IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD TUESDAY, THE THIRTEENTH DAY OF OCTOBER TWO THOUSAND AND NINE PRESENT THE HON'BLE SRI JUSTICE B.PRAKASH RAO and THE HON'BLE SRI JUSTICE SANJAY KUMAR WRIT APPEAL NO : 89 of 2008 (Writ Appeal under Clause 15 of the Letters Patent against the Order dated 26/10/2007 in WP NO : 14519 OF 2007 on the file of the High Court.) Between: S. Venkataramaiah S/o.S. Venkata Subbaiah R/o. 62/234, Near Central Library, Kurnool, Kurnool District. ..... APPELLANT AND 1 Khadi and Village Industries Commission , Rep. by its Chief Executive Officer, Gramodaya, 3 , Irla Road, Vile Parle (W) Mumbai. 2 Grama Swarajya Sangam, Door No. 49-1-2D, Laxmi Nagar, Kurnool-2, Rep. by its President, Mr. Tirumala Rayudu 3 Khadi and Village Industries Commission , P.B.No. 362 M.J. Road, Gandhi Bhavan, Hyderabad-1 Rep. by its State Director. .....RESPONDENT(S) Counsel for the Appellant:MR.V.SRINIVAS Counsel for the Respondent No.: MR.B.RAJENDRA The Court made the following : THE HON’BLE SRI JUSTICE B.PRAKASH RAO AND THE HON’BLE SRI JUSTICE SANJAY KUMAR WRIT APPEAL NO.89 OF 2008 JUDGMENT: (Per SK,J) The unsuccessful petitioner in Writ Petition No.14519 of 2007 is in appeal aggrieved by the order dated 26.10.2007 of the learned single Judge dismissing the writ petitioner, holding that no positive directions by way of a writ of mandamus could be granted in the matter. The appellant approached this Court by way of the writ petition seeking a declaration that the action of the Khadi and Village Industries Commission, Mumbai (for brevity, ‘the KVIC’), in withholding the title documents pertaining to the land admeasuring Ac.1.50 cents in Survey No.455/2, Kallur Village, Kurnool District, belonging to the Grama Swarajya Sangam, Kurnool (for brevity, ‘the Sangam’), despite the readiness of the Sangam to discharge the KVIC’s outstanding loan amount was illegal and unconstitutional; and to issue a consequential direction to the KVIC to return the said title documents upon repayment of the outstanding loan. The KVIC is a statutory body incorporated under the Khadi and Village Industries Commission Act, 1956 (for brevity, ‘the Act of 1956’). This statutory body was established for the purpose of developing Khadi and Village Industries. The Sangam is a Society registered under the provisions of the Societies Registration Act, 1962 (for brevity, ‘the Act of 1962’) and its main objective is to purchase cotton, draw thread from it and make cloth. The Sangam had in the distant past availed financial assistance from the KVIC for meeting its capital expenditure. In this regard, it deposited the title deeds pertaining to its immovable properties, including the land in Survey No.455/2 of Kallur Village, Kurnool District, with the KVIC for the purpose of securing the loan. Thereafter, the Sangam ran into rough weather financially over a period of time and was unable to discharge its loan to the KVIC. With the intention of resuscitating itself, the Sangam decided to raise funds by disposing of its idle immovable properties and accordingly, entered into the registered agreement of sale dated 28.04.2006 (Document No.7222/2006) with the appellant and another for alienating the land, being an extent of Ac.1.50 cents in Survey No.455/2 of Kallur Village, Kurnool District. The sale consideration was fixed at Rs.75 lakhs, which represented the market value prevailing at that time and an amount of Rs.6 lakhs was paid to the Sangam, the balance being payable at the time of registration of the sale deed. The appellant claims that the property was put in their possession by the Sangam under the said agreement of sale. It appears that the Sangam addressed letters to the KVIC seeking return of the title documents pertaining to this property expressing its readiness to pay the outstanding loan amount. However, the KVIC refused to accede to the request for return of the title documents, insisting that the Sangam ought not to have attempted to dispose of the subject land without seeking its permission. The KVIC also initiated steps to prevent the registration of the sale deed in respect of the subject land. The attempt of the appellant to obtain the execution of the sale deed by issuance of a legal notice to the Sangam resulted in its reply dated 10.05.2007, wherein the Sangam stated that it had applied for the permission of the KVIC and was awaiting the same. The appellant stated that the stand adopted by the KVIC, in not returning the title documents in spite of the readiness of the Sangam to repay the loan in full, was legally unsustainable and accordingly sought for a declaration and consequential direction in this regard. The Sangam filed a counter supporting the appellant. It stated that the amount of the loan due from it to the KVIC had swelled to Rs.87 lakhs and odd; and owing to the acute cash crunch faced by it, the Sangam was finding it difficult to meet its commitments and accordingly took the decision to dispose of its idle immovable properties so as to mobilize much needed funds. The Sangam decried the stand adopted by the KVIC in insisting that its permission ought to have been obtained before such alienation and asserted that the sale transaction with the appellant was genuine, bona fide and for legitimate consideration. Per contra, the KVIC in its counter affidavit assailed the maintainability of the writ petition and disputed the matter on merits. It admitted that the Sangam was an independent Institution registered under the Act of 1962, and that it implemented the KVIC’s programmees for general rural development. This admission is of significance in as much as it reflects that the Sangam was not a body established by the KVIC. The KVIC further stated that it had extended financial assistance to the Sangam on the security of the equitable mortgage created by the Sangam by deposit of its title deeds, including the deeds of the subject land. It is the specific case of the KVIC that the Sangam had no power to dispose of its immovable properties so mortgaged, without obtaining its prior permission. The KVIC relied upon the guidelines issued by it in Circular No.DKC/Policy/Reconstn/ Committee/2004-05 dated 21.12.2004 and the subsequent Circular No.DKC/DIS OF PROPERTY/GEN/2008-09 dated 05.12.2008 in this regard. The sale transaction between the Sangam and the appellant was therefore castigated as illegal in as much as the Sangam failed to obtain prior permission of the KVIC before entering into the agreement of sale. The KVIC claimed full power and authority over all transactions of sale of landed properties belonging to the Institutions which received financial assistance from it. According to the KVIC, such Institutions could dispose of their surplus land only under the strict supervision of the Committee constituted as per the guidelines prescribed by it and only for the purposes specified by it. The KVIC claimed that its relationship with the Sangam was more than that of a mere lender and borrower, stating that the Sangam was its implementing agency and accordingly, was bound to act in trust by protecting its properties. The KVIC further alleged that the appellant had acted in collusion with the Sangam and was trying to purchase the subject land at a low price. The KVIC pressed into service its Circular dated 07.09.2006 and more specifically clause-11 thereof, which dealt with release of original title deeds. Clause-11 reads as under: “The title deeds deposited by the borrower with the Commission in connection with the creation of Equitable Mortgage shall not be released without the permission of the Commission. Therefore, under no circumstance, the State/Divisional Directors should release the original title deeds without obtaining the permission. In the case of the institution and individual borrowers who have applied for financial assistance and created equitable mortgage of their property with the KVIC but no financial assistance has been provided to them by the KVIC, the State/Divisional Directors have been authorized to release the original title deeds to such institution and individual borrowers after obtaining “No Dues Certificate” from the Directorate of Accounts in respect of all such institutions and borrowers. The Circular dated 20.11.03 issued by the Directorate of Legal Affairs in this regard is placed at the end of the chapter. In the case of institutions who have been partly funded and created equitable mortgage in favour of KVIC and are ready to make the repayment of the entire amount of loan taken by them along with interest and penal interest to the KVIC, the State/Divisional Directors have been authorized to release the title deeds of the immovable properties after the entire payment of outstanding dues by the borrower has been received in the form of demand draft. The Circular dated 27.11.03 issued by the Director of Legal Affairs in this regard is placed at the end of the chapter.” Pausing here, it may be noticed that clause 11 only provides for prior permission of the KVIC before its State/Divisional Directors release title documents. It does not stipulate that permission should be obtained before the alienation is effected by the institution. Reliance is also placed upon the Khadi and Village Industries Commission Loan Rules, 1958 (for brevity, ‘the Rules of 1958’). Under Rule 16, the State Khadi and Village Industries Board set up under State Act would be competent to re-loan funds advanced, to it by the KVIC, to Institutions under its jurisdiction. One such Institution specified under Rule 17 is a Society registered under the Act of 1962. The KVIC accordingly submitted that the Sangam had no right to dispose of its lands without prior permission of the KVIC. The learned Judge having considered the above aspects was of the opinion that the issue raised by the appellant arose out of the loan transaction between the KVIC and the Sangam to which he was not a party and therefore the obligations flowing out of such a relationship could not be enforced by way of a writ petition under Article 226 of the Constitution of India. Stating so, the learned Judge left it open to the parties to pursue other remedies available to them in law and dismissed the writ petition. Sri Vedula Srinivas, learned counsel for the appellant, submitted that in the light of the admitted facts obtaining in the case, his client ought not to have been non-suited on the ground that a direction cannot ensue under Article 226 of the Constitution for return of the subject title deeds. He submitted that the finding of the learned Judge that his client, being a non-party to the loan transaction, could not seek the return of the documents is unsustainable in law as his client derives title to maintain the subject litigation from the Sangam, a party to the loan transaction. He submitted that pursuant to the interim order dated 29.02.2008 of this Court in the present appeal, his client had deposited a sum of Rs.87 lakhs with the KVIC at Hyderabad and was willing to pay any further amounts that may be found due for the discharge in full of the outstanding loan amount due from the Sangam to the KVIC. He submitted that the KVIC could only insist upon repayment of its loan and was overstepping its rights in exercising supervisory control over the Sangam, by insisting that the Sangam cannot alienate its properties except with its prior permission. He therefore prayed for a direction to the KVIC to return the title documents pertaining to the subject land. Per contra, Sri K.Subramanya Reddy, learned senior counsel appearing on behalf of Sri Bussa Rajendra, learned counsel for the KVIC, reiterated the stand taken by the KVIC in its detailed counter affidavit and submitted that the Sangam had acted illegally in entering into an agreement of sale with the appellant for sale of the subject land without first acquiring the permission of the KVIC. He submitted that the Sangam, once a flourishing enterprise, had run into financial trouble and the present attempts to sell away its valuable immovable properties for doubtful consideration was not in its interest. He asserted that the KVIC was more than a mere lender as the Sangam was the implementing agency of the KVIC’s programmees and therefore owed a moral obligation and responsibility to the KVIC to safeguard its properties. He placed reliance on the Act of 1956, the Rules of 1958 and the Circular dated 05.12.2008 in support of his contentions. At the outset, it may be noticed that this Court passed interim orders in the present appeal on 29.02.2008 directing the appellant to pay the loan amount being the capital and interest payable by the Sangam to the KVIC at Hyderabad and upon receipt of such amount the KVIC was directed to hand over the subject title deeds. In pursuance thereof the appellant claims to have deposited a sum of Rs.87 lakhs with the KVIC’s State level branch at Hyderabad. However, the said direction was assailed by the KVIC before the Supreme Court in Civil Appeal No.5143 of 2009. The Supreme Court, by its Order dated 03.08.2009, while setting aside the interim order dated 29.02.2008 passed by this Court, requested early disposal of this appeal, preferably within a period of three months from the date of receipt of the said order. The order was received on 05.09.2009. It is stated by Sri Vedula Srinivas, learned counsel, that the amount deposited by his client pursuant to the aforestated interim order dated 29.02.2008 is still lying with the KVIC. Be that as it may, the issue before us is whether the appellant is entitled to any relief in the present proceedings in the light of the facts of the case and the opinion expressed by the learned single Judge as regards the maintainability of the writ petition. The KVIC is admittedly a statutory organization and owes its existence to the Act of 1956. Its actions must therefore conform to the principles of fair play in action and transparency required of a state instrumentality. The writ petition would therefore be maintainable against such a body in the event of transgression of these principles. A perusal of the Act of 1956 would disclose that the KVIC was established for the development of Khadi and Village Industries and for matters connected therewith. Section 4 of the Act deals with the establishment and constitution of the Commission, a body corporate having perpetual succession. Section 15 of the Act of 1956 details the functions of the Commission and states inter alia that the Commission shall plan, promote, organize and assist in establishment and development of Khadi and Village Industries in the rural areas in co- ordination with other agencies engaged in rural development wherever necessary. Section 26 of the Act of 1956 gives power to the Central Government to make Rules to give effect to the provisions of the said Act and Section 27 vests the KVIC with power to make Regulations with the previous sanction of the Central Government by way of a notification in the Official Gazette. The Rules and Regulations made under Sections 26 and 27 of the Act of 1956 are required to be laid before the Parliament under Section 28 thereof. The Rules of 1958 define ‘borrower’ under Rule 3(iv) to mean amongst others ‘a society registered under the Societies Registration Act’. Rule 4 provides for grant of loans for promotion of Khadi and/or any industry specified in the schedule appended to the Act of 1956. Rule 9 stipulates that a loan will be granted to a borrower as defined in Rule 3(iv) on mortgaging immovable property and/or pledging and/or hypothecating movable properties as security for the loan applied for. Rule 11 posits that in the event of default in payment of an instalment, it shall be open to the Chief Executive Officer of the KVIC to take possession of the immovable or movable properties and dispose of the same and credit the receipts to the KVIC. The Circular No.DKC/DIS OF PROPERTY/ GEN/2008-09 dated 05.12.2008 issued by the Chief Executive Officer of the KVIC provides guidelines for grant of permission to various directly aided Institutions for disposal of their unused/ surplus land. It is stated therein that various directly aided Institutions were applying for permission to dispose of their unused/surplus land/properties for the purpose of repayment of loans taken from the KVIC and other Banks and that the Property Disposal Committee had been constituted as per the earlier Circulars of the KVIC. However, as some of the Institutions were conducting such sales for their benefit, the KVIC was issuing policy guidelines in the matter for disposal of the unused/surplus property mortgaged to it by the Institutions. The Circular goes on to detail the permissible purposes of disposal of surplus/unused land belonging to the aided Institutions, providing for the utilization of the proceeds of such disposal. The modus operandi to be adopted by the Institution proposing to dispose of its unusable property is also provided in the said Circular, clearly positing a major role for the KVIC in such process. So much so, the Disposal Committee is vested with the power of arranging the sale of such property to a buyer as per GFR guidelines and it would also have the full authority to accept or reject any bid. Thus, the Circular provides for a pervasive role for the KVIC in the disposal of such properties belonging to the aided Institutions. It is on the basis of this Circular and the preceding Circulars that Sri K.Subramanya Reddy, learned senior counsel, asserts that the action of the Sangam in resorting to a unilateral sale transaction behind the back of the KVIC cannot be accepted. It is however to be noticed that the origin of power underlying these Circulars is not manifest. There is no explanation forthcoming from the material on record as to the source whereby the KVIC derives the power to issue such Circular guidelines. Section 27 of the Act of 1956 no doubt gives power to the KVIC to make Regulations but such Regulations are to be made with the previous sanction of the Central Government and by way of a notification in the Official Gazette. Further, such Regulations need to be placed before the Parliament under Section 28 of the Act of 1956. There is no indication that these Circular guidelines issued by the KVIC fall within the ambit of ‘Regulations’ as provided under Section 27 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. These Circulars therefore have no statutory force and cannot be held to be binding upon the Sangam. It is to be noticed that the Sangam is not one of the organizations established and maintained by the KVIC as provided under Section 15(2)(i) of the Act of 1956. The KVIC itself admits to the position that the Sangam is an independent body registered under the Act of 1962. The mere fact that the Society is implementing the KVIC’s programmees does not make it an extension of the KVIC, thereby vesting the KVIC with supervisory control over its every action. In the absence of such power of supervisory control, the KVIC obviously cannot assert that its permission is a mandatory pre- requisite before the Sangam entered into the agreement of sale with the appellant. It is no doubt true that the Sangam appears to have created an equitable mortgage over its immovable property by deposit of its title deeds with the KVIC. However, 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 (for brevity, ‘the Act of 1882’). It is also to be noted that under Rule 11 of the Loan Rules of 1958, the KVIC was empowered, in the event of default in the payment of loan instalments, to take possession of the immovable property mortgaged to it and dispose of the same. Needless to state, the said Rule does not vest the KVIC to act in violation of the Act of 1882. Necessarily, the KVIC would have to adhere to the provisions contained in Chapter IV of the Act of 1882 in the event there was a default on the part of the Sangam in the payment of its loan instalments. Section 69 of the Act of 1882 provides that a mortgagee would have the power to sell the mortgaged property in default of the payment of the mortgage money without the intervention of the Court only in particular cases stipulated therein. It is not the case of the KVIC that its case falls within the ambit of the cases enumerated in the said Section. It is not the case of the KVIC that it ever attempted to institute a suit for foreclosure of the mortgage under Section 67 of the Act of 1882. Therefore, the Sangam is at liberty to redeem the mortgage by paying the outstanding loan amount due from it and then seek return of its title documents. Further, Section 91(a) of the Act of 1882 provides that a person who has any interest in or charge upon the property mortgaged may also redeem the mortgaged property. The appellant claims to be the successor-in-interest of the Sangam, based on the registered agreement of sale dated 28.04.2006 coupled with possession, and would therefore fall within the ambit of Section 91(a) of the Act of 1882. He cannot therefore be categorized as a stranger to the loan transaction as held by the learned single Judge. The language of the statute makes it clear that he is a person who is entitled to redeem the mortgage, having an interest in the mortgaged property. Section 96 of the Act of 1882 makes the provisions of Section 91 applicable to a mortgage by deposit of title deeds. Therefore, the KVIC cannot hark upon its non-statutory Circular guidelines to defeat the statutory provisions of the Act of 1882. In the absence of a right of supervisory control over the Sangam, the contention of the KVIC that its relationship with the Sangam is more than that of a mere lender-borrower cannot be accepted. In the light of the discussion hereinabove, it is clear that the Sangam is a separate entity independent of the KVIC and therefore the KVIC does not have pervasive control over the actions of the Sangam, as sought to be projected by it relying upon its non-statutory Circular guidelines. The enforceability of such guidelines is itself open to question and the KVIC cannot seek to draw support from the same in its endeavour to make out a right to interfere in the activities of the Sangam. Therefore, the KVIC, being a mere mortgagee by way of deposit of title deeds, can only seek recovery of the loan amount due to it and no further. 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. Sri Vedula Srinivas, learned counsel, submitted that in addition to the amount already deposited by his client, if the KVIC was of the opinion that any further amount was still due to discharge the loan, his client was willing to pay the same. In the light of this submission, it is no longer open to the KVIC to baldly assert that the sale transaction should be shelved merely because its prior permission was not obtained. This obdurate and wholly irrational stand of the KVIC is beyond comprehension when it has been promised the loan amount due to it, which has been outstanding for the past several decades. There is no reason why the KVIC should adopt this mulish stand and refuse to part with the title deeds thereby delaying the repayment of the loan due to it. Such a stand, opposed to all tenets of logic and reasonableness, does not find support on any legal principles. As stated supra, the Circular guidelines