JUDGMENT

B.N.MAHAPATRA, J.

This is an appeal under Section 32(9) of the State Financial Corporations Act, 1951 (for short, “Act, 1951”) filed by the Orissa State Financial Corporation (for short, “OSFC”) challenging correctness of the order dated 27.8.1996 passed by the learned District Judge, Phulbani in M.J.C. No. 4 of 1989.

2. The facts and circumstances giving rise to the present appeal in a nutshell are that respondent no.2 was the proprietor of the firm M/s. Azad Auto Servicing Garage, which is respondent no.1 in the present appeal. He had applied for a term loan of Rs.41,800/-to O.S.F.C. and the same was sanctioned by the petitioner-appellant in favour of respondent nos. 1 and 2 on 9.3.1981. Accordingly, a deed of hypothecation was executed between the parties on 18.3.1981 whereby respondent no.2 hypothecated the plant and machinery. Respondent no.3, as a guarantor to the aforesaid loan executed the deed of guarantee on 18.3.1981. The said loan was to be repaid by ten monthly instalments and last such instalment fell due on 18.3.1987. Pursuant to such loan agreement an amount of Rs.12,600/-was disbursed on 1.7.1981 from the sanctioned loan. Case of the appellant is that as no instalment was paid to the Corporation despite intimation, the appellant-Corporation seized the hypothecated plant and machineries of respondent nos. 1 and 2 and put the matter before the Disposal Advisory Committee in its meeting held on 29.6.1985. The plant and machineries were sold to one Surendra Katta on 14.10.1985 for a consideration of Rs.10,000/-. The sale proceed was credited to the account of respondent no.2. After adjustment of the aforesaid amount of Rs.10,000/-, further amount of Rs.8,329.15 including interest remained due from the respondents No.1 and 2. Since the said respondents did not clear up the balance dues despite notice dated 25.1.1989, the Corporation filed a petition under Section 31 of the Act, 1951 impleading the guarantor (Respondent no.3) as a party to the case claiming recovery of Rs.11,716.50. To this, opposite parties-respondents filed objection raising the question of maintainability of the application made u/s. 31 of the Act, 1951. The respondents further challenged the action of O.S.F.C. as illegal on the ground that O.S.F.C. had disbursed only Rs.12,600/-against the sanctioned loan of Rs.41,800/-for which the respondents sustained heavy loss. Learned District Judge dismissed the petition filed under Section 31 of the Act, 1951 on the ground that the reliefs sought for by the petitioner– appellant in the said petition cannot be entertained.

3. None appeared for respondents despite service of notice.

4. The only question that arises for consideration by this Court is as to whether the learned District Judge, Phulbani is justified in dismissing the petition of the petitioner-appellant filed under Section 31 of the Act, 1951 vide its order dated 27.8.1996 passed in M.J.C. No. 4 of 1989.

5. To deal with this question, it is necessary to know what is contemplated under Section 31 of the Act, 1951 and what is the relief sought for by the petitioner-appellant before the learned District Judge, Phulbani in its petition filed under Section 31 of the Act, 1951.

Section 31 of the Act, 1951 reads as follows:

“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 obligations 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 concerns 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 (4 of 1982)) any of