In Brief
An educational trust borrowed approximately Rs. 75 crores from a housing development corporation (HUDCO) and mortgaged six properties. During the mortgage period, the trust exchanged 21 acres of mortgaged property for unencumbered land from a state authority and later agreed to sell this 21 acres (along with other mortgaged land) to a third party. When recovery proceedings commenced for non-payment, a dispute arose over whether the exchanged 21 acres constituted an accession to the mortgaged property under property law. The Supreme Court held that the 21 acres do not constitute accession because the mortgaged property given in exchange lost its identity and the agreement to sell was entered before title was deposited with HUDCO. Therefore, HUDCO's security interest does not extend to the 21 acres. The trust was declared a willful defaulter and directed to settle repayment within one month, with authority for HUDCO to sell only the initially mortgaged properties (approximately 43 acres of property No. 6 and properties 1-5) if repayment defaults.
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