The duty of the Corporation to inform the party concerned about the actual amount due before exercising its power under S. 29 and afford a limited opportunity of contesting the computation of liability.

( 1 ) IN these three writ petitions, the petitioners have questioned the constitutional validity of S. 29 of the Karnataka State Financial Corporations Act, 1951.

( 2 ) THE brief facts of the case are these.- the Karnataka State Financial Corporation has been established by the State Government, by virtue of the power vested in it under S. 3 of the Karnataka State Financial Corporations Act, 1951, (the 'act' for short ). S. 24 of the Act provides that the Board of a State Financial Corporation in discharging its functions under this Act shall act on business principles, due regard being had by it to the interests of industry, commerce and the general public. S. 25 of the Act, specifies the kinds of business which the Financial Corporation should carry on under the Act. One of the powers of the Corporation is guaranteeing, on such terms and conditions as may be agreed upon; loans raised by industrial concerns which are repayable within a period not exceeding twenty years, and are floated in the public market and granting loans or advances to, or subscribing to debentures of, an industrial concern, repayable within a period not exceeding 20 years from the date on which they are granted or subscribed to.

( 3 ) S. 29 of the Act, the validity of which is challenged in this petition, reads:-"29. (1) Where any industrial concern, which is under a liability to the Financial Corporation under an 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, the Financial Corporation shall have the (right to take over the management or possession or both of the industrial concern), as well as the (right to transfer by way of lease or sale) and realise the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation. (2) Any transfer of property made by the Financial Corporation, in exercise of its powers, under sub-sec. (1), shall vest in the transferee all rights in or to the property transferred (as if the transfer) had been made by the owner of the property. (3) The Financial Corporation shall have the same rights and powers with respect to goods manufactured or produced wholly or partly from goods forming part of the security held by it as it had with respect to the original goods. (4) (Where any action has been taken against an industrial concern) under the provisions of sub-sec. (1), all costs, (charges and expenses which in the opinion of the Financial Corporation have been properly incurred) by it (as incidental thereto) shall be recoverable from the industrial concern and the money which is received by it, shall, in the absence of any contract to the contrary, be held by it in trust to be applied firstly, in payment of such costs, charges and expenses and, secondly, in discharge of the debt due to the Financial Corporation, and the residue of the money so received shall be paid to the person entitled thereto ). (5) (Where the Financial Corporation has taken any action against an industrial concern) under the provisions of sub-sec. (1), the Financial Corporation shall be deemed to be the owner of such concern, for the purposes of suits by or against the concern, and shall sue and be sued in the name of (the concern ). "

( 4 ) THE petitioner in Writ Petition No. 14877/ 1986, is a partnership firm, established on 8/01/1980. The petitioner in this writ petition has taken loans, one in a sum of Rs. 2,76,000/- and another in a sum of Rs. 55,000/-, for establishing a power mill, having executed necessary documents and bonds in the prescribed manner. As the petitioner failed to repay the amount due to the Corporation, action was sought to be taken under S. 29 of the Act. At this stage, the petitioner has presented this writ petition, questioning the constitutional validity of S. 29 of the Act.

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