JUDGMENT :

Leave granted.

2. The short question which arises for determination in this Civil Appeal is: Whether the High Court erred in law in holding, by the impugned judgment, that the Bangalore court has no territorial jurisdiction to hear the matter in view of the provisions of Section 31(1) of the State Financial Corporation Act, 1951?

3. M/s. Mullur Cylinders Pvt. Ltd., defendant No.6, is a company registered under the Companies Act. Defendants No.1 to 5 are its Promoters/Directors. For the manufacture of gas cylinders, defendant No.6 approached appellant-Corporation for loan of Rs.37.50 lakhs. The loan was sanctioned vide letter dated 1st September, 1984. Defendants also executed a Deed of Hypothecation whereby the assets of defendant No.6 Company stood mortgaged in favour of the appellant-Corporation. The loan amount was released. It was fully utilized by the borrowers. However, when it came to the question of repayment, defaults occurred. Ultimately, a legal notice came to be issued on 8th August, 1988 calling upon defendants to pay the entire loan with interest. Dispute consequently resulted.

4. Appellant exercised its power under Section 29 of the State Financial Corporations Act, 1951 (for short "1951 Act"). Consequently, the unit was sold for Rs.33 lakhs. However, the full outstanding amount could not be recovered and, in the circumstances, for enforcement of surety, Misc. Case No.109/1993 came to be filed in the court of VI Additional City Civil Judge, Bangalore City. The Suit was ultimately decreed in favour of the Corporation. Aggrieved by the said decision, the matter was carried in Appeal (Misc. Appeal No.1441/2001) in the Karnataka High Court.

5. We are not concerned with the merits of the claim. Suffice it to state that the question which arose for determination, as reproduced hereinabove, requires us to interpret the provisions of Section 31(1) of the 1951 Act.

6. We quote herein below Section 31(1) as also Section 32 and Section 46B of the 1951 Act.

"31. Special provisions for enforcement of claims by Financial Corporation.---(1) Where an industrial concern, in breach of any agreement, makes any default in repayment of any loan or advance or any instalment thereof or in meeting its obligations in relation to any guarantee given by the Corporation or otherwise fails to comply with the terms of its agreement with the Financial Corporation or where the Financial Corporation requires an industrial concern to make immediate repayment of any loan or advance under section 30 and the industrial concern fails to make such repayment, then, without prejudice to the provisions of section 29 of this Act and of section 69 of the Transfer of Property Act, 1882 (4 of 1882) any officer of the Financial Corporation, generally or specially authorised by the Board in this behalf, may apply to the district judge within the limits of whose jurisdiction the industrial concern carries on the whole or a substantial part of its business for one or more of the following reliefs, namely:-

(a) for an order for the sale of the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation as security for the loan or advance; or

(aa) for enforcing the liability of any surety; or

(b) for transferring the management of the industrial concern to the Financial Corporation; or

(c) for an ad interim injunction restraining the industrial concern from transferring or removing its machinery or plant or equipment from the premises of the industrial concern without the permission of the Board, where such removal is apprehended.

(2) An application under sub-section (1) shall state the nature and extent of the liability of the industrial concern to the Financial Corporation, the ground on which it is made and such other particulars as may be prescribed.

32. Procedure of district judge in respect of applications under section 31.---(1) When the application is for the reliefs mentioned in clauses (a) and (c) of sub-section (1) of