1. Civil Miscellaneous Appeal filed against the order and decree dated 27.7.2010 passed by the learned Additional District Judge, Krishnagiri in SFCOP No.27 of 2004.

2. State Industries Promotion Corporation of Tamil Nadu limited, hereinafter referred to as SIPCOT is the appellant. The first respondent was sanctioned a term loan in the year 1982 and an interest free sales tax loan in the year 1987. The first respondent executed the loan documents and the respondents 4 and 5 guaranteed the repayment of the loan.

3. However, the loan was not repaid and on 25.1.1991, the SIPCOT issued foreclosure notice. On 30.4.1996, the SIPCOT invoked the powers under Sec.29 of the State Financial corporation Act (hereinafter called SFC Act) and took possession of the factory and mortgaged property. The property was sold and the sale amount was appropriated.

4. Still there was a balance of a sum of Rs.4,89,14,379/-payable by the borrower. Therefore, SIPCOT filed a petition under Sec.31(1)(aa) of SFC Act before the District Court, Krishnagiri. It was numbered as SFC O.P.No.27 of 2004.

5. The respondent/borrowers contested the claim and the main contention was that the claim made under Sec.3