SARFAESI Auction Sale Vs. Automatic Housing Society Membership – Bombay HC

Judgment of the High Court of Bombay in  Writ Petition No.8631 of 2025 of Tanvi Diamoda Cooperative Housing Society Ltd  Vs.  State of Maharashtra and others

As aptly said by Dimple Merchant, every home buyer and the housing society should understand and follow the dictum of this landmark judgment.   Therefore, few facts at a glance.

The Bank had taken possession of gala of a member of the petitioner society under SARFAESI Act.  The Society informed the Bank that an outstanding amount of Rs.57,96,197/- for maintenance is due against the said member and the flat.

However, the Bank sold the flat to the respondent no.4 vide sale deed dated 27.4.2021, without obtaining NoC of the petitioner society.

The respondent no.4 had applied for membership.  However, the society asked for dues.

However, the respondent no.3 allowed appeal of the respondent no.4.

In that context, the High Court examined the frame work of Sections 154B-7 and 154B-12 that buying a flat does not automatically move from one person to another and a buyer does not automatically become a member of the society. 

Section 154B-7 is mandatory that no transfer becomes effective unless  all dues are paid.  The object is that the society should not suffer financial loss only because a member leaves behind arrears.  If the society is compelled to accept transfers without clearance of dues, it will not be able to recover common expenses.   This will affect all existing members.   The provision therefore, protects the financial stability of the society.

A cooperative housing society survives on the timely collection of maintenance charges.   Members enjoy common facilities because every member contributes.   When arrears remain unpaid or years, the society and its members suffer.  The law protects the society in such circumstances.   Section 154B-7 ensures that the financial structure of the society is not disturbed.   It places the responsibility on the transferee to clear the dues when the earlier member defaults.

The purchase under SARFAESI Act does not create an exception.   The SARFAESI Act secures the rights of the secured creditor.  It does not extinguish the lawful claims of the cooperative housing society.   Payment of legitimate dues remains the responsibility of the person seeking membership.  The SARFAESI Act does not water down these obligations.  The secured creditor and cooperative housing society enforces their independent statutory rights.  Neither overrides the other.