Supreme Court of India
MAHARAJI EDUCATIONAL TRUSTversusHOUSING & URBAN DEVELOPMENT CORPORATION LTD. & ORS.
- Citation
- 2017 INSC 1288
- Decided
- 8 May 2017
- Disposal
- Disposed off
- Bench
- ARUN MISHRA
Holding
The 21 acres obtained in exchange is not an accession under s.70 TP Act and therefore is not part of the mortgaged property; HUDCO’s first right of sale is limited to the remaining 43 acres of Property No.6 and Properties 1‑5.
Summary
Maharaji Educational Trust borrowed Rs.75 crore from HUDCO and mortgaged six properties. It later exchanged 21 acres of one mortgaged property with Avas Parishad and entered into a sale agreement for the entire 63.45 acres (including the exchanged land) with SGS Constructions, which was subject to an interim injunction by an arbitral tribunal. HUDCO initiated recovery under the SARFAESI Act. The key question was whether the 21 acres obtained in exchange constituted an accession under Section 70 of the Transfer of Property Act and thus fell within the mortgage. The Supreme Court held that the exchanged land was not an accession and therefore not part of the secured property; HUDCO could not claim a first right to sell it. HUDCO may sell the remaining 43 acres of the mortgaged portion of Property No.6 and, if necessary, Properties 1‑5 to satisfy the debt. The Court directed the Trust to settle a repayment scheme within a month and, on default, to allow the sale as directed. The appeals were disposed of.
Issues considered
- The 21 acres exchanged with Avas Parishad – does it amount to an accession under s.70 of the Transfer of Property Act?
- Whether HUDCO, as mortgagee, has the right to sell the exchanged 21 acres under the SARFAESI Act.
- Effect of the arbitral tribunal's interim injunction on HUDCO's enforcement rights.
- Whether the agricultural nature of Property No.6 bars its sale under SARFAESI.
- Application of marshalling principles under s.56 of the Transfer of Property Act.
Legislation cited
Subjects
SARFAESI ActTransfer of Property Actaccessionmortgagesecurity interestwillful defaulterarbitrationinterim injunctionmarshallingproperty saledebt recovery
Judgment
[2017] 4 S.C.R. 790
A MAHARAJI EDUCATIONAL TRUST
v.
HOUSING & URBAN DEVELOPMENT
CORPORATION LTD. & ORS.
B (Civil Appeal Nos. 6463-65 of 2017)
MAYOS,2017
[ARUN MISHRA AND S. ABDUL NAZEER, JJ.)
Securitization and Reconstruction of Financial Assets and
C Enforcement of Security Interest Act, 2002:
s. 13(2) - Appellant-Educational Trust took loan of Rs. 75
crores from respondent No. 1 (HUDCO) - Properties Nos. 1 to 6
mortgaged - Recovery proceedings by HUDCO under 1993 Act -
21 acres out of the mortgaged property No. 6 was exchanged by
D the Trust with Awas Parishad - Thereafter agreement to sell property
No. 6 comprising of 63.45 acres (including the 21 acres obtained
in exchange) by the Trust with a construction company - Part
payment (Rs. 9 crores) obtained from the constniction company paid
by the Tnist with HUDCO - In arbitration proceedings between the
Trust and the construction company in respect of specific
E p,erformance of the agreement, interim injunction was passed not
to sell the property in question therein - Proceedings by HUDCO ,-
under SARFAESI Act - Dispute as regards the Property No. 6 (which
included 21 acres exchanged land) between the Trust and the
construction company, as to whether it could be sold under
F SARFAESI Act for satisfying the dues of the Trust - Held: 21 acres
out of the property No. 6 (which was obtained in exchange) was
unencumbered - It cannot be treated as accession to property under
mortgage within purview of s. 70 of Transfer of Property Act -
Therefore HUDCO does not have first right to sell the 21 acres of
G land- It has right qua the other mortgaged properties (i:e. properties
Nos. 1 to 5 and 43 acres ofproperty No. 6) to realize the dues at the
first instance - The Trust is directed to settle the scheme for payment
with HUDCO - On failure by the Trust to settle the scheme, it would
be open to HUDCO to sell· approximately 43 acres of land (of the
mortgaged property No. 6) - if proceeds from the sale thereof are
H not sufficient to satisfy the dues, it can sell the property Nos. I to 5
790 '
MAHARAJ! EDUCATIONAL TRUST v. HOUSING & URBAN 791
DEVELOPMENT CORPORATION LTD.
or its part which may be necessary for realization of the outstanding A
dues - Recovery of Debts Due to Banks and Financial Institutions
Act, 1993 - Transfer of Property Act, 1882 - s. 70.
Transfer of Property Act, 1882:
s. 70 - Doctrine of accession - Meaning and Scope of -
Discussed. · B
Words and Phrases:
'Accession' - Meaning of. in the context of Transfer of
Property Act, 1882.
Disposing of the appeals, the Court c
HELD: 1. The doctrine of accession is limited to cases
where the security in existent and has not been destroyed
altogether and the mortgagor thereafter acqu~res, while keeping
the security intact, a new right which is called accession. In the ·
instant case, the property which is 21 acres under mortgage, could D
not have been transferred by the Educational Trust free from
encumbrances to Avas Parishad at all. As the property was
encumbered, the charge of HUDCO would remain on the existing
property which was actually under the mortgage deed. Thus the
property which has been taken by Avas Parishad from the
E
Educational Trust could not be said to be unencumbered and was
subject to mortgage and it was not legally permissible for
Educational Trust to give it to Avas Parishad as unencumbered.
property. [Para 29) [807-H; 808-A-B]
2. Enlargement of estate is also an accession. Section 70 of F
Transfer of Property Act, 1882 (TP Act) is not limited to physical
accretions or additions. In case there is increase of interest, the
same is also covered under purview of Section 70. In case
mortgagor had only the leasehold rights and had acquired freehold
rights during subsistence of the mortgage, the same has to be
treated as an accession to the property. Addition of occupancy G
rights or some other such rights with respect to the existing
property should also be an accession to the mortgaged property.
If the mortgagor discharges a prior encumbrance existing at the
date of the mortgage, the increase in the value of the estate is for
the benefit of the mortgagee. A clearance of the adjoining waste
H
792 SUPREME COURT REPORTS [2017] 4 S.C.R.
A land by the mortgagor is not an accession within the meaning of
Section 70. The property 21 acres obtained in exchange by
Educational Trust cannot be said to be accession within the
purview of Section 70 of TP Act. [Para 381 [812-C-FJ
Macleod v. Kissan (1906) ILR 30 Bom 250; Atmukur
B V. Chetty v. Thimpurasundar AIR 1965 Mad 185; Saila
Bala v. Swerna Moyee AIR 1939 Cal. 275; PMPM
Chettyar Firm v. Siemens Ltd. (1933) ILR 11 Rang 322;
Tay Gyi v. Maung Yan 146 IC 674; Balakrishnan v.
Malaiyandi Konar [2006) 2 SCR 363 : (2006) 3 SCC
49;. Krishna Gopal v. Miller (1902) ILR 29Cal. 803;
c Baljit Singh v. JI Cunnington AIR 1984 All 209; Nannu
Mal v. Ram Chander& Ors. AIR 1931 All. 277;
Sidheshwar Prasad v. Ram Saroop AIR 1963 Pat. 412
- referred to. ·
Elizabeth Webster & Ors. Herbert Power, George Henry
D Davenport and Robert Burke 1867-69 Vol. 2 ILR 69 -
referred to.
Black's Law Dictionary; The Law Lexicon by P. ;.,
Ramanatha Aiyar 2nd Edn. 1997; Oxford Dictionary -
referred to.
E
3. In the instant case the property was exchanged by the
Educational Trust with Avas Parishad in the year 2007. Agreement
had been entered into with SGS Constructions on 26.8.2010 for a
sum of Rs.154 crores in order to pay the dues of HUDCO and a
sum of more than Rs.9 crores had also been paid to Educational
F Trust which was deposited by it with HUDCO. Deposit of title
deed has been made by Educational Trust subsequently on
27.7.2011 with HUDCO but prior to that an agreement to sale
had been entered into for the aforesaid 21 acre~ of land which
was unencumbered. Thus at the time when the agreement had
G been entered into, the property was unencumbered and was not
under mortgage with HUDCO. Thus agreement with regard to
21 acres was not interdicted by interim order of DRT. Thus SGS
Constructions by making a huge payment of Rs.9 crores had
acquired a right over the said unencumbered property. Thus
HUDCO will not have the first right to sell the 21 acres of fan~
H which was unencumbered which was subject matter of agreement
MAHARAJ! EDUCATIONAL TRUST v. HOUSING & URBAN 793
DEVELOPMENT CORPORATION LTD.
· to sell. HUDCO will have the right for other mortgaged properties A
to realize the dues at the first instance. [Para 39) [812-F-H; 813-
A-B)
4. It is also apparent that there are several rounds of
litigation in spite of order of DRAT with respect to loan amount
having attained finality, is not being honoured for recovery which B
proceedings under the Securitization and Reconstruction of
Financial Assets and Enforcement of Security Interest Act had also
been initiated by HUDCO but sans any result. The history of the
case clearly indicates that it has virtually become impossible to
realize the dues owing to various litigations pending and filed by
parties or some other third persons. {Para 22] [805-C-D) C
5. It appears that on one hand the Educational Trust is trying
to convey that property No.6 be sold first, at the same time it has
undertaken not to do so before arbitral tribunal and not questioned
the order of arbitral tribunal rather has consented to order of
arbitral tribunal that property No.6 not be sold. Parties are D
expected not to blow hot and cold. Conduct is unfair and
inconsistent and indicative of dilly- dallying tactics on the part of
the Educational Trust. However, there is yet another aspect that
HUDCO is not bound by interim order of arbitral tribunal to the
extent of approximately 43 acres of1)roperty comprised in Item E.
No.6 and it would have first charge on said mortgaged property,
hence, it is permitted to sale 43 acres of land initially mortgaged
with it by Educational Trust. [Para 23) [805-F-Hl
6. The Educational Trust is a wilful defaulter and has built
the property, colleges, hospitals from the money borrowed from F
HUDCO. It was the bounden duty of the Educational Trust to
pay back the money to HUDCO. Thus no equitable principle
comes to their rescue as despite running the institutions for the
last 22 years, they have not paid back the amount. Once they
want to run their colleges, hospitals etc. built up with the help of
money advanced by HUDCO, obviously they must honestly ooze G
out the advantage which they are deriving from the institutions.
The increase of non-performing assets in banks is one of the
offshoots of such murky deals. It is shocking that despite having
means, earning profits, they are not interested in making payment.
Time has come when they have to be dealt with sternly and with H
794 SUPREME COURT REPORTS [2017] 4 S.C.R.
A an iron hand so as to make them pay public dues. The Educational
Trust is expected to make payment of the amount which has
~welled up to approximately to Rs.480 crores by now and make
payment otherwise they wiHhave to face the consequences. Not
only that, they have taken the money from HUDCO but from
other incumbents i.e. SGS Constructions also but not interested
B
in making payment in spite of running several institutions. There
were orders which were passed earlier with respect to bank
accounts also, but the Court has not been addressed as to what
happened to those orders. It is not only startling but also shocking
to note that a giant institution which is imparting education to
C about 3000 students involving manpower of about 700 personnel
. is finding it difficult to pay the loaned amount and is coming up
with lame excuses to shirk its responsibility. [Para 40) [813-B-F,
H; 814-A]
7. The Educational Trust is directed to settle scheme of
D repayment with HUDCO within one month and to start payment
of dues w.e.f. month of June, 2017. On failure of Education Trust
as per aforesaid direction or in case of default, it would be open
to HUDCO to sale approximately 43 acres of the land which .was
mortgaged with it to realize its dues in the legally permissible
manner. In case the proceeds from sale ofapproximately 43 acres
E of land are not sufficient to satisfy the dues of HUDCO, it would
be open to sale property No.1 to 5 or its part which may be
necessary for realization of the outstanding dues. However, 21
acres of property which has been obtained in exchange from
Awas Parishad, cannot be sold. It is only in the -cir.cuinstance, if
F Arbitrator disallows the claim of SGS Constructions for purchase
of 21 acres of said property can be sold, not otherwise. That
too, if dues of HUDCO remain outstanding after sale of
approximately 43 acres of land out of Ite.m No.6 mortgaged
initially and property item No.I to 5 which are under mortgage.
[Para 42] [814-D-GJ
G
Sura} Lamp & Jndusries Pvt. Ltd. v. State of Haryana &
Am: (2011) 11 SCR 848 : (2012) 1 SCC 656; Raheja
Universal Ltd. v. NRC Limited & Ors. [2012) 3 SCR 388
: (2012) 4 SCC 148; ML. Aggarwal v. Oriental Bank
of Commerce & Ors. 128 (2006) Delhi Law Times 407
H (DB) - cited.
MAHARAJ! EDUCATIONAL TRUST v. HOUSING & URBAN 795
DEVELOPMENT CORPORATION LTD.
Case' Law Reference A
[2006) 2 SCR 363 referred to Para25
(1902) ILR 29 Cal. 803 referred to Para 36
(1906) ILR 30 Dom 250 , referred to Para 36
AIR 1965 Mad 185 referred to Para 36·
B
AIR 1939 Cal. 275 . referred to Para 36
(1933) ILR 11 Rang 322 referred to ·Para 36
AIR 1984 All 209 ' referred to Para 37
AIR 1931 All. 277 - referred to Para 37
Am 1963 Pat. 412
I_
referred to Para 38 c
'146 IC 674 referred to Para 38
[2011) 11 SCR 848 cited Para 41
(2012) 3 SCR 388 · cited Para 41
128 (2006) Delhi Law cited Para 41
D
Times 407 (DB)
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 6463-
6465 of 2017.
From the Judgment and Order dated 01.02.2017 of the High CoUrt
of Delhi at New Delhi in W. P. (C) No. 4412 of2013, LPA No. 248 of E
2016 & LPA No. 249 of2016
WITH
C. A. No. 6466 of2017.
Dr. A. M. Singhvi, Jayant Bhushan, Sr. Advs., Ashutosh Khaitan, F
Navpreet Singh Ahluwalia, Deepak Chawla, Adhish Sharma, Umesh
Kumar Khaitan, Advs. for the Appellant.
Rana Mukherjee, Basav Prabhu S. Patil, Sr. Advs., Aarohi Bhalla,
Pallav Saxena, Omito Unnar K., Hrishikesh Baruah, Advs. for the
Respondents. 'G
The Judgment of the Court was delivered by
ARUN MISHRA, J. 1. Leave granted.
2. The appeals arise out .of common order dated 1.2.2017 passed
by the Division Bench of the High Court of Delhi at New Delhi in writ
H
796 SUPREME COURT REPORTS [2017] 4 S.C.R.
A petition and two Letters Patent Appeals (LPAs) arising out of the
proceedings before the Debt Recovery Tribunal, New Delhi (for short
"DRT"). Maharaji Educational Trust (hereinafter referred to as "the
Educational Trust") had taken a loan of approximately Rs. 75 crores
from Housing & Urban Development Corporation Ltd. (for short
B 'HUDCO') and mortgaged properties Nos. l to 6. The Trust is running
several medical colleges, dental college and 700 bedded hospitals. Besides
3000 students are said to be getting education with 700 staff !Ilembers.
The Trust is running several other colleges. It is alleged that its worth is
more than Rs.12,000 crores. Proceedings were initiated in 2002 by
HUDCO for recovery against the Trust under the Recovery of Debts
C due to Banks and Financial Institutions Act, 1993 (hereinafter referred
to as "the Act of 1993"). Though the land was under mortgage with
HUDCO, the Trust had exchanged 21 acres of the mortgaged property
out of property No.6 with U.P. Avas Evam Vikas Parishad (hereinafter
referred to as "the Avas Parishad"). The exchange deed was executed
D on 4.5.2007. There was a dispute between the parties whether 21 acres
of land which has been obtained in exchange from Avas Parishad is to
be treated as mortgaged property or not. The application for recovery of
loan filed by HUDCO was allowed by the DRT-II on 3.6.2008.
3. An agreement to sell had been entered into by the Educational
Trust in favour of Mis. SGS Construction and Development (P) Ltd.
E (for short 'SGS Constructions') qua item No.6 of the property comprising
63.45 acres which also included 21 acres of the property obtained in
exchange from Avas Parishad. The agreement was entered into for a
consideration of Rs.154 crores out of which a sum of Rs.9.01 crores
was admittedly paid upfront which was deposited by Trust with HUDCO.
p It was entered into to obtain money to wipe off dues of HUDCO. With
respect to specific performance of the agreement arbitration is pending
between.Educational Trust and SGS Constructions, interim injunction
had been passed by the arbitrator with the consent of Educational Trust
not to sell the property comprised in item No.6 which is the subject
matter of arbitration during its pendency. The order has attained finality.
G The arbitral tribunal had passed order on 15.1.2011. The Trust and its
Chainnan submitted an undertaking not to make any alienation for the
disputed land which was subject matter of arbitration. Accordingly, status
quo was ordered by the arbitrator which order is continuing to operate,
is not disputed at the Bar.
H
MAHARAJ! EDUCATIONAL TRUST v. HOUSING & URBAN 797
DEVELOPMENT CORPORATION LTD. [ARUN MISHRA, J.]
4. The DRAT, in appeal vide order dated 6.10.2010 had directed A
the Educational' Trust to pay Rs.50 crores per month to HUDCO till
recovery in toto. The DRAT noted in its order that borrower wanted to
settle the matter with HUDCO. In spite of taking time they did not do
so. It was also noted that the borrower had no intention to apply for one
time settlement at Rs.240 crores. Borrower wanted to pay Rs.240 crores B
whereas HUDCO was claiming Rs.250 crores. However contrary to
that proposal was moved for one time settlement ofRs.75.07 crores. It
was noted that the borrower had no intention for applying OTS at Rs.240
crores. Authorities were misled. It was also observed by DRAT that the
action of borrower borders contempt of court due to lack of direct
evidence. Action under the Contempt of Courts Act or section 340 Cr.P. C. C
had not b'een initiated. It was observed that the borrower required no
sympathy at all and the entire scene was created to take a few dates.
Accordingly, the order was passed to pay Rs.50 crores per month till full
realization. Thereafter, in case of default, immovable property be sold
and HUDCO may be permitted tu bring a better purchaser. The order D
of DRAT has not been complied with by the Educational Trust.
5. The title deed of the property which had been exchanged by
the Trust from Awas Parishad was deposited in 2011 with HUDCO. It
was also mentioned in the reply that status quo was directed to be
maintained by DRT on 26.8.2002 with respect to mortgaged property
which order was confirmed on 3.6.2008. The DRT's'order to maintain E
status quo had been violated by the Trust. In the appeal DRAT had
ordered payment of interest @ 16.5% on the amount of approximately
Rs.148 crores. Agreement to sell could not have been entered into by
the Trust. On I 9.5.2011 SGS Constructions preferred objections before
the Recovery Officer. On 3.8.2011 it was submitted by SGS Constructions F
that HUDCO admitted that the land obtained by the Educational Trust
under exchange deed dated 4.5.2007 was not mortgaged in its favour.
On 6.9.2011 Recovery Officer directed sale of remaining mortgaged
properties in RC No. 039/2011.
6. HUDCO issued demand notice on 19.9.2011 under section 13(2) G
of the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (for short 'SARFAESIAct'),
and also issued possession notice on 21.11.2011. The High Court of
Judicature at Allahabad in W.P. No.11669/2011 stayed further proceedings
H
798 SUPREME COURT REPORTS [2017] 4 S.C.R.
A in respect of agricultural land. In view of the interim order of High Court
vacant possession was restored to the Educational Trust. On 6.9.2011
Recovery Officer directed for sale of remaining mortgaged properties
from serial Nos. I to 5 vide orders dated 22.11.2011 and 9.1.2012.
On 25.1.2012 on the prayer made by the Educational J:rust,
B HUDCO was restrained from proceeding against 5 mortgaged properties.
HUDCO preferred miscellaneous appeal as against order before DRAT.
7. DRAT vide order dated 5.6.2013 while deciding the appeal
again.st order of Recovery Officer preferred by the Trust challenging
the attachment of their bank accounts directed Recovery Officer to
c decide the objections on merits and proceed against the bank accounts
in case the subject property was not sold within 6 months. On 25.6.2013
DRAT directed sale of agricultural land by HUDCO by way of private
treaty under the SARFAESI Act.
8. In the meantime SGS Constructions had paid stamp duty and
D got the agreement registered. On 25.9.2013 High Court of Allahabad
had passed an order in W.P. No.11669/2011 and directed status quo to
be maintained with respect to 21 acres of property which was obtained
in exchange by the Trust fromAvas Parishad. It was also clarified that
the order passed by the High Court shall not affect interim order passed
by the arbitrator directing maintenance of status quo. In the special leave
E ·petition which was preferred before this Court for quashing the said
order dated 25. 9.2013 this Court decided C.A. Nos.4494-96/2015. This
Court noted that by the time of proceedings for recovery of debt, the
amount had amassed to more than Rs.433 crores under the SARFAESI
Act. -It was also noted that prayer had been made by SGS Constructions
F that properties Nos.I to 5 be sold and not to sell property No.6 which
was subject matter of agreement. As the matter was pending before
DRT at Delhi, this Court opined that it was not for the High Court Bench
at Lucknow to declare the property as unencumbered and to direct
demarcation of 21 acres of land as unencumbered property as this
question was required to be decided by DRT where the objections of
G SGS Constructions were pending. Nor High Court could have decided
question ofaccession under section 70 of the Transfer of Property Act
(for short "TP Act") in writ jurisdiction. This Court also did not decide
the said question and set aside the order passed by Lucknow Bench of
the High Court of Allahabad on the ground that the matter which was
H
MAHARAJ! EDUCATIONAL TRUST v. HOUSING & URBAN 799
DEVELOPMENT CORPORATION LTD. [ARUN MISHRA, J.]
pending at DRT, Delhi could not have been agitated before Lucknow A
Bench. As the property was situated at Ghaziabad, Lucknow Bench
had no territorial jurisdiction to entertain the writ petition, this Court held
that order passed by the High Court was required to be set aside as no
cause of action had arisen at Lucknow. This Court also did not comment
on the validity of registration of agreement as writ petition (C) No.38596/ B
2013 in this regard was pending before High Court of Allahabad, and it
would be for High Court to adjudicate upon aforesaid questions. It is
apparent that this Court did not decide the various questions on merits
and the order of Lucknow Bench was set aside on the ground for want
of territorial jurisdiction only. No doubt about it that this Court commented
adversely upon the attempt to get questions adjudicated by the High C
Court which were required to be dealt with in SARFAESI proceedings.
9. On 20.5.2015 in W.P. (C) No.2604/2013 High Court observed
that Recovery Officer would give due weightage to the mandate of
order dated 25.6.2013 passed by the appellate tribunal while deciding
objections pending before him. Before the Recovery Officer applications D
were filed which were dismissed on 1.7.2015. Division Bench of the
High Court of Delhi in LPA No.385/2015 on 1. 7.2015 directed Recovery
Officer to decide all the questions raised by a party before him in
accordance with law, uninfluenced by the observations made by Single
Judge in his order dated 20.5.2015. ·
E
10. As against the order dated 1.7.2015 appeal was preferred by
SGS Constructions before ORT on 3.7.2015. Appeal was dismissed on
10.7.2015. Howevervide order dated 13.7.2015 High Court in W.P. (C)
· No.2604/2013 directed Recovery Officer to decide the objections keeping
in view issues involved in the case. On 14.7.2015 SGS Constructions
preferred an appeal against the order passed by ORT before DRAT. On F
21.7.2015 High Court in W.P. (C) No.2604/2013 stayed the execution/
adjudicatory proceeding relating to objections pending before Recovery
Officer.
On 29.7.2015 SGS.Constructions preferred W.P. (C)'No.7261/
2015 for expeditious settlement of dispute between the parties and G
indicated its willingness to clear the dues ofHUDCO.
11. The Educational Trust also filed W.P. No.4987/2016 before
the High Court challenging notice dated 26.4.2016 issued by HUDCO
proposing to classify the Educational Trust and its trustees as willful
H
800 SUPREME COURT REPORTS [2017] 4 S.C.R.
A defaulters. Writ petition was disposed ofvide order dated 27.5.2016
with a direction that HUDCO after hearing the Educational Trust shall
take a decision on the matter on or before 30.6.2016. Time was extended
by 31.8.2016 on the prayer made by HUDCO in W.P. (C) No.4987/
2016. On 8.12.2016 HUDCO again moved an application. Further eight
B weeks' time was granted by the High Court to HUDCO to pass the
order. Ultimately, vide order dated30.1.2017 Trust had been declared as
wilful defaulter.
12. By impugned order dated 1.2.2017 High Court has directed
Recovery Officer to consider and decide objections raised by SGS
Constructions with regard to property No.6. The order of Recovery
C Officer dated 1.7.2015 as confirmed by DRT 0n 10.7.2015 and DRAT
by order dated 20.7.2015 were set aside and the applications filed by
SGS Constructions were allowed as prayed, for amendment of its
objections. High Court also observed that the DRT shall decide all pending
applications which are filed including the claim of SGS Constructions
D that property No.6 being an agricultural land is beyond the purview of
SARFAESI Act and pass an appropriate order. High Court further
directed status quo to be maintained in respect of property Nos. I to 6.
Aggrieved by the order, Educational Trust as well as SGS Constructions
preferred appeals in this Court.
E 13. The Educational Trust in appeal has urged that SGS
Constructions has no right on the basis of agreement to sale dated
26.8.2010 and the property has been mortgaged to HUDCO. Agreement-
holder cannot raise any objection. Item No.6 of property should be sold
first for recovery of dues of HUDCO. High Court has erred in setting
aside orders dated 1.7.2015, 10.7.2015 and20.7.2015 passed by Recovery
F Officer, DRT and DRAT respectively. By setting aside orders the High
Court has protracted the process and prolonged the recoyery process.
High Court has erroneously held that under section 17 of SARFAESI
Act there is automatic protection against sale of property No.6. On the
basis of registered agreement no right could accrue to SGS Constructions
G and unilateral registration has been questioned in a writ petition pending
before the High Court of Allahabad. Right of HUDCO is paramount.
SGS Constructions cannot be permitted to contend that property No.6 is . ·
agricultural land. SGS Constructions had no locus to sustain its objections.
Futile writ petition was filed before Lucknow Bench, order passed in
which was set aside by this Court. The combined value of the properties
H
MAHARAJ! EDUCATIONAL TRUST v. HOlJSING & URBAN 801
DEVELOPMENT CORPORATION LTD. [ARUN MISHRA, J.]
items 1 to 6 of appellant is approximately Rs. l 000 crores and SGS A
Constructions had offered a mere sum of Rs.400 crores under the garb
of clearing the dues of Educational Trust owed to HUDCO. The fetter
has been imposed by the High Court by impugned order. SGS
Constructions is trying to unsettle and dislodge the livelihood of various
individuals who are attached to running of medical college, dental college B
and hospitals at property Nos. I to 5 and attempting to create hurdles in
education process of three thousand students getting education in medical
college, dental college and hospital. There are 700 employees working
in institutions running for the last 22 years. The Educational Trust is
suffering interest approximately Rs.2 crores per month. It would be in
the interest of public money that recovery proceedings take place at an C
early date. Value of property No.6 is approximately Rs.776 crores. That
should be first put to public auction to derive its best value.
14. SGS Constructions in the appeal filed has questioned the order
of High Court on the ground that the offer of settlement made by appellant
had not been taken into consideration. There is no decision rendered by D
the High Court on merits of the case and proposal for settlement would
have cleared entire dues of HUDCO which, in turn, has not taken
effective measures for recovery for a long period. The offer of appellant
is viable and would bring the dispute to a quietus and public money due
towards HUDCO shall also be recovered in the process. On the one
hand medical and dental colleges and hospital are being run but payment E
is not being made. Medical college and other immovable property from
S.Nos.1 to 5 is subject matter of mortgage i.ie. non-agricultural property
and is liable to be sold under SARFAESI Act in recovery proceedings.
Agricultural land i.e. item No.6 cannot be sold under SARFAESI Act
and applying the principle of marshalling under section 56 ofTP Act, F
SGS Constructions being agreement-holder has a right that property
Nos. I to 5 should be sold first and only ifthe dues are not satisfied item
No.6 of property to be sold and not otherwise.
15. It was urged on behalfof Educational Trnst that only property
No.6 should be directed to be sold and the High Court has erred in G
passing impugned order. Right of marshalling of property under section
56 of TP Act cannot be exercised by SGS Constructions. It was also
submitted that the exchanged property has to be treated as accession to
property under the mortgage with HUDCO by virtue of provisions
contained in section 70 ofTP Act. Property which has been exchanged
H
802. SUPREME COURT REPORTS [2017] 4 S.CR
A is thus liable to be sold and though arbitrator had passed an order of
maintenance of status quo,with respect to item No.6 of property, this
Court has ample power under Article 142 to vacate the order. The order
passed by arbitral tribunal should be vacated and this Court should direct
sale of property No.6 which is. worth Rs.776 crores and its sale would
B be enough to satisfy dues of HUDCO. It would not be appropriate to
direct sale uf property NosJ to S as prayed by SGS Constructions, as
that would disturb running of medical and dental colleges and hospitaL It
would be detrimental to the interest of the education oflarge number of
students as well as employees.
16. It was submitted on behalf of Trust that this Court has also
C commented adversely on filing of petition before the Lucknow Bench
by SGS Constructions the order passed was held to be without jurisdiction.
Agreement was not duly stamped and registered as required in State of
UP. It was stamped and got registered unilaterally. Its registration has
been questioned before High Court of Allahabad. Thus on the basis of
D such agreement no right accrued to SGS Constructions. The amount of
Rs.9 crores had been paid under the agreement The Trust is ready to
refund a sum ofRs27 crores to,it as such this Court should direct sale
of property item No.6 so as to satisfy dues ofHUDCO.
17. It was urged on behalf of SGS Constructions that in view of
Eorder passed by arbitral tribunal for maintaining status quo, property
item No.6 cannot be sold. The Trust and its Managing Director had
submitted undertaking before Arbitral TribunaL Apart from that it being
an agricultural land property cannot be sold under SARFAESl Act. In
addition thereto agreement-holder has a right under section 56 of TP
Act of marshalling of property that is to say property which is subject
F matter of agreement and arbitra!'proceedings should be sold by mortgagee
only when by sale of other properties dues of HUDCO are not satisfied.
Property item No.6 is subject matter of agreement as matter is sub
judice before arbitral tribunal cannot be sold at this stage. Only that
portion of mortgaged property can be sold later on which is necessary
G for satisfying dues ofHUDCO, only if an outstanding amount remains
and its dues are not satisfied by sale of property Nos. I to S after decision
of arbitral tribunal. Apart from that it was submitted that property which
had been exchanged i.e. 21 acres from Avas Parishad could not be said
to be an accession to property within the purview of section 70 of TP
Act. It is an unencumbered property as the property 21 acres which
H
MAHARAJ! EDUCATIONAL TRUST v. HOUSING & URBAN 803
DEVELOPMENT CORPORATION LTD. [ARUN MISHRA, J.]
was in fact mortgaged had been given by Educational Trust to Avas A
Parishad in an illegal manner. Thus the property which was under
mortgage could not have been exchanged and property which was given
to Avas Parishad by Educational Trust continues to be under mortgage
with HUDCO which would have first right-on it. Thus property which
has been given by Avas Parishad in exchange after acquisition of land
8
was unencumbered and not under mortgage, it cannot be said to be an
encumbered property thus cannot be sold for satisfying the dues of the
Trust as the agreement to sale has been entered into by Trust with SGS
Constructions Ltd., with respect to 63 acres which includes 21 acres of
unencumbered property. The conduct of the Educational Trust has been
noted by DRAT, it has never intended to settle dues in spite of running C
institutions and possessing assets of more than Rs.12,000 crores and is a
willful defaulter bound to pay the whopping money, it has taken the huge
amount from SGS Constructions also and now wants to resile from its
obligation. SGS Constructions is ready to clear dues of HUDCO by
purchasing property Nos. 1 to 6 which offer ought to have been D
considered on merits by High Court. Educational Trust is running chain
of other educational institutions but is not making payment and is a wilful
defaulter.
18. It was submitted on behalf of HUDCO that proceedings are
collusive between SGS Constructions as well as the Educational Trust.
Nobody intends to pay public money and HUDCO be permitted to sell E
property, in particular item No.6 so as to realize the dues.
19. When the matter came to this Court on earlier occasion this
Court had set aside the order passed by Lucknow Bench of Allahabad
High Court on the ground that it had no territorial jurisdiction to entertain
the writ application with respect to matter of ORT at Delhi and property F
situated at Ghaziabad, as such the main seat at Allahabad could have
entertained the petition. It could not have been entertained by Lucknow
Bench of said High Court for want ofterritorial jurisdiction. This Court
did not decide the question as to accession under section 70 and left it
open for DRT and attempt which was made by SGS Constructions to G
demarcate 21 acres of land as unencumbered property was also set
aside on the ground of territorial jurisdiction and that this was the matter
to be decided not by High Court but it was required to be decided in the
proceeding~ of the DRT.
20. The Educational Trust is running various institutions and H
804 SUPREME COURT REPORTS [2017) 4 S.C.R.
A hospitals but at the same time it is not making payment of dues of loan
amount to HUDCO by which money it established them. The DRAT in
its order dated 6.10.2010 in Appeal Nos. 120/2008 and 124/2008 has
noted conduct of Trust and recorded the following findings :
"74. From the above said facts and circumstances the following
B points emerge:
(b) Before HUDCO they moved OTS for Rs .240 crores whereas
HUDCO was claiming Rs.250 crores or more. However, the
Court was informed that OTS was for Rs.75.07 crores only. The
earlier OTS moved for Rs.80 to 90 crores had found no favour
c with the HUDCO authorities. How it could have agreed to the
proposal of Rs.75.07 crores only. Even after I heard the final
arguments, the borrowers moved yet one more application for not
announcing the judgment as they wanted to settle the matter with
HUDCO. I gave them 15 days more time. It transpired that they
had again made proposal in the sum of Rs.75.07 crores. It is
D apparent that the borrowers want to bid for time on one pretext or
the other. In this respect mala fides are writ large on them.
(e) At best, it can be said that the borrowers had no intention to
apply for OTS at Rs.240 crores. The authorities were, however,
misled. Meeting of minds is the sine qua non of an agreement
E coercion, force, misrepresentation, fraud or anything of the like
have no place at all. Although, the action of the borrowers borders
the contempt of court, yet due to lack of mens rea, lack of proper
and direct evidence not touching the heart of the problem, it would
not be worthwhile to initiate action under the Contempt of Courts
F Act or under Section 340 Cr.P.C.
(f) However, at the same time, the conduct, misrepresentation
and bizarre behaviour of the borrowers cannot be swept undef-
the carpet. It is very easy to gauge into antecedents of borrowers
particulars that of Dr. Mahalingam who is responsible and liable
G for admitted interpolations and alterations. Can allegations against
Mr. Naresh Chandra and two/ three officers of HUDCO without
being substantiated by any cogent and plausible evidence come to
the rescue of the borrowers? All these facts and circumstances
will be put in the scales of Justice and their pros and cons would
be evaluated as per law. One fact is clear that the borrowers
H
MAHARAJ! EDUCATIONAL TRUST v. HOUSING & URBAN 805
DEVELOPMENT CORPORATION LTD. [ARUN MISHRA, J.]
deserve no sympathy at all. Since all these drama was created to A
take a few dates, therefore, instead of taking action under the
Contempt of Court Act and Section 340 Cr.P.C. it would be
worthwhile to come to the main point anJ action be initiated
accordingly."
21. It is apparent from averments made by the Trust itself that it B
has more than 700 employees and 3000 students are taking education
but it is shocking and surprising that the amount due to HUDCO taken
as loan in 1995 is not being paid which has amassed to approximately
Rs.480 crores at present.
22. It is also apparent that there are several rounds of litigation in c
spite of order of DRAT with respect to loan amount having attained
finality, is not being honoured for recovery which proceedings under the
' SARFAESIAct had also been initiated by HUDCO but sans any result.
The hist01y of the case as projected clearly indicates that it has virtually
become impossible to realize the dues owing to various litigations pending
and filed by parties or some other third persons. D
23. It is not disputed at the Bar with respect to item No.6 the
arbitral tribunal had passed an order on the basis of an undertaking given
by Trust and its Managing Director, for directing maintenance of status
quo, and the said order has not been vacated and it has not been questioned
by any of the parties. Oral prayer has been made to this Court in course E
of arguments to vacate the same in exercise of power under Article 142
of the Constitution of India. However as the interim order of arbitral
tribunal has not been questioned before us in any proceedings, it would
not be appropriate to vacate the interim order in the absence of it being
challenged. It appears that on one hand the Educational Trust is trying to F
convey that property No.6 be sold first at the same time it has undertaken
not to do so before arbitral tribunal and not questioned the order of arbitral
tribunal rather has consented to order of arbitral tribunal that property
No.6 not be sold. Parties are expected not to blow hot and cold. Conduct
is unfair and inconsistent and indicative of dilly- dallying tactics on the
part of the Educational Trust. However, there is yet another aspect that G
HUDCO is not bound by interim order of arbitral tribunal to the extent
of approximately 43 acres of property comprised in Item No.6 and it
would have first charge on said mortgaged property, hence, it is permitted
to sale 43 acres ofland initially mortgaged with it by Educational Trust.
Remaining 21 acres of land obtained in exchange was unencumbered H
806 SUPREME COURT REPORTS [2017) 4 S.C.R.
A and cannot be said to be accession for reasons mentioned hereinafter.
24. However at the same time it appears that in spite of having
means, ninning colleges and hospital the Educational Trust is not paying
the amount to HUDCO and the Educational Trust has been declared as
willful defaulter by HUDCO as per order dat.ed 30.1.2017. It is necessary
B to safeguard the interest of HUDCO. Even after the order of DRAT,
the Educational Trust has not cleared the long pending dues ofHUDCO.
As observed by DRAT, the Trust is not paying the amount in spite of
having been given the facility of making payment in instalments. It would
not be appropriate to expect HUDCO to wait till eternity. In view of the
order passed by appellate tribunal, it would be open to HUDCO to sell
C 43 acres of initially mortgaged land comprised in Item No.6 and other
mortgaged properties No. I to 5 and which had been mortgaged by the
Educational Trust to HUDCO. However as medical colleges, dental
college and hospitals are running and Educational Trust is obviously
earning from them, cannot claim that the mortgaged property cannot be
D sold. However before sale we deem it appropriate to give one more
opportunity to the Educational Trust to make payment to HUDCO. We
deem it appropriate to direct HUDCO as well as the Trust to make an
endeavour to settle the amount within a period of one month and the
amount which may be settled between the parties be paid within a period
E as may be mutually agreed. In case no settlement is reached between
HUDCO and the Educational Trust and ifthe Educational Trust fails to
come forward with appropriate offer acceptable to HUDCO and start
payment from the month of June, 2017 as may be agreed between the
parties, it would be open to HUDCO to realize the amount in accordance
with law by taking resort to mechanism available to it under the rules as
f expeditiously as possible.
25. lt was submitted on the strength of decision in Balakrishnan
v. Malaiyandi Konar (2006) 3 SCC 49 that only that part of the property
should be sold which may be necessary to satisfy the decree. There is
no dispute with aforesaid proposition and Recovery Officer shall take
G care to sell only that part of the property which is enough to satisfy the
amount to be realized. Sale of entire mortgaged property is not necessary.
26: When the matter had been heard finally and reserved for
orders by this Court, precisely various submissions were raised in this
Court had also been argued before the Recovery Officer. Propriety
H required that Recovery Officer should have waited for the decision of
MAHARAJI EDUCATIONAL TRUST v. HOUSING & URBAN 807
DEVELOPMENT CORPORATION LTD. [ARUN MISHRA, J.]
this Court. We direct DRT not to associate said Recovery Officer any A
more with proceedings. This Court heard and reserved the matter on
31.3.2017. Matter has been argued before Recovery Officer
subsequently and order dated 24.4.2017 has been passed to the effect
that item No.6 property is mortgaged land and it has been held that no
interest has accrued to the objector by'Virtue of agreement to sell which · B
has been entered into by the Educational Trust. It has also been held by
Recovery Officer that 21 acres of land which_had been obtained by the
Educational Trust in exchange with Avas Parishad, has to be treated as
accession of land within the purview of section 70 ofTP Act and there
is deposit of title deeds also. Thus the land obtained in exchange is to be
treated as mortgaged land. C
27. With respect to the mortgaged property no doubt about it that
the law is that the first charge would be of the mortgagee that is HUDCO.
In the case, properties 1 to 5 and out of item No.6 property, approximately
43 acres are admittedly under mortgage with HUDCO. The entire
property No.6 was comprised ofapproxirnately 63.50 acres, out of this D
21 acres had been exchanged by the Educational Trust with Avas
Parishad, whether same is encumbered is in dispute. The question is
whether it is the case of accession to the property. Section 70 ofTP Act
is extracted hereunder :
"70. Accession to mortgaged property.-lf, after the date E·
of a mortgage, any accession is made to the mortgaged property,
the mortgagee, in the absence of a contract to the contrary, shall,
for the purposes of the security, be entitled to such accession."
28. Section 70 refers to the mortgagee's right to accessions to the
mortgaged property. Section 63 deals with the expression "accession to F
mortgaged property" where mortgaged property in possession of the
mortgagee has, during the continuance of the mortgage, received any
accession, the mortgagor, upon redemption shall, in the absence of a
contract to the contrary, be entitled as against the mortgagee to such
accession. There can be natural accessions which are incorporated in
the mortgaged property, from part of the mortgagee's security, and revert G
to the mortgagor upon redemption.
29. The doctrine of accession is limited to cases where the security
in existent and has not been destroyed altogether and the mortgagor
thereafter acquires, while keeping the security intact, a new right which
H
808 SUPREME COURT REPORTS [2017] 4 S.C.R.
A is called accession. In the instant case the property which is 2 I acres
under mortgage, could not have been transferred by the Educational
Trust free from encumbrances to Avas Parishad at all. As the property
was enc~bered, the charge of HUDCO would remain on the existing
property which was actually under the mortgage deed. Thus the property
B which has been taken by Avas Parishad from the Educational Trust
could not be said to be unencumbered and was subject to mortgage and
it was not legally permissible for Educational Trust to give it to Avas
Parishad as unencumbered property.
30. Black's Law Dictionary defines the expression "accession"
with respect to property thus :
c
"4. The acquisition of title to personal property by bestowing
labor on a raw material to convert it to another thing <the owner's
accession to the lumber produced from his land>. -Also termed
(in Roman law) accessio. See ADIUNCTION (2). [Cases:
Accession I.]
D
"Accessio is the combination of two chattels belonging
to different persons into a single article: as when A's cloth is
used to patch B's coat, or a vehicle let on hire-purchase has
·new accessories fitted to it." R.F.V. Heuston, Salmond on
the Law o/Torts 113 (17th ed. 1917).
E
5. A property owner's right to all that is added to the property
(esp. land) naturally or by labor, including land left by floods and
improvements made by others <the newly poured concrete
driveway became the homeowner's property by accession>. ? In
Louisiana law, accession is the owner's right to whatever is
F produced by or united with something, either naturally or artificially.
La. Civ. Code arts. 483, 490, 507. Cf. ANNEXATION. 6. An
improvement to existing personal property, such as new shafts on
golf clubs.
"The problem of accessions arises infrequently, judging from
G reported cases, but an obvious instance of the difficulty arises
where a motor vehicle is being financed by a secured party ·
and the debtor in possession of necessity acquires a new engine
or new tires for the vehicle .... If the seller of the engine or
tires reserved a security interest at the time the goods were
installed, the selleuhould prevail over the vehicle's secured
H
MAHARAJI EDUCATIONAL TRUST v. HOUSING & URBAN 809
DEVELOPMENT CORPORATION LTD. [ARUN MISHRA, J.]
party, with a right to remove the accessions. Conversely, ifthe A
sale were on open credit with no security interest reserved, or
if the seller acquired a security interest after installation of the
goods, then the financer of the vehicle should prevail." Ray D.
Henson, Handbook on Secured Transactions Under the
Uniform Commercial Code § 4-22, at 93 (2d ed. 1979).
B
7. The physical uniting of goods with other goods in such a manner
that the identity of the original goods is not lost. UCC § 9-
102(a)(l)."
31. It is apparent from the aforesaid definition that it is not a case
of acquisition of title to personal property. It is necessary that in the c
combination which has been formed into a single article, existing property
is not lost. In the facts of the instant case it cannot be said that it is so.
Apart from that as specified in aforesaid point (7) above that accession
is physical uniting of goods with other goods in such a manner that the
identity of original goods is not lost. In the instant case identity of the
original mortgaged property is lost and 21 acres of land is no more D
available. Thus it is not the case of uniting.
32. In The Law Lexicon by P. Ramanatha Aiyar, 2"d Edn. 1997,
"accession" has been defined thus :
"Accession is a mode ofacquiring property as an addition to existing E
property by natural growth or by application of human labour.
(See Cent. Diet.) In its broadest sense it may be defined to be
the means by which title to the increment& to one's property
movable or immovable, is acquired, whether by natural or artificial
means (as) accession ofa province to an Empire. In the restricted
sense, in which it is generally used in law, it applies to the acquisition F
of title to the increments to one's movable property, brought.about
by artificial means, such as labour or the addition of material other
than the intermixture of goods or things of the same kind.
(Anderson L. Diet. ;Bl. Comm. 404 ; Black's Law Dictionary ;
Burrill, 2 Kent Comm. 360, etc.) G
xx xx xx
xx xx xx
xx xx xx
H
810 SUPREME COURT REPORTS [2017) 4 S.C.R.
A In Roman Law accession is the general name given to every
accessory thing, that has been added to a principal thing from
I
without and has been connected with it, whether by the powers
ofnature or by the will of man, so that in virtue of this connection
it is regarded as part and parcel of the thing:Sheo Pagan Prasad
v. Bhagwati Dubey, AIR 1949 Pat. 99 ..
B
1. coming to as an addition ; the mode of acquiring property by
which the owner of a corporal substance (as land or cattle)
becomes the owner of addition by growth, increase or labour ;
any property so acquired (S. 63, T.P.Act]; 2. coming to the throne
[S. 57(5), Indian Evidence Act]; 3. coming to an office [S. 57(7),
c Indian Evidence Act]; 4. increase by som~thing added; 5. assent
(art. 57, Geneva Conventions Act]." ·
Emphasis is on addition to the existing property. Then there can
be addition by natural or artificial means. The property obtained in
exchange could not be said to be accessory thing to the remaining
D mortgaged land which was not exchanged with Avas Parishad.
33. Accession to property has also been defined in aforesaid Law
Lexicon with reference from Encyclopaedia of Laws of England. Same
is extracted hereunder :
E "Accession of Property. The Law of alluvion is a branch of the
general law regarding accession to property: The Law of accession
may be stated as follows. Where any corporeal substance, over
which rights of property are exercised, receives an addition,
increase or improvement, either in a natural way, as by the growth
offruits or the pregnancy ofanimals, or in an artificial way; as by
F the erection of houses on land, receding of a river or lake, such
addition, increase or improvement falls primarily to the owner of
the original substance. (Encyc. of the Laws of England)."
34. In Oxford Dictionary "accession" has been defined and relevant
portion is extracted thus : ·
G
"accession x x x
2.a new item added to an existing collection of books, paintings,
or artefacts.
11 An amount added to an existing quantity of something;
H
MAHARAJ! EDUCATIONAL TRUST v. HOUSING & URBAN 811
DEVELOPMENT CORPORATION LTD. [ARUN MISHRA, J.)
substantial accessions of gold. A
~ Verb [with obj.] (usu. Be accessioned) record the addition
of (a new item) to a library, museum, or other collection.
- ORIGIN late 16th cent. (in the general sense 'something added'):
from Latin accession(n-), froin the verb accedere 'approach,
come to ' (see ACCEDE)" B
Emphasis is on addition to the existing property, quality or title.
35. The Privy Council in Elizabeth Webster & Ors. Herbert
Power, George Henry Davenport, and Robert Burke 1867-69 Vol. 2
ILR 69 had considered the version of accession and meaning of the c
word 'increase' of the original subject-matter for attracting the provisions
of section 70 ofTP Act. The Court has laid down thus:
"The first question which suggests itself to their Lordships'
consideration is :~What was included in the Plaintiffs' original
Mortgage ? It was admitted at the Bar that the answer to be D
given to the question whether the Mortgage included any sheep
brought upon the Run which were not the issue of those that
were on the Rune at the date of the Mortgage, if considered with
reference to the mere words of that instrument, must depend upon
the construction which their Lordships put upon the word
"increase." Their Lordships, looking at the deed, and seeing that E
"increase" is always spoken of as the increase, not of a flock, but
as the increase of those sheep which were originally the subject
of the Mortgage, are clearly of opinion, that it must be taken to
mean the natural increase, or the offspring of those original sheep."
36. The question of accession has been dealt with by various F
High Courts. In Krishna Gopal v. Miller (1902) ILR 29 Cal. 803,
Macleod v. 'Kissan ( 1906) ILR 30 Born 250; and Atmukur v Chetty v..
Thimpurasundar AIR 1965 Mad 185, it has been laid down that i(the
mortgagor builds on the property mortgaged, the building forms part of
the mortgagee's security. Same is true with respect to land formed by G
alluvion or dilluvion as laid down in Saila Bala v. Swerna Moyee AIR
1939 Cal. 275. Even machinery fixed by bolts and nuts to the concrete
floor of a building in certain circumstances may be an accession to which
the mortgagee is entitled, as laid down in PMPM .Chettyar Firm v.
Siemens Ltd. (1933) ILR 11 Rang 322.
H
812 SUPREME COURT REPORTS [2017] 4 S.C.R.
A 37. In Baljit Singh v. JI Cunnington AIR 1984 All 209 where
only the building was mortgaged and not the site, it was held that the site
cannot be deemed to be an "accession" to the mortgaged property. In
Nannu Mal v. Ram Chander & Ors. AIR 1931 All. 277 in the
background of the fact that the auction purchasers at a prior mortgage's
B sale, removed a shed, and built a small house on land mortgaged. A
puisne mortgagee who had not been made a party sued to enforce the
mortgage, the court laid down that the mortgagee was entitled to have
the house sold as an accession to the property mortgaged. It was also a
case of improvement in existing property.
38. Enlargement of estate is also an accession. The section is not
C limited to physical accretions or additions. In case there is increase of
interest, the same is also covered under purview of section 70 as held in
Sidheshwar Prasad v. Ram Saroop AIR 1963 Pat. 412. In case
mortgagor had only the leasehold rights and had acquired freehold rights
during subsistence of the mortgage, the same has to be treated as an
D accession to the property. Addition of occupancy rights or .some other
such rights with respect to the existing property should also be an
accession to the mortgaged property. If the mortgagor discharges a prior
encumbrance existing at the date of the mortgage, the increase in the
value of the estate is for the benefit of the mortgagee. A clearance of
the adjoining waste land by the mortgagor is not an accession within the
E meaning of section 70 as observed in Tay Gyi v. Maung Yan 146 IC
674.
Thus in our opinion property 21 acres obtained in exchange by
Educational Trust cannot be said to be accession within the purview of
section 70 ofTP Act.
F
39. In the instant case the property was exchanged by the
Educational Trust with Avas Parishad in the year 2007. Agreement had
been entered into with SGS Constructions on 26.8.2010 for a sum of
Rs.154 crores in order to pay the dues of HUDCO and a sum of more
than Rs.9 crores had also been paid to Educational Trust which was
G deposited by it with HUDCO. Deposit of title deed has been made by
Educational Trust subsequently on 27. 7.2011 with HUDCO but prior to
that an agreement to sale had been entered into for the aforesaid 21
acres of land which was unencumbered. Thus at the time when the
agreement had been entered into, the property was unencumbered and
H was not under mortgage with HUDCO. Thus agreement with regard to
MAHARAJI EDUCATIONAL TRUST v. HOUSING & URBAN 813
DEVELOPMENT CORPORATION LTD. [ARUN MISHRA, J.]
21 acres was not interdicted by interim order of DRT. Thus SGS A
Constructions by making a huge payment ofRs.9 crores had acquired a
right over the said unencumbered property. Thus HUDCO will not have
the first right to sell the 21 acres of land which was unencumbered
which was sutiject matter of agreement to sell. HUDCO will have the
right for other mortgaged properties to realize the dues at the first instance.
B
40. In the instant case it is apparent that the Educational Trust is
a wilful defaulter and has built the property, colleges, hospitals from the
money borrowed from HUDCO. It was the bounden duty of the
Educational Trust to pay back the money to HUDCO. Thus no equitable
principle comes to their rescue as despite running the institutions for the
last 22 years, they have not paid back the amount. Once they want to C
run their colleges, hospitals etc. built up with the help of money advanced
by HUDCO, obviously they must honestly ooze out the advantage which
they are deriving from the institutions but it has become a general scenario
that the persons who earn money with help of hefty loans, in spite of
running institutions which have been set up by the money Jent to them, D
they are not making payment of dues. Consequently, they will have no
right to run the institutions in such a dishonest manner. The increase of
non-performing assets in banks is one of the offshoots of such murky
deals. It is shocking that despite having means, earning profits, they are
not interested in making payment. Time has come when they have to be
dealt with sternly and with an iron hand so as to make them pay public E
dues. We expect the Educational Trust to make payment of the amount
which has swelled up to approximately to Rs.480 crores by now and
make payment otherwise they will have to face the consequences. Not
only that, they have taken the money from HUDCO but from other
incumbents i.e. SGS Constructions also but not interested in making F
payment in spite of running several institutions. There were orders which
were passed earlier with respect to bank accounts also, but to our dismay,
we have not been addressed as to what happened to those orders. Be
that as it may. It is made clear that in case the Educational Trust wants
to run institutions, they are bound to make payment and as they are
liable to pay, they should pay in all fairness all sums which they have G
borrowed sans any ifs and buts. It is what is expected of them. Otherwise
courts will have to step in and take action in case dues remain unpaid
and bottlenecks are created by one way or the other in realization of
dues. It iS not only startling but also shocking to note that a giant institution
H
814 SUPREME COURT REPORTS [2017] 4 S.C.R.
A which is imparting education to about 3000 students involving manpower
of about 700 personnel is finding it difficult to pay the loaned amount and
is coming up with lame excuses to shirk its responsibility.
41. It was also submitted on the strength of decision in Suraj
Lamp & Jndusries Pvt. Ltd. v. State of Haryana & Am: (2012) l SCC
B 656, Raheja Universal Ltd. v. NRC Limited & Ors. (2012) 4 SCC 148;
and ML. Aggarwal v. Oriental Bank of Commerce & Ors. 128 (2006)
Delhi Law Times 407 (DB) that the agreement entered into was not
registered as such no right could accrue as per provisions of Section 54
ofT.P Act prevailing in State ofUttar Pradesh. However we refrain to
comment finally on the said issue. However, fact remains that the
C registration of agreement has been made subsequently and stamp duty
of more than Rs.4 crores has been paid. Effect thereof has to be
considered in appropriate proceedings/arbitral tribunal.
42. Thus we direct as under :
D (1) That Educational Trust is directed to settle scheme of repayment
with HUDCO within one month and to start payment of dues w.e.f.
month ofJune,2017.
(2) On failure of Education Trust as per aforesaid direction or in
case of default it would be open to HUDCO to sale approximately 43
E acres of the land which was mortgaged with it to realize its dues in the
legally permissible manner.
(3) In case the proceeds from sale of approximately 43 acres of
land are not sufficient to satisfy the dues of HUDCO, it would be open
to sale property No. l to 5 or its part which may be necessary for
F realization of the outstanding dues.
(4) However, 21 acres of property which has been obtained in
exchange from Awas Parishad cannot be sold. It is only in the
circumstance ifArbitrator disallows the claim of SGS Constructions for
purchase of 21 acres of said property can be sold not otherwise. That
G too if dues of HUDCO remain outstanding after sale of approximately
43 acres ofland out of Item No.6 mortgaged initially and property item
No.I to 5 which are under mortgage. Let the Arbitrator also expedite
the matter and decide the proceedings as far as possible within two
months. '
H
MAHARAJ! EDUCATIONAL TRUST v. HOUSING & URBAN 815
DEVELOPMENT CORPORATION LTD. [ARUN MISHRA, J.]
43. With the aforesaid directions and modification in the order of A
the High Court, the appeals stand disposed of. No costs.
Kalpana K. Tripathy Appeals disposed of.
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