1. Appellant herein filed O.S. No. 57 of 1996, on the file of Civil Judge (Sr. Dn.), Saundatti (old No. OS 60 of 1993, on the file of Principal Civil Judge, Bailhongal) against the first respondent firm and its four partners (respondents 2 to 5) and two sureties (respondents 6 and 7). The appellant and first respondent will also be referred to as the 'Bank' and 'borrower firm'. Respondents 1 to 5 together will also be referred to as the 'Borrowers' and respondents 6 and 7 as the 'guarantors'.

2. The plaint averments, in brief, were as under:
2.1 Appellant Bank sanctioned a term loan of Rs. 6,37,000/- to the first respondent firm (and its partners-respondents 2 to 5) for construction of ginning factory and purchase of machineries. Out of sanctioned loan, the borrowers availed in all Rs. 6,11,000/- (that is Rs. 1,00,000/- on 31-10-1984, Rs. 1,00,000/- on 13-11-1984, Rs. 2,04,743/- on 23-11-1984, Rs. 40,600/- on 18-12-1984, Rs. 50,000/- on 28-12-1984, Rs. 25,000/- on 11-6-1985 and Rs. 90,657/- on 19-9-1985). The borrowers and the sureties executed a Term loan-cum-hypothecation agreement dated 31-10-1984 in favour of the Bank agreeing to repay the loan in agreed instalments with interes