Can a society refuse membership to an auction buyer over the old owner's dues? Bombay High Court, July 2026

A flat in your building has been sold at a bank auction. The buyer is at the door with a sale certificate and a membership application, and the previous owner left years of maintenance unpaid. Can the committee insist on payment before admitting the buyer? On 14 July 2026 the Bombay High Court answered that question.

The case in brief

Makrand Shirkant Padalkar And Anr vs Monarch Orchid Co Op. Hsg. Soc. Ltd. (Writ Petition No. 8034 of 2025; 2026:BHC-AS:28599) was decided by Sandeep V. Marne, J., of the High Court of Judicature at Bombay. The society, at Plot 94-95, Sector 19, Kharghar, was the petitioner under Article 227 of the Constitution. The Padalkars, the auction purchasers, were respondents 4 and 5.

Flat 1101 belonged to Milind and Minal Purohit and was mortgaged to North Kanara GSB Co-op Bank. They defaulted on maintenance. The Bank proceeded under sections 13(2) and 13(4) of the SARFAESI Act, and at the e-auction on 17.3.2023 the Padalkars were the successful bidders at Rs 86,20,000. The sale certificate recorded that the flat was sold on an "As is Where is Basis" and that the purchaser undertakes to pay pending and future dues. The society demanded the past dues on 3.5.2023 and issued a demand notice on 10.10.2023 for Rs 8,05,925.

The Padalkars applied to the Registrar under section 23(2) of the Maharashtra Co-operative Societies Act, 1960 (the Act) on 26.10.2023. The Assistant Registrar allowed the application and the Joint Registrar dismissed the society's revision. The question was whether membership can be denied to an auction purchaser who will not pay the previous owner's past dues, and whether clearing them can be a precondition.

What the court decided

The court held that the sale was on an as-is-where-is basis and that the Padalkars inherited the liability attached to the flat. In the court's words, "Padalkars are not entitled to be admitted as members of the Society without first clearing the past maintenance dues." The Registrar-level orders were set aside.

The holding is narrow, and it rested on four things: (i) a SARFAESI as-is-where-is auction whose sale certificate expressly recorded the purchaser's undertaking to pay pending dues; (ii) dues whose amount was not in dispute; (iii) the purchaser's knowledge of the dues, with the society having demanded them promptly and refused membership; and (iv) the statutory charge under section 154B-14 of the Act, which is a charge on the share and interest of a member or past member to the extent of the dues payable.

What the order actually required is less than the Rs 8,05,925 demanded. The society had offered to waive interest up to the date of purchase, a waiver of Rs 3,30,837 against pre-purchase dues with interest of Rs 7,22,079. The Padalkars declined at the hearing, but the court kept the offer open. If the Padalkars pay the principal amount of the past dues within six weeks, without interest up to the date of purchase but with interest after the date of purchase, the society must admit them as members.

Why it matters for your society

The court applied Tanvi's Diamoda Co-op HS v. State of Maharashtra (WP 8631 of 2025): section 154B-7 is mandatory; a transfer is valid between the parties but not effective in the society until the dues are cleared; and the purchaser may not be personally liable for the earlier default but must clear the dues as a burden on the property if he wants membership. Banganga Anurag Co-op HS v. Divisional Joint Registrar, 2026(3) ALL MR 71 was followed: undisputed dues follow Tanvi's Diamoda. Brightland Co-op HS v. Divisional Joint Registrar, 2025 SCC OnLine Bom 2795 was distinguished, where the dues were disputed and the society had neither demanded them nor refused membership.

What your committee should do

1. Demand the past dues from the purchaser in writing, promptly, with the amount stated. Demand notices are issued under bye-law 69.

2. Diarise bye-law 39(c). If the decision on a transfer application is not communicated to the applicant within three months of receipt, the application is deemed accepted and the transferee deemed admitted as a member, as provided under section 22(2) of the Act.

3. Decide the application on the record and communicate the decision in writing. Under bye-law 39(b) the committee may refuse admission on transfer only for non-compliance with the Act, the Rules, the bye-laws or any other law or government order.

4. Ask for the sale certificate and check whether it records an undertaking to pay pending dues. Reconcile the ledger first, because the court relied on the amount being undisputed.

5. Complete the usual transfer formalities under bye-law 38(e): the transfer fee of Rs 500 and the entrance fee of Rs 100 payable by the transferee, and no additional amount by way of donation or contribution under any other pretext. Under bye-law 38(d) a society NOC is not required to transfer the transferor's shares and interest.

Limits of this ruling

The court did not decide the following. Sales that are not on an as-is-where-is basis: The Banganga Anurag carve-out for a contract to the contrary or a waiver of the dues by the society was not applied or analysed on these facts. Seriously disputed dues, which the decisions say go first to section 91 or section 154B-29 of the Act, were not decided. The quantum of the dues and the Padalkars' liability in recovery were left to the section 91 and recovery proceedings.

The 2014 Model Bye-laws have no provision on an auction, a SARFAESI sale, a court sale or an involuntary transfer, and no bye-law makes clearing dues a condition of admission. On interest, bye-law 71 as printed provides simple interest at 21% per annum or a lower rate fixed by the general body, while the apportionment table in rule 106C-12(1)(f) caps interest on defaulted charges at 12% simple interest per annum. On the face of the two texts they conflict, and neither says which prevails.