HILL PROPERTIES LTD. versus UNION BANK OF INDIA AND OTHERS

Citation: [2013] 10 S.C.R. 89 · Decided: 11-09-2013 · Supreme Court of India · Bench: K.S. RADHAKRISHNAN · Disposal: Dismissed

Judgment (excerpt)

[2013] 10 S.C.R. 89 
HILL PROPERTIES LTD. 
v. 
UNION BANK OF INDIA AND OTHERS 
(Civil Appeal No. 7939 of 2013) 
SEPTEMBER 11, 2013 
[K.S. RADHAKRISHNAN AND A.K. SIKRI, JJ.] 
A 
B 
Transfer of Property - Multi-storeyed flats - Flats 
purchased by members of Cooperative Society or 
shareholders of Company - Right, title, interest over such flat 
C 
- Nature of - Held: It 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- It cannot be said that flat owners cannot 
sell, let, hypothecate or mortgage their flat for availing of loan 
without permission of the builder, Society or the Company -
The right of transfer of land is incidental to the right of 
ownership and such a right can be curtailed or taken away only 
by reason of a Statute - The Articles of Association of a 
Company have no force of a Statute and consequently on 
facts, right of Respondent No.5 to mortgage could not have 
been restricted by the Articles of Association - 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 
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 no error with the 
warrant of attachment issued by the ORT on the flat in 
·question. 
The Appellant-company claims to be the owner of the 
flat in question. Respondent No.5 is a shareholder of 
appellant-Company holding one "A" equity share. The 
89 
D 
E 
F 
G 
90 
SUPREME COURT REPORTS 
[2013] 10 S.C.R. 
A flat was allotted to· Respondent No.5 which was holding 
the Share Certificate. Respondent No.5, being an 
associate of Respondent-: no.2, created an equitable 
mortgage to secure dues of Respondent No.2 to 
Respondent no.1-bank by depositing the Share 
B Certificate. Respondent no.1- Bank filed suit for recovery 
of the dues and also for enforcement of the security. The 
Debt Recovery Tribunal (ORT) passed an order of 
attachment in respect of the flat in question. 
The question arose as to whether the property 
C which was mortgaged to the Bank and the right of 
Respondent No.5 upon it could be attached and sold in 
execution of a decree. 
On behalf of the appellant, it was submitted that 
D Respondent No.5 was only a shareholder of appellant-
Company and hence only 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 vested in the Company; and that Respondent 
E No.5 being a shareholder, was bound by the provisions 
of Articles of Association of the appellant-Company and 
could not have mortgaged the suit flat without the 
permission of appellant-Company. 
F 
Dismissing the appeals, the Court 
HELD: 1.1. 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 
G 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 
H as the Cooperative Societies registered under the 
HILL PROPERTIES LTD. v. UNION BANK OF INDlA 
91 
Registration of Cooperative Societies Act, etc. Flats are 
A 
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, 
B 
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 Acts. Such a legislation exists in 
the State of Maharashtra as well. [Para 10] [96-E-H] 
C 
1.2. 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, wi

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