JUDGMENT

A. S. NAIDU, J. — This letters patent appeal is directed against the judgment dated 26.9.1996 passed in Miscellaneous Appeal No. 414 of 1994 by the Single Bench dismissing the said appeal solely on the ground that the application filed under Sec. 31 (1) (aa) of the State Financial Corporations Act, 1951 (hereinafter referred to as “the Act”) was barred by limitation. The appel¬lant-Corporation being aggrieved by the above-referred judgment has filed this Letters Patent Appeal.

2. Shorn of unnecessary details, the short facts as pleaded by the respective parties are as follows :

Admittedly, Respondent, No.1 - Sailendra Narayan Patnaik availed a loan to the tune of Rs. 1,55, 800/- from the Orissa State Financial Corporation (hereinafter referred to as “the Corporation”) for purchasing a truck and his father Kailash Chandra Patnaik, respondent No.2 stood surety for due repayment of the loan and executed necessary deed of guarantee. The vehicle which was purchased utilising the finance advanced by the appel¬lant-Corporation, was hypothecated by means of a deed of hypothe¬cation. The aforesaid term loan was availed on 29.10.1980. The borrower, however, defaulted in repayment of the loan amount and the Corporation finding no other way out, issued demand notice on 20.7.1982 and thereafter on 18.1.1983, seized the truck in exercise of the power conferred on it under Sec. 29 of the Act. After serving due notice and publication in newspapers, the seized vehicle was put to auction sale on 11.3.1983. One Sisir Kumar Rout being the highest bidder, purchased the said vehicle for a consideration of Rs. 1.40,000/-. The said amount was duly adjusted towards the loan amount of the respondents. Thereafter, it was found that a sum of Rs. 67,277.82 paise still remained outstand¬ing towards the principal amount from the borrower i.e. respond¬ent No.1. On 18.4.1983 a letter was issued to respondent No. 1 intimating him about the sale of the vehicle and the terms and conditions thereof. On 16.11.1989 a demand notice was issued to respondent No.1 intimating him that as on June 30,1989, the outstanding amount including interest on his loan was Rs. 1,26,999.94 paise after adjustment of the consideration amount for which the vehicle was sold in auction. Respondent No.1 was called upon to pay the said amount on or before 15.11.1989. It is averred that a copy of the said demand notice was also served upon respondent No.2, the guarantor. Subsequently another notice was issued on 19.11.1990 calling upon the respondent No.1 to pay the dues, a copy whereof was also served on respondent No.2. In spite of receipt of the aforesaid notice when no steps were taken by the loanee or the guarantor i.e. respondents 1 and 2 respectively, to repay the amount, the Corporation filed an application under Sec. 31 (1)(aa) of the Act on 22.1.1991 for enforcement of personal liability against respondents 1 and 2. The said application was registered as Misc. Case No. 5 of 1991 in the Court of the District Judge, Cuttack.

3. Respondents 1 and 2 appeared and filed their joint objec¬tion. Apart from disputing the amount claimed, they also chal¬lenged the legality of invocation of the power under Sec. 31 of Act. It was contended that as the Corporation parted with hypoth¬ecated vehicle without giving any notice to the surety-respondent No.2, the guarantor stood discharged from his liability as surety.

4. The trial Court by its order dated 7.4.1994 accepted the contentions raised by the opp. parties and rejected the applica¬tion filed by the Corporation by observing that since the Corpo¬ration failed to move against the principal debtor as well as the guarantor to realise the outstanding dues within the reasonable time after sale of the truck in 1983, it would be improper to exercise jurisdiction under Sec. 31 of the Act.

The Corporation-appellant assailed the order passed by the trial Court by filing an appeal under Sec. 32 (9) of the Act before this Court which was registe