We find that neither the Companies Act nor any other
statute make any provision prohibiting the transfer of
species of interest to third parties or to avail of loan for the
flat owners’ benefit.
A legal bar on the saleability or
transferability of such a species of interest, in our view, will
create chaos and confusion.
The right or interest to occupy
any such flat is a species of property and hence has a stamp
of transferability and consequently we find no error with the
warrant of attachment issued by the DRT on the flat in
question.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 7939 OF 2013
(Arising out of SLP(C) No.14563 of 2012)
Hill Properties Ltd.
... Appellant
Versus
Union Bank of India and others
Respondents
...
JUDGMENT
K.S. RADHAKRISHNAN, J.
Dated;September 11, 2013.
Leave granted.
We are in this case concerned with the saleability of
Flat No.23, Building No.2, Hill Park Estate, A.G. Bell Road,
Malabar Hill, Mumbai – 400 006, which is under attachment
in the execution proceedings before the Debt Recovery
Tribunal (DRT), Mumbai.
3.
Union Bank of India, Respondent No.1 herein, had
advanced
some
financial
assistance
respondent sometimes in the year 1992.
to
the
second
Respondent Nos.3
and 4 stood as personal guarantors for repayment of the
dues
of
Respondent No.2. Respondent No.5, being an associate
company
of
Respondent
No.2,
mortgaged
the
aforementioned flat in favour of the Union Bank of India to
secure repayment of the dues of Respondent No.2.
For
realization of the payment of the amount, proceedings were
initiated under the Securitization Act before the DRT,
Mumbai, and the flat in question was attached under the
warrant of attachment on 23rd August, 2005.
4.
The Hill Properties Ltd., Appellant herein, preferred Suit
No.1627 of 2007 before the High Court of Judicature at
Bombay (Ordinary Original Jurisdiction), to release the flat in
question from attachment. Notice of Motion was taken out
for injunction restraining the Bank and others from taking
any steps in furtherance of warrant of attachment or
transferring the suit property to third parties. Learned Single
Judge rejected the Appellant’s Notice of Motion seeking to
release the flat from attachment by its order dated 25 th
January, 2012, giving liberty to the Appellant to make its
offer to purchase the suit flat at a price determined by the
Valuer or the price determined by the Auditor of the
Company, whichever is higher. Aggrieved by the order, the
Appellant preferred Appeal (L) No.185 of 2012 before the
Division Bench of the Bombay High Court contending that
Respondent No.5, being only a shareholder of the Company,
has only a right to occupy the flat and has no right to
mortgage the same to the Bank without permission of the
Company. Further, it was pointed out that Respondent No.5
is only holding “A” equity share (bearing Share Certificate
No.45) in the Appellant Company.
By virtue of Articles of
Association of the Company, Respondent No.5 was only
permitted to use and occupy the flat owned by the Appellant
Company and, therefore, the same is not liable to be
attached and sold.
5.
The Application was resisted by Respondent No.9
contending that the right to occupy the suit flat is the
valuable right and value in the share of the Company is
nothing but the value of the flat and the same could be
transferred for consideration.
The flat was, therefore,
rightly mortgaged to the Bank and the learned Single Judge
was justified in rejecting the claim of the Appellant.
6.
The Division Bench of the Bombay High Court found no
illegality in the order passed by the learned Single Judge and
dismissed the Appeal, so also the Notice of Motion. Various
safeguards incorporated by the learned Single Judge were
reiterated. Aggrieved of the said order, this appeal has been
preferred.
7.
Shri Shyam Divan, learned senior counsel appearing for
the Appellant, submitted that Respondent No.5 is only a
shareholder of the Appellant Company and hence only
permitted to use and occupy one of the flats owned by the
Company and all the rights, title and interest in respect of
the flat in question exclusively vest in the Company.
Learned senior counsel submitted that Respondent No.5
could
not
have
permission of the
mortgaged the
suit
flat without the
Company which is in violation of the
provisions of the Articles of Association of the Company.
Learned senior counsel referred to the Articles of Association
of the Company and submitted that Respondent No.5 being
a shareholder, is bound by the provisions of Articles of
Association of the Company. Learned senior counsel placed
reliance on the judgments of this Court in Bacha F. Guzdar,
Bombay Vs. Commissioner of Income Tax, Bombay,
(1955)
1
SCR
876,
and
Vodafone
International
Holdings B.V. Vs. Union of India & Anr., (2012) 6 SCC
613,
Learned senior counsel also submitted that the ratio
laid down by this Court in Ramesh Himatlal Shah Vs.
Harsukh Jadhavji Joshi, (1975) 2 SCC 105, is not
applicable to the case on hand, since in that case this Court
was dealing with the interest of a member in an immovable
property
of
a
Cooperative
Society
governed
by
the
provisions of the Maharashtra Cooperative Societies Act,
1960, which is inapplicable in the case of right of a
shareholder in a limited liability company registered under
the Indian Companies Act, 1956.
8.
Shri U.U. Lalit, learned senior counsel appearing for the
Respondents, on the other hand, submitted that the principle
laid down in Ramesh Himatlal Shah’s case (supra), will
clearly apply to the facts of this case.
Learned senior
counsel submitted that the question as to whether the flat
belongs to a member of a Cooperative Society or a
shareholder of a Company makes no difference, since the
right, title and interest and the right to occupy is the species
of property, which has the stamp of transferability. Learned
senior counsel submitted that in the absence of any clear
and unambiguous legal provisions to the contrary, such
species of rights can always be transferred and there is no
illegality in mortgaging the property to the Bank, as security
for the loan transaction. Learned senior counsel submitted
that the High Court has rightly rejected the suit as well as
the Notice of Motion and the same calls for no interference
by this Court.
DISCUSSION
9.
The Appellant claims to be the owner of the property
known as Flat No.23, Building No.2, Hill Park Estate, A.G. Bell
Road, Malabar Hill, Mumbai – 400 006. Respondent No.5 is
the shareholder of the Appellant Company holding one “A”
equity share.
Flat No.23 was allotted to Respondent No.5
who was holding the Share Certificate No.45.
Respondent
No.5 created an equitable mortgage to secure dues of
Respondent No.2 to the Union Bank of India by depositing
Share Certificate No.45.
Union Bank of India filed Suit
No.1079 of 1993 for recovery of the dues and also for
enforcement of the security. The suit was later transferred
to the DRT, Mumbai, and was numbered as OA No.245 of
2001.
The DRT, Mumbai, later passed an order of
attachment in respect of the flat in question. The question
arose as to whether the property which was mortgaged to
the Bank and the right of Respondent No.5 upon it could be
attached and sold in execution of a decree.
10. We are of the view that the right, title, interest over a
flat conveyed is a species of property, whether that right has
been accrued under the provisions of the Articles of
Association of a Company or through the bye-laws of a
Cooperative Society.
The people in this country, especially
in urban cities and towns are now accustomed to flat culture,
especially due to paucity of land.
Multi-storeyed flats are
being constructed and sold by Companies registered under
the Companies Act as well as the Cooperative Societies
registered under the Registration of Cooperative Societies
Act, etc.
becoming
Flats are being purchased by people by either
members
of
the
Cooperative
Society
or
shareholders of the Company and the flat owners have an
independent right as well as the collective right over the flat
complex.
Flat owners’ right to dispose of its flat is also well
recognized, and one can sell, donate, leave by will or let out
or hypothecate his right.
These rights are even statutorily
recognized
by
many
State
Legislatures
by
enacting
Apartment Ownership Acts. Such a legislation exists in the
State of Maharashtra as well.
11. Most of the flat owners purchase the flat by availing of
loan from various banking institutions by mortgaging their
rights over the purchased flat.
By purchasing the flat, the
purchaser, over and above his species of right over the flat,
will also have undivided interest in the common areas and
facilities, in the percentage as prescribed.
Flat owners will
also have the right to use the common areas and facilities in
accordance with the purpose for which they are intended. It
is too late in the day to contend that flat owners cannot sell,
let, hypothecate or mortgage their flat for availing of loan
without permission of the builder, Society or the Company.
So far as a builder is concerned, the flat owner should pay
the price of the flat.
So far as the Society or Company in
which the flat owner is a member, he is bound by the laws or
Articles of Association of the Company, but the species of his
right over the flat is exclusively that of his.
That right is
always transferable and heritable. Of course, they will have
charge over the flat if any amount is due to them upon the
flat.
12. In Ramesh Himatlal Shah’s case (supra), this Court
has clearly delineated the legal principle which is as
follows :-
“20. Multi-storeyed ownership flats on cooperative
basis in cities and big towns have come to stay
because of dire necessity and are in the process of
rapid expansion for manifold reasons. Some of
these are: ever growing needs of an urban
community necessitating its accommodation in
proximity to cities and towns, lack of availability of
land in urban areas, rise in price of building
material,
restrictions
under
various
rent
legislations, disincentive generated by tax laws
and other laws for embarking upon housing
construction on individual basis, security of
possession depending upon fulfilment of the
conditions of membership of a society which are
none too irksome. In absence of clear and
unambiguous legal provisions to the contrary, it
will not be in public interest nor in the interest of
commerce to impose a ban on saleability of these
flats by a tortuous process of reasoning. The
prohibition, if intended by the legislature, must be
in express terms. We have failed to find one.”
13. Reference may also be made to another judgment of
this Court in DLF Qutub Enclave Complex Educational
Charitable Trust Vs. State of Haryana, (2003) 5 SCC
622, wherein this Court held that the right of transfer of land
indisputably is incidental to the right of ownership and such
a right can be curtailed or taken away only by reason of a
Statute.
In our view, the Articles of Association of a
Company have no force of a Statute and that the right of
Respondent
No.5
to
mortgage
could
not
have
been
restricted by the Articles of Association.
14. We find that neither the Companies Act nor any other
statute make any provision prohibiting the transfer of
species of interest to third parties or to avail of loan for the
flat owners’ benefit.
A legal bar on the saleability or
transferability of such a species of interest, in our view, will
create chaos and confusion.
The right or interest to occupy
any such flat is a species of property and hence has a stamp
of transferability and consequently we find no error with the
warrant of attachment issued by the DRT on the flat in
question.
15. We may reiterate that the appellant will certainly have
the right of pre-emption, but not at any value lesser than the
market value of the suit flat at the time of the sale. Various
directions already given by the High Court, therefore, will
stand.
16. The appeal is, therefore, dismissed and the amount, if
any, deposited by the Appellant be refunded to him.
There
will, however, be no order as to costs.
..................................J.
(K.S. Radhakrishnan)
....................................J.
(A.K. Sikri)
New Delhi,
September 11, 2013.
No comments:
Post a Comment