Hon’ble Mahesh Chandra Tripathi, J.—Heard Shri Arvind Srivastava, learned counsel for the petitioner-company, Shri K.M. Asthana, learned counsel appearing for first and second respondents, Shri Rahul Sripat, learned counsel for the eight respondent and Shri Anil Sharma, learned counsel for the tenth respondent.

2. Brief background of the case, as reflected from the record, is that M/s. Ashok Iron & Steel Rolling Mills, Ashok Nagar, Tehsil Chauri Chaura, District Gorakhpur (fifth respondent) is a partnership firm with its Head Office at 194/1/7, Grand Trunk Road, Salkia Howrah, West Bengal and principal office of business and manufacturing unit at Ashok Naga, Tappa Kewatali Pargana Haveli, Tehsil Sadar, (Now Chauri Chaura), District Gorakhpur, U.P. The firm was set up by its partners to manufacture M.S. Rods, Flats, Iron angles etc. The firm was availing a cash credit loan from the State Bank of India, Branch Bank Road, Gorakhpur (third respondent) from a long time. Due to death/retirement of its partners, the firm was reconstituted on 30th day of December, 1991 and since thereafter the firm was carrying on business with following partners namely (i) Maghraj Garg; (ii) Krishna Chang Garg; (iii) Prem Chand Garg; (iv) Lachhman Dass Jindal; (v) Ramesh Kumar Jindal and (vi) Lajwanti Goel, arrayed as sixth to eleven respondents. They requested the respondent-bank to grant a cash credit (working capital) limit for carrying on their manufacturing business and the respondent bank allowed them to execute the document of loan and arrange for suitable guarantors to mortgage immovable properties in favour of the bank as security for payment of loan, interest and charges. They were further asked to pledge their materials, goods in the process of manufacture, finished goods and machinery as security for repayment of loan, interest and charges.

3. Thereafter the contesting respondents requested the bank to sanction an overall limit of Rs. One Crore. The respondent bank examined the stage of the business of the firm and came to the conclusion that a limit of Rs. 75,00,000/- was sufficient to meet their requirements. They had again requested the respondent bank to sanction them an overall limit of Rs. One Crore. The respondent bank sanctioned an overall limit of Rs. One Crore but the operational limit was pegged upto Rs. 75 lacs. They had also agreed to guarantee the loan of Rs. One Crore and the respondents executed an agreement for cash credit of Rs. One Crore in Form ‘C’ General dated 25.1.1993, demand promissory note dated 25.1.1993, agreement for partnership firm dated 25.1.1993, deed of guarantee in Form ‘I’ (Special) dated 25.1.1993 and an arrangement letter. The aforesaid cash credit loan was under facilities and the raw materials/goods in process of manufacture, finished goods and machinery pledged to the respondent bank. The private respondents were permitted to retain possession and custody of the above stated materials and goods to facilitate their business activities. The private respondents availed the loan within the operational limit of Rs. 75 lakhs and carried on their business. They had also acknowledged the loan in writing and executed revival letter form on 11.7.1995.

4. All the transactions were made by the private respondents through its account, which was opened in the respondent bank at the time of advancement of the loan but they failed to operate the account as per agreement of the loan. They informed the bank in the month of December, 1995 that the firm had been reconstituted. The private respondents were asked to liquidate the outstanding loan amount and in case they want to carry on their business, they would liquidate the loan and complete the formality of opening a new account by the partners of the reconstituted firm to carry on their business but they did not respondent to it. Thereafter, the respondent-bank stopped the operation of the account of the firm. When the loan account had not been liquidated a