HON’BLE SRI JUSTICE A.RAMALINGESWARA RAO WRIT PETITION Nos.4230 & 9222 of 2010 DATED: 28.04.2014 WP No.4230 of 2010:
Between:
S. Venkataramaiah ... Petitioner And Khadi and Village Industries Commission, rep. by its Chief Executive officer, Mumbai & others … Respondents The Court made the following:
HON’BLE SRI JUSTICE A.RAMALINGESWARA RAO WRIT PETITION Nos.4230 & 9222 of 2010 COMMON ORDER:
Heard the learned counsel for petitioners and learned Advocate General for Respondents 1 and 2. The parties are described as they are arrayed in WP No.4230 of 2010 for the sake of convenience.
2. The petitioner in WP No.4230 of 2010 is the purchaser of the immovable properties belonging to the 3rd respondent in an extent of Ac.1.5 cents in Sy.No.455/2, Kallur village, Kurnool district. The 3rd respondent, which is a society registered under the Societies Registration Act, after obtaining permission of the general body as well as the executive committee, initially entered into an agreement of sale with the petitioner and registered it as document No.7222 of 2006 for a sale consideration of Rs.75,00,000/-. The title deeds relating to the said properties were deposited by the 3rd respondent with Respondents 1 and 2 while availing loan from them. After availing the loan by the 3rd respondent with Respondents 1 and 2, it fell in deep financial crisis and it has become virtually defunct and it wanted to dispose of its idle immoveable properties in order to pay back the loan of the 1st respondent and also to re-start its activities. In those circumstances, it entered into a sale transaction for the sale of the above properties with the petitioner. In pursuance of the request of the 3rd respondent for return of the title deeds, respondents 1 and 2 refused to return title deeds. The petitioner herein filed WP No.14519 of 2007 seeking a direction to the 1st and 2nd respondents to return the title deeds and respondents 1 and 2 herein filed counter-affidavit stating that the 3rd respondent availed loan and advances to a tune of Rs.106.72 lakhs for taking up the activities of Khadi & Village Industries Commission (KVIC) and 3rd respondent has no power to dispose of the immovable properties except with the prior permission of the KVIC. A learned single Judge of this Court dismissed the said writ petition on 26.10.2007 holding that there was no privity of contract between the petitioner and respondents 1 and 2 and the petitioner has to avail other remedies open to him. The petitioner filed WA No.89 of 2008 and the same was allowed by a detailed order of a Division Bench of this Court on 13.10.2009. In pursuance of the interim order in the writ appeal dated 29.02.2008, the petitioner paid a sum of Rs.87.30 lakhs to the account of the 3rd respondent as on 31.03.2003 and this Court also directed respondents 1 and 2 to maintain the same in a separate account and they were also directed to hand over the title deeds to the 3rd respondent. Even after receiving the amount, when respondents 1 and 2 did not comply with the order, the petitioner filed CC No.705 of 2008 and the 1st respondent approached the Hon’ble Supreme Court by way of SLP No.16931 of 2008 challenging the interim order of the Division Bench dated 29.02.2008 and ultimately, the said SLP was disposed of on 03.08.2009 directing disposal of the writ appeal itself.
3. The Division Bench while allowing the writ appeal by order dated 13.10.2009 after considering rival contentions, held as follows:
1. Since the KVIC is a statutory organization and owes its existence to the Act of 1956, it actions must conform to the principles of fair play in action and transparency required of a state instrumentality. The writ petition would be maintainable against such a body in the event of transgression of those principles.
2. Reliance of Respondents 1 and 2 on Circular No.DKC/DIS OF PROPERTY/GEN/2008-09 dated 05.12.2008 issued by the Chief Executive Officer of the KVIC providing guidelines do not for grant of permission to various directly aided institutions for disposal of their unused/surplus land, was negatived on the ground that the said guidelines fall within ambit of ‘Regulations’ as provided under Section 27 of KVIC Act and there is no evidence to show that the statutory procedure prescribed under Sections 27 and 28 of the Act of 1956 has been followed in the case of these circulars. Circulars have no statutory force and cannot be held to be binding upon the Sangam, 3rd respondent.
3. Since the 3rd respondent created an equitable mortgage over its immovable property by deposit of its title deeds with the KVIC, the same would only vest the KVIC with the statutory protection afforded to a mortgagee under Chapter IV of the Transfer of Property Act, 1882. Since the KVIC never attempted to institute a suit for foreclosure of the mortgage under Section 67 of the Transfer of Property Act, 1882, the Sangam, 3rd respondent is at liberty to redeem the mortgage by paying the outstanding loan amount due from it and then seek return of its title documents.
4. The petitioner herein (appellant in WA No.89 of 2008) who claims to be successor-in-interest of the Sangam, based on the registered agreement of sale dated 28.04.2006 coupled with possession, would fall within the ambit of Section 91(a) of the Transfer of Property Act, 1882 and therefore cannot be categorised as a stranger to the loan transaction as held by the learned single Judge.
5. The Sangam, 3rd respondent, being a separate entity independent of the KVIC and the KVIC does not have pervasive control over the actions of the Sangam, by relying upon its non-statutory circular guidelines.
6. The KVIC being a mere mortgagee by way of deposit of title deeds, and in the light of the willingness and readiness shown by the Sangam with the support of the appellant to repay the entire outstanding amount, the KVIC can no longer have any grievance and its action in withholding the title documents cannot be sustained. It is not for the KVIC, a third party, to object to the sale transaction on the ground that it was less than the market value, which, in any event was not borne out by the record.
7. There shall be a direction to the KVIC to intimate to the appellant and the Sangam, within a period of two weeks from the date of receipt of a copy of the order, the amount that is still outstanding in the loan account of the Sangam and the writ appellant and/or the Sangam shall repay the entire loan amount due from the Sangam to the KVIC within a period of four weeks from the date of receipt of such intimation. The KVIC shall return to the Sangam the title documents pertaining to the subject land within a period of one week from the date of receipt of such payment.
4. Thereafter, the KVIC held its 575th meeting on 25.11.2009 at Mumbai, and Item 16.5 was one of the items pertaining to the implementation of the judgment of this Court in WA No.89 of 2008 and the relevant portion of the decision is as follows:
“Commission deliberated in detail the note of Directorate of Legal Affairs and the judgment of the Hon’ble High Court of Andhra Pradesh in Writ Appeal No.89 of 2008 filed by Shri Venkataramaiah against KVIC and Gram Swarajya Sangham, Kurnool. The Commission taken into account the legal opinion furnished by the Legal Adviser and noted the precarious and flawed legal position that the present circulars/guidelines of KVIC does not have sanction of law and Non Statutory provision does not over ride Statutory provisions of the law and decided to comply the order of the Hon’ble Court.”
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But the other two paras in the same item relates to future course of action to be taken with regard to charging of interest and amendments to the KVIC Act and Loan Rules and are not relevant for the purpose of this case.
5. The petitioner addressed a letter to Respondents 1 and 2 on 12.11.2009 enclosing a copy of the order in WA No.89 of 2008 dated 13.10.2009 stating that pursuant to the interim order in the above writ appeal, he deposited Rs.87,30,137/- and as per the statement of the account as on 31.03.2003 of respondents 1 and 2, the balance amount payable by the 3rd respondent is only Rs.87,30,137/-, which was already deposited by the petitioner. Therefore, he requested to inform the amount outstanding in the account of the 3rd respondent, if any, after deducting the amount already deposited by him and on receipt of such intimation, he would take further steps as directed by this Court.
6. The 2nd respondent addressed a letter on 24.12.2009 to the petitioner admitting the receipt of the amount of Rs.87,30,140/- and the outstanding amount of the Sangam as on 24.12.2009 after deducting the amount of Rs.90,91,134/- was Rs.2,77,52,666.57 and he was directed to pay the said amount within a period of four weeks from the date of receipt of the said letter. The petitioner was surprised to receive the said communication, got issued a notice through his counsel on 03.01.2010 to respondents 1 and 2 asking them to furnish the following particulars with documentary evidence to substantiate the amount claimed by them.
“a) The particulars of the Loans/Grants/Rebates given and also the terms imposed on the Sangam at the time of sanction of the Loans/Rebates/Grants etc., from time to time from the inception of the Sangam.
b) The letters from the Sangam to you accepting the terms of the loan imposed by you;
c) The rate of interest prescribed by the KVIC/Central Government from time to time in respect of the amounts financed by the KVIC to the bodies like the Grama Swarajya Sangam;
d) A statement showing the computation of the amount as per the orders of the Hon’ble High Court in W.A.No.89/2008 whereby you arrived at and amount of Rs.2.77 crores as due from the Sangam.”
7. The 2nd respondent furnished the required information on 22.01.2010, on the basis of which, the present writ petition was filed challenging the action of the 1st respondent in directing to recover the outstanding amount due from the 3rd respondent by charging interest @ 12% per annum from the beginning in pursuance of the order of this Court in WA No.89 of 2008 dated 13.10.2009.
8. The 3rd respondent also filed WP No.9222 of 2010 challenging the action of the 1st respondent in trying to recover the outstanding amount of the petitioner’s society by charging the interest at 12% p.a. and withholding the documents of title of the properties belonging to the Society.
9. Respondents 1 and 2 filed a counter-affidavit objecting to the maintainability of the writ petition against the order dated 24.12.2009 issued by the KVIC demanding total outstanding balance amount. They further stated that the Society purchased 16 properties with the grants given by the KVIC and this itself shows that the action of respondents-KVIC in charging the higher rate of interest on the outstanding dues of the petitioner society is justifiable. The counter also states that the action of the petitioner institution in disposing the immovable property of the institution acquired out of the grant provided by the KVIC was in gross violation of the byelaws of the petitioner institution. Counter also raises the same grounds, which were raised and considered by the Division Bench. They ultimately state that it is an unwritten policy of the respondent-KVIC to charge market rate of interest on the loan provided by it from those beneficiaries who are acting against the objectives and purpose for which they are established and abandon the activities of the respondent-KVIC.
10. Learned counsel for the petitioner states that since the 1st respondent had communicated to the 2nd respondent on 19.11.2009 with regard to the outstanding amount of Rs.1,41,26,978.85 as due as on 16.11.2009, respondents 1 and 2 are entitled to collect only the said amount after making necessary adjustments. A perusal of the statement would clearly indicate that while arriving at the said amount, the interest and penal interest was charged on different accounts and beyond that, respondents 1 and 2 cannot recover any amount and it is only to frustrate the order passed by the Division Bench, respondents 1 and 2 are insisting for payment of 12% interest. Learned Advocate General, on the other hand submits that in view of the purchase of the properties by the society from loan amount disbursed by respondents 1 and 2 and diverting the funds for non KVIC activities, respondents 1 and 2 are within their right to charge interest at 12% per annum on the outstanding amount.
11. When reliance was placed on inter-section note dated 04.12.2009 enabling them to collect interest at 12% per annum on Khadi and Village Industries funds based on inter-section note dated 26.11.2009, minutes of the meeting held on 25.11.2009 were called for and the decision in item No.16.5 categorically shows that the order of the Division Bench was decided to be complied with. But the learned Advocate General was unable to clarify this Court with regard to the basis for collecting the interest at 12% per annum on the outstanding amount even after charging interest and penal interest on various loan accounts and arriving at a figure of Rs.1,41,26,978.85 by the 1st respondent while communicating to the 2nd respondent on 19.11.2009. The said communication was immediately after the order of this Court in WA No.89 of 2008 dated 13.10.2009. In the absence of any basis for charging interest at 12% per annum apart from the interest and penal interest calculated on various accounts in the said letter, the action of respondents 1 and 2 demanding amount of Rs.2,77,52,666.57 after adjusting the amount of Rs.90,91,134/-, cannot be held to be valid.
12. In the circumstances, respondents 1 and 2 are directed to adhere to the calculation sheet communicated by the 1st respondent to the 2nd respondent in letter No.Accounts/GSS/AP/Dues/2009-10/dated 19.11.2009 and communicate the outstanding amount based on the said letter, within a period of two weeks from the date of receipt of a copy of this order and it is open to the petitioner and the 3rd respondent society to repay the entire balance amount as communicated by respondents 1 and 2 within a period of four weeks from the date of receipt of such intimation and on receipt of the said amount, respondents 1 and 2 are directed to return the title documents forthwith.
13. Both the writ petitions are accordingly allowed. Pending miscellaneous petitions in these writ petitions, if any, shall stand dismissed in consequence. No order as to costs.
A. RAMALINGESWARA RAO, J
Date: 28.04.2014 BSS HON’BLE SRI JUSTICE A. RAMALINGESWARA RAO 8 WRIT PETITION Nos.4230 and 9222 of 2010 Date: 28.04.2014 BSS