re-interpretation narrows borrowers’ ability to reclaim property by citing their own statutory breach and strengthens transactional security for purchasers. The case stands as a precedent that statutory words like “void” must be read purposively, balancing legislative intent, equitable principles, and market certainty.

For practitioners, the ruling signals two key imperatives: (i) verify active participation of the co-operative society before pleading Section 48; (ii) ensure conditional sale-cum-reconveyance arrangements are formalised with registration, timelines, and fair consideration to be enforceable.