Case: Maharaji Educational Trust Vs. Housing &amp; Urban Development Corporation Ltd. &amp; Others

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 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 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 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 of TP Act.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 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 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 land which was unencumbered which was subject matter of agreement to sell. HUDCO will have the right for other mortgaged properties to realize the dues at the first instance.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 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 lent to them, 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 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 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 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 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 & Indusries Pvt. Ltd. v. State of Haryana & Anr. 2011(4) R.C.R.(Civil) 669 : 2011(5) Recent Apex Judgments (R.A.J.) 397 : (2012) 1 SCC 656 , Raheja Universal Ltd. v. NRC Limited & Ors. 2012(2) R.C.R.(Civil) 506 : 2012(2) Recent Apex Judgments (R.A.J.) 69 : (2012) 4 SCC 148 ; and M.L. 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 of TP Act prevailing in State of Uttar Pradesh. However we refrain to comment finally on the said issue. However, fact remains that the 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.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]21. It is apparent from averments made by the Trust itself that it 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 spite of order of DRAT with respect to loan amount having attained finality, is not being honoured for recovery which proceedings under the SARFAESI Act had also been initiated by HUDCO but sans any result. The history 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 thirdappears 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 expected not to blow hot and cold. Conduct is unfair and inconsistent and indicative of dillydallying 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 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 of land initially mortgaged with it by Educational Trust. Remaining 21 acres of land obtained in exchange was unencumbered and cannot be said to be accession for reasons mentionedview of the order passed by appellate tribunal, it would be open to HUDCO to sell 43 acres of initially mortgaged land comprised in Item No.6 and other mortgaged properties No.1 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 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 as may be mutually agreed. In case no settlement is reached between HUDCO and the Educational Trust and if the 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 expeditiously as possible.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 of approximately 63.50 acres, out of this 21 acres had been exchanged by the Educational Trust with Avas Parishad, whether same is encumbered is in dispute.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 is called accession. In the instant case the property which is 21 acres under mortgage, could 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 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 unencumberedthe 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 available. Thus it is not the case of uniting.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 combination which has been formed into a single article, existing property is not lost. Inthe 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 available. Thus it is not the case of uniting.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 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 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 land which was unencumbered which was subject matter of agreement to sell. HUDCO will have the right for other mortgaged properties to realize the dues at the first instance.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 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 lent to them, they are not making payment of dues. Consequently, they will have no right to run the institutions in such a dishonest manner. The increase ofassets 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 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 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 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 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 itswe refrain to comment finally on the said issue. However, fact remains that the 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.