Court rules that errors in sale documents regarding society name and flat area cannot bar membership; previous owner's claim over excess area rejected as mala fide.
In a significant ruling dated September 30, 2026, the Delhi High Court (Division Bench comprising Justices Prathiba M. Singh and Dinesh Bhatt) directed the Ispat Co-operative Group Housing Society Ltd. to grant membership to Devender Mudgal and co-petitioner, purchasers of a flat at Ispatika Apartments, Dwarka, acquired through a bank auction under SARFAESI proceedings. The Court dismissed the society's refusal to admit the purchasers as members based on clerical errors in the sale certificate and sale deed, which incorrectly mentioned the society's name as "Ispatika" instead of "Ispat" and understated the flat area due to increased Floor Area Ratio (FAR).
The petitioners had purchased Flat No. E-304 for Rs. 1.91 crore in a SARFAESI auction conducted by Bank of Baroda against the earlier owner, Mr. Lalit Kumar Jha, who had mortgaged the property. Despite the Registrar of Cooperative Societies (RCS) twice directing the society to grant membership subject to standard formalities and indemnity bonds, the society persisted in denying membership, citing discrepancies in the documents.
The Court held that the purchasers could not be faulted for errors made by the bank in describing the property in sale documents and that the identity of the flat was undisputed. Importantly, it rejected Mr. Jha's claim over an 18 sq. meter excess area arising from increased FAR, terming it mala fide and contrary to law. The Court noted that once the entire flat was mortgaged and auctioned as a single asset, any increase in FAR would benefit the purchaser, not the previous owner.
Further, the Court emphasized that challenges to the auction sale and claims over alleged unsold portions of the flat could not be entertained in civil court, as the SARFAESI Act and the Debt Recovery Tribunal (DRT) provide exclusive jurisdiction and remedies. It relied on a prior judgment by the District Court dismissing Mr. Jha's suit for partition and declaration as barred by law, reinforcing that the plaintiffs could not circumvent SARFAESI procedures.
The Court ordered the society to treat the judgment as membership itself and directed issuance of the membership certificate within one week, with membership effective from the date of the first RCS order (July 2, 2025). It also imposed costs of Rs. 25,000 on the society for non-compliance with RCS directives and unfairly supporting the previous owner's baseless claims.
This judgment underscores the legal sanctity of SARFAESI auction sales and protects bona fide purchasers from undue harassment caused by procedural errors or mala fide claims by prior owners. It reinforces the principle that cooperative societies cannot obstruct membership transfers on technical grounds once RCS directions are in place.
Bottom Line:
Delhi Co-operative Societies Act, 2003 - Purchasers of flat in bank auction under SARFAESI cannot be denied membership of co-operative housing society on ground of errors in sale documents regarding society name or flat area/FAR - Once entire flat stood mortgaged and was auctioned, previous owner retained no right in alleged excess area arising from increased FAR - Society directed to issue membership; Court treated its order as membership and imposed costs for non-compliance with RCS directions.
Statutory provision(s):
Constitution of India Article 226, Delhi Co-operative Societies Act, 2003 Sections 91, 105; Delhi Co-operative Societies Rules, 2007 Rule 124; Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 Sections 17, 34
Devender Mudgal v. Registrar of Cooperative Societies, (Delhi)(DB) : Law Finder Doc Id # 2992082
