JUDGMENT

HANSARIA. J.:—M/s. Suvarna Board Mills, hereinafter, the respondent, approached the appellant seeking "bridge loan" towards State Capital Incentive and for purchase of some machineries etc. A sum of Rs. 3 lakhs was disbursed by the appellant some time in September 1990 laying down the repayment schedule. The respondent did not repay as agreed upon. A small amount of Rs. 11,588/- was once paid and cheques given thereafter bounced. In December 1990 the appellant reminded the respondent to clear arrears, but to no effect. Reminders of April and May 1991 also bore no fruit. In January 1992 the arrear on account of principal, interest and expenses became about Rs.2.5 lakhs. The appellant, a State Financial Corporation, decided to invoke power conferred by Section 29 of the State Financial Corporations Act and did so on 7-1-92 by issuing a notice contemplated by this section stating, inter alia, that the Corporation has become entitled because of the failure and neglect of the respondent to clear the dues, to recover the entire outstanding loan amount of about Rs. 5 lakhs and called upon the respondent to pay the same by 21-1-92 failing which it was stated that the possession of