Dismissed

hill properties Ltd. v. union bank of india and 8 Ors.

Bombay HC20 Mar 2012APP/225/2012

Case brief

AI extract

What is this about?

The High Court dismissed the appeal, holding that the right to occupy a flat vested in a shareholder is a transferable property liable to attachment and sale. The court upheld the lower order allowing the flat to be sold by a DRT valuer while granting the company liberty to exercise its right of pre-emption.

What did the court decide?

Appeal dismissed; Notice of Motion disposed of; Valuation report from company's auditor deadline extended to 14 April 2012.

hill properties Ltd. Vs union bank of india and 8 Ors. — Execution and Attachment | Bombay HC (2012)

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APP(L).185.2012

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION

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APPEAL (L) NO.185 OF 2012 WITH NOTICE OF MOTION NO.2332 OF 2007 IN

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SUIT NO.1627 OF 2007

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Hill Properties Limited versus

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Union Bank of India and others

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Appellant

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Respondents

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Mr.J.P.Sen with Mr.Gaurav Mehta i/by Bachubhai Munim & Co. for appellent.

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Mr.Ashish Kamat a/w Mr.Vinod Kothari and Smita Lad i/by M/s.Apex Law Partners for defendant no.9 ARCIL.

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Mr.Vipul Bilve i/by Mulla & Mulla & C.B. & C for respondent no.7.

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CORAM : MOHIT S. SHAH, C.J. AND RANJIT MORE, J. DATE : March 20, 2012

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PC :

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This appeal is directed against the order dated 25 January 2012 of the learned Single Judge rejecting appellant/plaintiff's Notice of Motion seeking release of the suit flat being Flat No.23, Building No. 2, Hill Park Estate, A.G.Bell Road, Malabar Hill, Mumbai-400 006 (suit flat' for short) from attachment under the Warrant of Attachment levied in Execution proceedings before the Debt Recovery Tribunal (DRT' for short) .

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APP(L).185.2012

Defendant no.5 who is a member of the plaintiff company was allotted the suit flat in the above building. The Defendant no.2 while taking loan from Defendant no.1 Union Bank of India, offered the suit flat as a security through the Mortgage Deed entered by respondent no.5. On account of non payment of the loan amount, respondent no.1 bank filed the proceedings before DRT and after the recovery certificate was issued, respondent no.1 bank executed the Deed of Assignment in favour of Defendant no.9 Asset Reconstruction Company (India) Ltd. (`Defendant no.9 or ARCIL' for short).

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Pursuant to the recovery certificate issued in the year 2003, the suit flat came to be attached. When respondent no.9 took steps for getting the security realized, the plaintiff company filed the suit and sought release of the suit flat from attachment by filing the Notice of Motion.

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The Notice of Motion has been disposed of by the learned Single Judge after giving various directions including -

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(a) valuation of the suit flat to be done by empaneled valuer of DRT and if the plaintiff does not accept the said valuation, liberty is granted to the plaintiff to get the valuation done by a certified valuer;

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(b) the order of the learned Single Judge shall be treated as notice of pre-emption and members of the plaintiff company shall be

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APP(L).185.2012

at liberty to offer bids to purchase the suit flat at the price determined by the valuer of the DRT or the price determined by the Auditor of the plaintiff company, whichever is higher, within 21 days of receiving the valuation report, if any, given by the plaintiff's auditor. If any member accepts to purchase the suit flat at such price within the time indicated above, the member shall deposit 25% of such valuation with the DRT within 48 hours of making the offer and shall deposit the balance 75% amount of the consideration with the DRT within 15 days of the first deposit;

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(c) In case no member of the plaintiff company makes an offer within the above time limit or if any member who has made any offer fails to comply with the above conditions, defendant no.9 shall be entitled to sell the suit flat at the valuation fixed by the valuer of DRT to a body corporate by public auction by following the usual procedure;

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(d) the sale shall be made with the existing tenancy of defendant no.7 in view of the order dated 4 October 2005 and that it would be for defendant no.9 as the prospective purchaser to take such steps as are required against defendant no.7 claiming tenancy in the suit flat in accordance with law.

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It is the aforesaid order which is challenged in this appeal.

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Learned counsel for the appellant-plaintiff has raised the following contentions :-

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APP(L).185.2012

(i) It is the plaintiff-appellant which is the owner of the suit flat and defendant no.5 is merely a share holder who, by virtue of owning the share in question, has a right to occupy the suit flat, but defendant no.5 itself is not the owner of the suit flat. Hence, the learned Single Jude should not have given the impugned direction for sale of the suit flat;

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(ii) Only the plaintiff is entitled to sell the suit flat in accordance with Articles of Association being Article Nos.52 to 73 and particularly Articles 52 and 53 which read as under :

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"52. (a) Except as hereinafter provided no shares in the Company shall be transferred unless and until the rights of pre-emption hereinafter conferred shall have been exhausted.

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(b) It is particularly provided that no share shall be transferred by any member unless and until the flat occupied by such member or his or its nominee or nominees by virtue of the holding of such share under the provisions of Article 4(b) hereof has been vacated.

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Every member or other person referred to in the Transmission Article who intends to transfer shares (hereinafter called "The Vendor") shall give notice in writing to the Board of his intention. That notice shall

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APP(L).185.2012

constitute the Board, his agent for the sale of said shares in one or more lots at the discretion of the Board to Members of the Company at a price to be agreed upon by the Vendor and the Board, or in default of the agreement at a price which the auditor of the Company for the time being shall certify, by writing under his hand, to be in his opinion the fair selling value thereof as between a willing vendor and a willing purchaser."

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(iii) The appellant is not bound by the valuation report of the empaneled valuer of DRT and that the valuation made by the DRT valuer is bad as it does not give proper weightage to the fact that the suit flat is in possession of defendant no.7 as a tenant.

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On the other hand, learned counsel for defendant no.9 has opposed the appeal by relying on a decision of the Apex Court in case of Ramesh Himmatlal Shah Vs. Harsukh Jadhavji Joshi (1985)2SCC-105 and submitted that right to occupy the suit flat is a valuable right and value of the share in the plaintiff company is nothing but value of the flat. As a share holder, Defendant no.5 has no other right than to occupy the flat in question which is relatable to its share of the plaintiff company.

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Secondly it is submitted that the learned Single Judge has already given an option to the plaintiff company to get the valuation made by the plaintiff's private auditor and that no prejudice will be caused to the plaintiff company if higher valuation is made for the suit flat.

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APP(L).185.2012

Having heard learned counsel for the parties, we find considerable substance in the submission made by the learned counsel for respondent no.9. As regards argument advanced on behalf of the appellant-plaintiff that the suit flat is owned by the plaintiff and defendant no.5 being merely a share holder, has no saleable right in the suit flat, the principle laid down by the Apex Court in case of Ramesh Shah (supra) is a complete answer. The Apex Court was, of course, concerned with the property which belonged to a tenant cooperative society, but the contention similar to the one raised by the appellant here was raised. The Apex Court held that the right or interest to occupy is a species of property and this right to a particular property is attachable and saleable in execution of the decree against a member of the co-operative society who is the judgment debtor and who holds the share in the co-operative society. The Apex Court further held that there is no reason to think that there is any question of refusal of membership of the society to a non-member if he is qualified otherwise and makes an appropriate application in which case the transfer of shares will be operative and thus the assignment of the right to occupation will hold good. The Apex Court further unhesitatingly came to the conclusion that species of property, namely the right to occupy a flat acquires under the law a stamp of transferability in furtherance of the interest of commerce and no fetter under any of the legal provisions can be found against such a conclusion. The attachment and the sale of the property in execution of the decree are valid under the law.

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7 APP(L).185.2012

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The aforesaid ratio is clearly applicable to the present case also. The plaintiff company claims to be the owner of the suit flat and it is submitted that defendant no.5 is merely a share holder. As held by the Apex Court, the right to occupy the suit flat vested in defendant no.5 is, therefore, clearly transferable and is liable to be attached and sold in execution of the decree.

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Coming to the second contention, we see no infirmity in the order of the learned Single Judge. Right to pre-emption conferred on members of the appellant society by Article 53 of the Articles of Association has been taken into consideration by the learned Single Judge, and, therefore, liberty has been given to the members of the plaintiff society to make an offer to purchase the suit flat.

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As regards the contention that the valuation of the suit flat can be done only by the plaintiff company and not by the valuer of DRT, we see no substance in this contention either. When the property is being sold in execution of a decree i.e. recovery certificate issued by DRT, naturally the valuation made by the empaneled valuer of DRT is relevant and we see no reason why the appellant company should object to the valuation of the suit flat being made by the empaneled valuer of the DRT. In any case, the learned Single Judge has granted liberty to the appellant to get valuation of the suit flat made by its own auditor. Significantly, defendant no.5 itself has not raised any objection to the valuation made by the valuer on the panel of DRT..

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8 APP(L).185.2012

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In view of the above discussion, we see no reason to interfere with the impugned order. The appeal is accordingly dismissed. Notice of Motion (L) No.874 of 2012 does not survive and stands disposed of as such.

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At this stage, at the request of learned counsel for appellantplaintiff, time limit for obtaining valuation report from its own auditor is extended up to 14 April 2012.

(CHIEF JUSTICE)

(RANJIT MORE, J.)

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M.S.Thatte

hill properties Ltd. v. union bank of india and 8 Ors.

Case brief

What is this about?

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hill properties Ltd. v. union bank of india and 8 Ors.

Case brief

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