VINOD K. SHARMA, J.

1. State Industries Promotion Corporation of Tamil Nadu Limited, a company registered under the Companies Act and having its registered office at No.19-A, Rukmani Lakshmipathy Road, Egmore, Chennai 600 008, a notified financial institution defined under the State Financial Corporations Act, 1951, has filed this petition under section 31 (aa) of the State Financial Corporation Act, 1951, for recovery of Rs.8,49,46,899.50/-(Rupees eight crores forty nine lakhs forty six thousand eight hundred and ninety nine and paise fifty only) together with future interest @ 14.5% per annum from 1.3.2001 till relalisation and for costs.

2. M/s.Hannis Aromatics (P) Limited, respondent No.1 herein, registered under the Companies Act, approached the petitioner for loan assistance for construction of building and purchase of machinery. The respondent No.1 was sanctioned term loan of Rs.80,00,000/- (Rupees eighty lakhs only) on 30.1.1985. On request of the respondent No.1, second term loan of Rs.10,00,000/-(Rupees ten lakhs only) was sanctioned on 31.8.1998. In addition, the respondent No.1 was also granted IDBI Seed Capital Soft loan of Rs.10,00,000/- (Rupees ten lakhs only) on 5.3.1985. The petitioner also participated in equity of Rs.3,00,000/-(Rupees three lakhs only) on 27.3.1985 with stipulation of buy-back. The respondent No.1 was also granted subsidy of Rs.14,77,000/-(Rupees fourteen lakhs seventy seven thousand only).

3. The respondent No.1 secured the loan referred to above by deed of hypothecation, deed of Undertaking, registered Mortgage and Equitable Mortgage, dated 28.3.1985. These documents were executed to secure the Ist term loan of Rs.80,00,000/- (Rupees eighty lakhs only). For the II term loan, Deed of Hypothecation, Deed of Undertaking and Equitable Mortgage were executed on 29.9.1988. IDBI Seed Capital Soft loan of Rs.10,00,000/- (Rupees ten lakhs only) was secured by deed of agreement, dated 7.3.1985 and the Deed of Personal Guarantee, dated 28.3.1985.

4. Whereas an agreement was executed for repurchase of equity shares on 15.4.1985. Similarly, Central subsidy of Rs.14.77,000/-(Rupees fourteen lakhs seventy seven thousand only) was secured as per the deed of agreement, dated 15.4.1985 and deed of Personal Guarantee. Guarantee deeds were executed by the respondents 3 and 5 guaranteeing the loan and financial assistance granted to the respondent No.1.

5. The first respondent Company had agreed to repay the loan amount as per repayment schedule in the loan agreement. On default by the respondent No.1 in repayment of loan amount as per schedule, the petitioner in exercise of its powers under the terms of the loan agreement, foreclosed the loan on 15.9.1992.

6. This action of the petitioner was challenged by the respondent No.1 in W.P.No.18968 of 1992 and operation of the order foreclosing the loan was stayed by this Court.

7. The writ petition was thereafter admitted and interim stay was granted subject to the condition that the respondent No.1 should deposit a sum of Rs.25,00,000/- (Rupees twenty five lakhs only) on or before 31.12.1992. The respondent No.1 failed to comply with the conditional order which resulted in the petitioner taking possession of the unit of the respondent No.1 on 8.1.1993 in exercise of powers conferred under section 29 of State Financial Corporation Act.

8. The petitioner thereafter advertised for the sale of mortgaged assets of the first respondent and offer of M/s.Modern Steel Industries of Rs.57,00,000/- (Rupees fifty seven lakhs only) was accepted on 6.12.1995. The credit of this amount was given to the respondent No.1.

9. It is the case of the petitioner that as on 28.2.2001 a sum of Rs.8,49,46,899.50 (Rupees eight crores forty nine lakhs forty six thousand eight hundred and ninety nine and paise fifty only) was still due from the respondent No.1. Whereas writ petition filed by the respondent No.1 was dismissed by this Court on 6.3.1996.

10. It is pleaded case of t