Case: Hill Properties Ltd Vs. Union Bank Of India

Union Bank of India, Respondent No.1 herein, had advanced some financial assistance to the second respondent sometimes in the year 1992. 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, 20054. 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 25th 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 sold5. 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 Appellant6. 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.

Reasoning:
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. Flats are being purchased by people by either becoming 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 ActsWe 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 question15. 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