The liability of the surety is co-extensive with that of the principal debtor, and the court must find the liability of the principal debtor before granting reliefs under Section 31 of the State Financial Corporations Act, 1951.

A. S. NAIDU, J.

( 1 ) THE Orissa State Financial corporation being aggrieved by an order dated 12-12-1997 passed by the District judge, Cuttack in a proceeding Initiated under Section 31 of the State Financial corporations Act, 1951 (hereinafter referred to as 'the Act1) has preferred this Miscellaneous appeal invoking jurisdiction under section 32 (9) of the Act.

( 2 ) THE Orissa State Financial Corporation (hereinafter referred to 'osfc') filed an application under Section 31 of the Act for a direction to sell the properties attached by it for realisation of its outstanding dues towards loan and also to permit it to enforce the personal liability of the guarantor for realisation of the amount due along with agreed interest till realisation. The District judge by the impugned order dismissed the misc. Case against the loanee (opposite party-respondent No. 1) observing that the loanee cannot be held personally liable for payment of the outstanding dues, but the hypothecated property can be attached and allowed the OSFC to proceed against respondent no. 2, the surety, to realise the loan amount along with agreed interest till realisation. The OSFC was also permitted to sell the properties under schedule 'b' to the Misc. Case petition and adjust the sale proceeds towards its dues and also to recover the balance amount, if any, from the surety. The said order, as stated earlier, is impugned in this appeal.

( 3 ) FOR better appreciation of the facts and law, it would be necessary to glance over section 31 of the Act which is quoted hereinbelow:"section 31 : Special provisions for enforcement of claims by Financial Corporation (1) Where an industrial concern, in breach of any agreement, makes any default in repayment of any loan or advance or any instalment thereof or in meeting its obligation in relation to any guarantee given by the Corporation or otherwise fails to comply with the terms of its agreement with the Financial corporation or where the Financial corporation requires an industrial concern to make immediate repayment of any loan or advance under Section 30 and the industrial concern fails to make such repayment, then, without prejudice to the provisions of section 29 of this Act and of Section 69 of the Transfer of Property Act, 1882 any officer of the Financial Corporation, generally or specially authorised by the Board in this behalf, may apply to the District Judge within the limits of whose jurisdiction the industrial concern carries on the whole or a substantial part of its business for one or more of the following reliefs, namely : (a) for an order for the sale of the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation as security for the loan or advance; or (aa) for enforcing the liability of any surety; or (b) for transferring the management of the industrial concern to the Financial Corporation; or (c) for an ad interim injunction restraining the industrial concern from transferring or removing its machinery or plant or equipment from the premises of the industrial concern without the permission of the board, where such removal is apprehended. (2) An application under sub-section (1) shall state the nature and extent of the liability of the industrial concern to the Financial corporation, the ground on which it is made and such other particulars as may be prescribed. "

( 4 ) BUT then, the learned District Judge while allowing the petition filed by OSFC under Section 31 of the Act for realisation of the outstanding amount, rejected the same so far as the loanee was concerned by observing as follows:"u/s. 31 of the Act personal liability of the principal debtor, i. e. borrower, cannot be enforced. However, personal liability of the surety can be enforced. "

( 5 ) LEARNED counsel appearing for OSFC took exception to the aforesaid observation and submitted that the said order of the district Judge is not sustainable in the eye of law.

( 6 ) LAW is no more res integra that; the liab