( 1 ) THE appellant and the respondents in this appeal are respectively the plaintiff and the defendants in O. S. No. 33 of 1983 on the file of the Civil Judge, Srirangapatna. For convenience the parties will be referred to by their Ranks in the trial Court. The plaintiff will also be referred to as the 'bank'.

( 2 ) THE first Defendant, a Company incorporated under the Companies Act, was a constituent of the plaintiff Bank at its Malai Mahadeswaraswamy Hills Branch, Kollegal Taluk, Mysore District. On the request of the first defendant for certain loan facilities for purposes of their business, the Bank granted the following credit facilities on 16-1-1980 : (A) A cash credit loan facility to a limit of Rs. 2,00,000/- against hypothecation of goods/stock in trade repayable with interest at State Bank Advance Rate with a minimum of 161/2 per annum with quarterly rests; (hereinafter referred to as the Hypothecation Account); (B) A cash credit clean loan of Rs. 60,000/- repayable with interest at the State Bank Advance Rate with minimum of 16 1/2 p. a. , with quarterly rests (hereinafter referred to as the clean loan Account) (C) A term loan of Rs. 1,65,00/- against the