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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

J U D G M E N T

K.S. RADHAKRISHNAN, J.

1. Leave granted.

2.  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

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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  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, 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

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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

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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

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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  mortgaged  the  suit  flat  without  the  

permission  of  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

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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

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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

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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.   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

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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

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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  

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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.

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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.