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TMI Blog2017 (6) TMI 186X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Recovery of Debts 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 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 M/s. SGS Construction and Development (P) Ltd. (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. It was entered into to obtain money to wipe off dues of HUDCO. With respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agreement to sell could not have been entered into by the Trust. On 19.5.2011 SGS Constructions preferred objections before the Recovery Officer. On 3.8.2011 it was submitted by SGS Constructions 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) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short 'SARFAESI Act'), 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 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.1 to 5 vide orders dated 22.11.2011 and 9.1.2012. On 25.1.2012 on the prayer made by the Educational Trust, HUDCO was restrained from proceeding against 5 mortgaged properties. HUDCO preferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court also did not comment on the validity of registration of agreement as writ petition (C) No.38596/2013 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 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 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. 10. As against the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty 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 and 20.7.2015 passed by Recovery Officer, DRT and DRAT respectively. By setting aside orders the High Court has protracted the process and prolonged the recovery 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 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 items 1 to 6 of appellant is approximately Rs. 1000 crores and SGS Constructions had offered a mere sum of Rs. 400 crores under the garb of clearing the dues of Educa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained in section 70 of TP Act. Property which has been exchanged 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 be enough to satisfy dues of HUDCO. It would not be appropriate to direct sale of property Nos.1 to 5 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 of large number of students as well as employees. 16. It was submitted on behalf of Trust that this Court has also 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 U.P. It was stamped and got registered unilaterally. Its registration has been questioned before High Court of Allahabad. Thus on the basis of such agreement no right accrued to SGS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 to purchase properties No. 1 to 6 which offer ought to have been 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 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 DRT at Delhi and property 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 of territorial jurisdiction. This Court did not d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 deserve no sympathy at all. Since all these drama was created to 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 and action be initiated accordingly." 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew 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 possibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the mortgaged property. Section 63 deals with the expression "accession to 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 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 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 sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssary that in the 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 available. Thus it is not the case of uniting. 32. In The Law Lexicon by P. Ramanatha Aiyar, 2nd Edn. 1997, "accession" has been defined thus : "Accession is a mode of acquiring property as an addition to existing property by natural growth or by application of human labour. (See Cent. Dict.) In its broadest sense it may be defined to be the means by which title to the increments to one's property movable or immovable, is acquired, whether by natural or artificial means (as) accession of a province to an Empire. In the restricted sense, in which it is generally used in law, it applies to the acquisition of title to the increments to one's movable property, brought about by artificial means, such as labour or the additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RIGIN late 16th cent. (in the general sense 'something added'): from Latin accession(n-), from the verb accedere 'approach, come to ' (see ACCEDE)" Emphasis is on addition to the existing property, quality or title. 35. The Privy Council in Elizabeth Webster & Herbert Power, George Henry Davenport and Robert Burke [1867-69] 2 ILR 69 had considered the version of accession and meaning of the word 'increase' of the original subject-matter for attracting the provisions of section 70 of TP 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 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 "increase" is always spoken of as the increase, not of a flock, but as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so 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 & Industries (P.) Ltd. v. State of Haryana [2012] 1 SCC 656, Raheja Universal Ltd. v. NRC Ltd. [2012] 4 SCC 148; and M.L. Aggarwal v. Oriental Bank of Commerce 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. 42. Thus we direct as under : (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 of June, 2017. (2) On failure of Education Trust as per aforesaid direc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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