JUDGMENT

S.B. Sinha, J. — The 1st respondent herein had set up a small scale industrial unit. The appellant herein is an establishment constituted under the State Financial Corporation Act, 1951. An application for sanction of loan in the Corporation was submitted by the respondent-Company. It was approved. The necessary agreements for loan were executed in terms whereof the properties of the 1st respondent were mortgaged.

2. It was decided to expand the existing unit and procure some machinery therefor. The Respondent also placed orders for other and further equipments/machinery necessary for expansion of the said scheme. Allegedly, the Managing director of the Corporation visited the 1st respondents factory on 29.1.1988 and having satisfied himself that there existed justification for expansion of the capacity utilization had agreed to sanction an additional term loan to the tune of Rs.15 lakhs on terms and conditions mentioned therein, some of which are as under :

"Clause 7 : The concern will have to submit the following papers before the execution of the legal documents:-

(a)Income Tax Clearance Certificate under section 230(A) of the Income Tax Act, 1961 in respect of the Dire