The Law Cannot Reward a Person for His Own Wrong: Supreme Court Clarifies Void vs Voidable Land Sales under Cooperative Societies Act

Case Summary

• Case Name: Machhindranath S/o Kundlik Tarade (Deceased) through LRs v. Ramchandra Gangadhar Dhamne & Ors.

• Date of Judgement: 2 June 2025

• Coram: Hon'ble Mr. Justice Ahsanuddin Amanullah and Hon'ble Mr. Justice Sudhanshu Dhulia

• Appellants: Legal Representatives of the deceased plaintiff Machhindranath

• Respondents: Legal Representatives of original defendants

• Advocates: Not specified by name in the judgment

• Acts and Sections Cited:

  • Maharashtra Co-operative Societies Act, 1960: Sections 47 and 48

  • Prevention of Fragmentation and Consolidation of Holdings Act, 1947

• Key Judgements Cited:

• C.S. Venkatesh v. A.S.C. Murthy, (2020) 3 SCC 280

• State of Rajasthan v. Shiv Dayal, (2019) 8 SCC 637

• Sindav Hari Ranchhod v. Jadev Lalji Jaymal, (1997) 7 SCC 95

• Dhurandhar Prasad Singh v. Jai Prakash University, (2001) 6 SCC 534

• Ram Pyare v. Ram Narain, (1985) 2 SCC 162

• Kusheshwar Prasad Singh v. State of Bihar, (2007) 11 SCC 447

  
  

Introduction

In a detailed and nuanced judgment dated 2 June 2025, the Hon’ble Supreme Court of India addressed the long-disputed issue of whether a sale executed in violation of Sections 47 and 48 of the Maharashtra Co-operative Societies Act, 1960 (“the Act”) could be declared void, particularly when such action is sought by the very person who committed the breach. The judgment engages deeply with the doctrine of ex turpi causa non oritur actio and the jurisprudential divide between “void” and “voidable” transactions.

Background of the Dispute

The controversy revolves around agricultural land (Survey No. 30) in Rahuri, Ahmednagar, Maharashtra—ancestral property of the original plaintiff, Machhindranath. In 1969, the plaintiff created a charge on the land in favour of a registered co-operative society to secure a loan. Subsequently, in 1971, he sold the land to his son-in-law and nephew (Defendant No. 1) by a registered deed, while simultaneously executing an unregistered Ram Ram Patra—a reconveyance deed stating that the land would be returned upon repayment of ₹5,000.

This transaction was followed in 1972 by a second sale to Defendant No. 2, who acquired 10 acres from the first purchaser. The plaintiff challenged this transaction, seeking possession and reconveyance, alleging the sale violated the statutory charge.

Trial and Appellate Proceedings

The Trial Court ruled in favour of the plaintiff, declaring the sale void under Section 48 of the Act. However, the Single Judge and the Division Bench of the Bombay High Court took contrary views in successive rounds of appeal, ultimately siding with the defendants. The matter eventually reached the Supreme Court.

Key Legal Issues

1. Whether the alienation of the charged land without prior consent of the society is void or voidable.

2. Whether the subsequent discharge of the loan and release of the charge validates past unauthorised alienations.

3. Whether a party can seek relief by asserting the illegality of its own actions.

Section 48 and the Nature of the Transaction

Section 48 of the Act unequivocally places a statutory bar on alienating land charged in favour of a co-operative society without repayment of the outstanding loan. Any such alienation “shall be void”.

Yet, the Court astutely observed:

"The law cannot, and does not, reward a person for his/her own wrongs."

The Hon’ble Bench clarified that although Section 48(e) uses the word void, its invocation is not automatic. Rather, it must be enforced by the society to protect its interest, not misused by the debtor to undo his own transaction. This distinction is critical: a statutory prohibition, even when couched in strong language, cannot serve as a tool for unjust enrichment.

Void vs Voidable: Statutory Language and Legal Doctrine

The Court explored jurisprudence to assess whether “void” in Section 48(e) implies an absolute nullity or merely a voidable act. Relying on Dhurandhar Prasad Singh and Kusheshwar Prasad Singh, the Bench held:

“Voidable acts are those which remain effective unless challenged and set aside; void acts are those which are nullities ab initio.”

Applying this to the present case, the Court reasoned that the plaintiff, having created the charge and then wilfully violated the embargo, could not seek to void the transaction when the society itself had taken no such action.

The Question of Reconveyance: Conditional Sale or Colourable Transaction?

One of the main contentions was that the sale was a loan in disguise, backed by a contemporaneous reconveyance agreement (Ram Ram Patra). However, the Court was unconvinced. The reconveyance document lacked registration and was on informal paper.

Notably, the Bench remarked:

“It cannot be believed that a valid reconveyance deed would not specify any time-period or escalation in the amount to be returned… these are conspicuous by their absence.”

Furthermore, the plaintiff never demonstrated that he tendered repayment or that defendant no.1 ever refused to accept it—both preconditions for invoking the reconveyance clause.

Bona Fide Purchaser and Due Diligence

The rights of Defendant No. 2, a subsequent purchaser, were a central issue. The Court held that he had no constructive notice of the encumbrance or reconveyance agreement and thus qualified as a bona fide purchaser for value without notice.

This is a crucial finding because it safeguards innocent third-party interests in property law. As the Court put it:

“The transaction was made on the basis of the title which was apparent… no occasion existed for the purchaser to be cautious.”

Post-Facto Release of Charge: Retrospective Validation?

A novel issue considered was whether the society’s resolution to release the charge (passed after the sales) retrospectively validated the transactions. The Court ruled that while such discharge shows the society’s satisfaction, it does not retrospectively cure the breach or entitle the original loanee to challenge the alienation.

In this context, the Court importantly observed:

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

Conclusion: No Relief for a Self-Inflicted Injury

Ultimately, the Supreme Court dismissed the appeal. It categorically refused to grant relief to a party who had, in essence, violated the law and then approached the court seeking its protection.

In the words of the Hon’ble Bench:

“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 de hors the wrong committed.”

This decision upholds both the integrity of the cooperative credit structure and the sanctity of third-party bona fide transactions, while clarifying the limits of judicial tolerance for opportunistic litigation.

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