In Brief
Maharaji Educational Trust borrowed approximately Rs. 75 crores from HUDCO (Housing & Urban Development Corporation) and mortgaged six properties. The Trust exchanged 21 acres from property No. 6 with Avas Parishad in 2007, and later agreed to sell property No. 6 (including those 21 acres) to SGS Constructions for Rs. 154 crores. HUDCO initiated recovery proceedings. The Supreme Court held that the 21 acres obtained in exchange cannot be treated as an accession to the mortgaged property under Transfer of Property Act Section 70, because the agreement was entered before the property was pledged with HUDCO. HUDCO retains first charge on the remaining 43 acres of property No. 6 and properties 1–5. The Trust (a wilful defaulter) must negotiate a repayment scheme within one month; failing payment, HUDCO may sell mortgaged properties to recover its dues, now exceeding Rs. 480 crores.", <parameter name="principles">["The doctrine of accession under Section 70 of the Transfer of Property Act applies only where the mortgaged security remains intact and additions are made to it while the security is preserved; exchange of mortgaged property resulting in loss of identity of the original property does not constitute accession.", "A mortgagee's right to accessions is limited to natural increases or improvements to existing mortgaged property; exchange transactions that remove the original property entirely fall outside the accession doctrine.", "When an agreement to sell is entered into prior to the deposit of title deeds with a mortgagee, the property subject to the agreement is not encumbered at the time of agreement; therefore, the mortgagee does not acquire rights over that unencumbered property obtained later as accession.", "A mortgagor who is a wilful defaulter and has constructed institutions, colleges, and hospitals using borrowed funds has a bounden duty to repay the loan, and may not rely on equitable principles to avoid satisfaction of the debt.", "In mortgage recovery proceedings, only such portion of the mortgaged property as is necessary to satisfy the outstanding debt should be sold; sale of the entire mortgaged property is not permissible."]
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