Goda Raghuram, J.

The A.P. State Co-operative Bank Limited - the petitioner, sanctioned a term loan of Rs. 36.75 lakhs and working capital loan of Rs. 15.31 lakhs comprising Rs. 9.34 lakhs under cash credit limit and Rs. 5.97 lakhs under Bills limit, to the 1st respondent on the acceptance by the 1st respondent of the terms and conditions stipulated in the agreement executed by respondents 2 to 4. The petitioner bank obtained security documents and personal guarantees of respondents 2 to 4. The term loan of Rs. 36.75 lakhs was repayable in ten half yearly equal instalments at the rate of Rs. 3,67,500/- starting from 8-10-1993 to 8-4-1998. The term loan carried an interest of 19% p.a., at half yearly rests and penal interest of 2% p.a., on over dues/ defaults. The validity of the working capital limit expired on 23-1-1996. As payments were not made by the loanee, the petitioner issued notice for repayment of the entire loan amount due. Despite repeated requests and notices by the petitioner, the 2nd respondent did not repay the loan amount due. In the circumstances, the petitioner sought reference to arbitration under Section 61 of the A.P. Co-operative Societies Act, 1964 (for