Case at a Glance
A couple bought a flat in Vasundhara Apartment Cooperative Group Housing Society through a SARFAESI bank sale after the original member’s loan defaulted, received a Sale Certificate dated 12 March 2010, and later had the membership transferred to them — only for it to be cancelled on 28 May 2024 on the ground that their purchase documents were not registered. A Division Bench of the Delhi High Court held that the right of membership cannot be taken away without strict compliance with Section 86 of the Delhi Cooperative Societies Act, 2003 and Rule 99 of the 2007 Rules, that the couple had not been given an opportunity to defend themselves, and that a SARFAESI Sale Certificate “ought to be given credence just like other registered sale documents.” It directed the Registrar of Cooperative Societies to hear both sides and decide by 25 December 2026.
Flat No. A-407 in the Vasundhara Apartment Cooperative Group Housing Society was originally allotted to a member who mortgaged it to State Bank of Indore for a loan taken by an entity he ran. When the loan defaulted, SARFAESI proceedings followed, and Santosh Agarwal and Sarita Agarwal bought the property in the bank’s sale. The Sale Certificate is dated 12 March 2010. They also applied to the DDA for conversion of the flat from leasehold to freehold, a matter that is pending in a separate writ.
The couple sought transfer of the membership, which was transferred and then cancelled on 28 May 2024. The cancellation notice said the purchase documents were not registered. A civil suit against the cancellation was disposed of on the ground that the civil court lacked jurisdiction. They then made representations under Section 86 to the Registrar of Cooperative Societies on 28 April 2025, which had not been acted on when they approached the High Court under Article 226.
The Key Question Before the Court
Can a cooperative housing society cancel the membership of a person who bought the flat in a SARFAESI bank sale without following the expulsion procedure in Section 86 of the Delhi Cooperative Societies Act and Rule 99 of the Rules — and what weight does the bank’s Sale Certificate carry?
Membership is a right that needs due process
The Court set out Section 86(1) of the Delhi Cooperative Societies Act, 2003 — which permits expulsion only on specified grounds such as persistent default, deception in obtaining membership or conduct harming the society, after an opportunity of hearing following three registered notices, a three-fourths vote of the committee and approval of the Registrar — along with the deemed-approval and appeal provisions in Section 86(2)–(4) and the detailed steps in Rule 99 of the 2007 Rules. Relying on Delhi EPDP Coop. Group Housing Society Ltd. v. Registrar Coop. Societies and R.K. Aggarwal v. Registrar Cooperative Societies, Delhi, it held that the right of membership “cannot be taken away without strict compliance” with these provisions, which are “mandatory in nature”, and that neither the society nor the Registrar can “arbitrarily expel any member.” It also referred to Jai Kishan Khanna v. Shantnu Apartment Coop. Group Housing Society on how the 180-day period and the limitation for appeal operate.
Applying these principles, the Court noted that the cancellation notice “merely states that the membership deserves to be cancelled” and that the petitioners were not given an opportunity to defend themselves under Rule 99. On the society’s objection about unregistered purchase documents, the Court observed that bank auction sales under SARFAESI are “within the four corners of law” and that a Sale Certificate “ought to be given credence just like other registered sale documents.” Since the statutory scheme places the decision with the Registrar, the Court held that “this matter deserves to be looked into by the Registrar” and sent it there with a deadline, leaving all rights and remedies open.
What the Court Actually Held
- The right of membership in a cooperative housing society cannot be taken away without strict compliance with Section 86 of the Delhi Cooperative Societies Act, 2003 and Rule 99 of the 2007 Rules, which are mandatory.
- Neither the society nor the Registrar can arbitrarily expel a member; here the cancellation notice gave no proper basis and no opportunity of defence was given.
- A Sale Certificate issued in a SARFAESI bank sale ought to be given credence just like other registered sale documents.
- The Registrar of Cooperative Societies to hear the petitioners and the society, consider the Sale Certificate dated 12 March 2010, and decide either confirming or rejecting the expulsion in accordance with law by 25 December 2026; all rights and remedies left open.
Why This Judgment Matters
- Many Delhi flats in cooperative group housing societies change hands through bank auctions; this ruling protects such buyers against summary cancellation of membership.
- It restates that Section 86 and Rule 99 — notices, hearing, committee vote and Registrar approval — are mandatory before any expulsion.
- It gives a SARFAESI Sale Certificate the weight of a registered sale document when a society examines membership.
What Should Advocates Take Away From the Judgment?
For Flat Buyers
- If you buy a society flat at a bank auction, keep the Sale Certificate and apply promptly for transfer of membership.
- If the society cancels your membership without notices and a hearing, approach the Registrar under Section 86, and the High Court if the Registrar does not act.
For Counsel
- Test any expulsion against each step of Section 86(1) and Rule 99 — three registered notices, hearing, three-fourths vote and Registrar approval.
- Cite Delhi EPDP Coop. Group Housing Society Ltd. v. Registrar Coop. Societies and R.K. Aggarwal v. Registrar Cooperative Societies, Delhi on strict compliance.
Key Takeaways
- Society membership cannot be cancelled without the full Section 86 process.
- Rule 99 notices and a hearing are mandatory.
- SARFAESI Sale Certificate to be treated like a registered sale document.
- Registrar to decide by 25 December 2026.
Frequently Asked Questions
Can a housing society cancel my membership without a hearing?
No. The Delhi High Court held that Section 86 of the Delhi Cooperative Societies Act and Rule 99 require notices, an opportunity of hearing, a three-fourths committee vote and the Registrar’s approval, and these are mandatory.
Is a bank’s SARFAESI Sale Certificate enough proof of purchase?
The Court said such a certificate ought to be given credence just like other registered sale documents, and directed the Registrar to take it into consideration.
Did the Court restore the membership?
Not directly. It directed the Registrar to hear both sides and decide, confirming or rejecting the expulsion, by 25 December 2026, keeping all rights and remedies open.
Conclusion
The judgment protects buyers who acquire society flats through lawful bank sales from being shut out on technical objections. A society may have grounds to expel, but it must follow the statutory route to get there.
Practical takeaway: A cancelled society membership can be challenged before the Registrar under Section 86; insist on the Rule 99 procedure and rely on the SARFAESI Sale Certificate as your title document.
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