The dispute arose from a loan advanced by the Noida Commercial Co‑operative Bank, a society registered under the Uttar Pradesh Co‑operative Societies Act, 1965, to M/s Sangwan Heights Private Limited. The appellant’s predecessor‑in‑interest acted as guarantor for that loan and, as security, deposited the original title deeds of a 2630 square metre parcel of land situated in Village Bhowapur, District Ghaziabad. By a registered sale deed dated 18 September 2014, the guarantor transferred the property to the appellant, who thereafter claimed to be its owner in possession.
When the borrowing company defaulted on repayment, the bank initiated arbitration proceedings under the provisions of the Co‑operative Societies Act. An award was passed in favour of the bank on 8 November 2019 and subsequently modified on 11 March 2020. The award directed the company and its directors to deposit Rs 1,35,16,345 in three equal monthly instalments, with a stipulation that failure to comply would entitle the bank to sell the mortgaged property to recover the dues. The company did not make the required payments, whereupon the bank conducted a public auction, sold the property to respondent no. 2, issued a sale certificate and executed a sale deed dated 10 January 2022 in favour of the respondent.
Aggrieved by the sale, the appellant first instituted a civil suit seeking a permanent injunction and cancellation of the sale deed executed in favour of respondent no. 2. That suit remains pending without any interim order in the appellant’s favour. Subsequently, the appellant filed a second suit claiming the right of redemption of the mortgage over the same property.
Legal Issue
The core question before the trial court and subsequently the High Court was whether a civil suit for redemption of a mortgaged property, which had already been sold in pursuance of an award passed under the Uttar Pradesh Co‑operative Societies Act, 1965, is maintainable when the relief sought would necessarily interfere with that award. The appellant contended that, as the alleged owner in possession, he was entitled to exercise his statutory right of redemption under the Transfer of Property Act, 1882, irrespective of the sale effected by the bank.
Respondent no. 2 resisted the suit by filing an application under Order VII Rule 11 of the Code of Civil Procedure, 1908, raising four grounds for rejection of the plaint. The trial court accepted three of those grounds in favour of the appellant but held that the suit was barred by Section 111(d) of the Co‑operative Societies Act and consequently rejected the plaint.
Court’s Reasoning
Justice Anish Kumar Gupta, delivering the judgment of the First Appeal, began by noting that the appellant’s plaint sought two distinct forms of relief: (i) redemption of the mortgaged property, and (ii) a declaration that the sale deed dated 10 January 2022 executed in favour of respondent no. 2 was illegal and void. The Court observed that the sale deed in question had been executed expressly in compliance with the award passed by the arbitrator under the Co‑operative Societies Act.
The Court then turned to Section 111 of the Uttar Pradesh Co‑operative Societies Act, 1965, which ousts the jurisdiction of civil and revenue courts in matters arising under the Act. Clause (d) of that section extends the bar to any other order or award made under the Act. Justice Gupta quoted the statutory language and emphasized that the bar is absolute unless the award is first set aside or interfered with through a proceeding expressly permitted by the Act.
Applying the provision to the facts, the Court held that granting the relief of redemption—or declaring the sale deed void—would inevitably require setting aside or interfering with the award, because the sale deed’s validity is directly derived from the award’s direction to sell the mortgaged property. Since the civil court is expressly prohibited from interfering with such an award under Section 111(d), the relief claimed by the appellant cannot be granted.
The Court further addressed the procedural objection raised under Order VII Rule 11 CPC. It reiterated the well‑settled principle that, for the purpose of deciding an application under that rule, only the averments contained in the plaint are to be considered. The trial court had examined those averments and, after finding three of the four grounds inapplicable, proceeded to consider the statutory bar. The High Court found no error in that approach and affirmed the trial court’s conclusion.
Outcome
Accordingly, the Allahabad High Court dismissed the appellant’s first appeal, upholding the trial court’s order that rejected the plaint for redemption of the mortgage. The suit is therefore barred by Section 111(d) of the Uttar Pradesh Co‑operative Societies Act, 1965, and the appellant is left to pursue any remedy that does not entail interference with the arbitral award, such as an application to set aside the award under the specific provisions of the Act.
The decision clarifies the scope of the jurisdictional bar imposed by Section 111(d) and reinforces that civil courts cannot entertain redemption claims where the underlying property has been disposed of in execution of an award under the Co‑operative Societies Act, unless the award itself is first challenged or set aside in the manner prescribed by the statute.