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Company can't stop flat mortgage

The right to occupy a flat is a species of right to property and the flat can be mortgaged to avail of a loan for the flat owner's benefit, the Supreme Court stated last week while dismissing the appeal of Hill Properties Ltd against the attachment of a Malabar Hill flat at the instance of a petition by Union Bank of India before the Debt Recovery Tribunal.

 A shareholder of the building company mortgaged the flat, which was attached under the Securitisation Act. The company challenged it. Dismissing its appeal, the court stated: "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," the court said while upholding the view of the Bombay High Court. The company had argued that the occupier had permission only to use the flat owned by it and the rest of the substantial rights belonged to the company. A shareholder could not mortgage the flat without the permission of the company which was in violation of the articles of association of the company, it was argued by the company. The Supreme Court rejected this line of argument. It said: "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 always transferable and heritable."
Article referred: http://www.pressdisplay.com/pressdisplay/viewer.aspx

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