JUDGMENT KUMAR RAJARATNAM J. - The State Bank of Mysore granted financial assistance for the purchase of Modi xerox machine to the first respondent. Apparently the loan that was granted to the first respondent was under the Prime Minister's Rozgar Yojana Scheme. Under the scheme a person who applies for the loan should be an unemployed person. It was submitted that the first respondent was not an unemployed person. However after certain mutual discussion the application was entertained and the loan was granted for expanding the first respondent's business. The first respondent was sanctioned a loan of Rs. 95,000 on May 21, 1997, and was required to make payment from June 21, 1997, on monthly instalments. The amount was to be cleared in 60 monthly instalments. It was submitted by the appellant-bank that right from the beginning the loanee first respondent failed to keep up the commitment with the bank and in fact paid the first instalment only on September 11, 1997, and that too a sum of Rs. 500 as against Rs. 1,600 x 3 = 4,800. Since the first respondent was a defaulter, the bank was compelled to adjust some monies available in Janatha Deposit Account and SB Account as banker's lien. On account of the default by the first respondent by December, 1998, the first respondent owed the bank a sum of Rs. 1,01,251. The appellant-bank realised that the first respondent was a chronic defaulter and therefore had no alternative except to bring the xerox machine for sale, since it was hypothecated to the bank. It is not disputed that the first respondent entered into a hypothecation agreement dated May 21, 1997, hypothecating the xerox machine to the bank. The first respondent was notified about the proposed auction. The bank independently got the xerox machine valued at Rs. 52,000. It was submitted by the appellant-bank that the first respondent did not respond to the notice dated January 16, 1999, granting the first respondent 15 days' time to pay the loan amount and there was also no response from the first respondent with respect to the sale notice dated February 2, 1999. The bank on February 10, 1999, sold the xerox machine in favour of the seventh respondent through tender and possession of the xerox machine was delivered to the seventh respondent on the same date. The bank on February 10, 1999, sold the xerox machine in favour of the seventh respondent through tender and possession of the xerox machine was delivered to the seventh respondent on the same date. The first respondent being aggrieved by the public auction of the xerox machine and for the other alleged irregularities committed by the bank approached the court under article 226 of the Constitution of India. The learned single judge curiously directed the appellant-bank to hand over a sum of Rs. 60,000 with interest recovered from the sale proceeds of the xerox machine and further directed the bank to sanction an additional loan to the first respondent to purchase a new xerox machine. The learned single judge further directed a sum of Rs. 2,500 to be paid by the bank towards cost of litigation and further the learned single judge granted liberty to the first respondent to initiate proceedings to claim damages against the bank. Being aggrieved by the order of the learned single judge the bank has come up on appeal. It is not denied that the first respondent entered into a hypothecation agreement with the bank dated May 21, 1997. The hypothecation agreement was also under the category known as composite term loan agreements for small scale industries under a scheme to provide self-employment to educated unemployed youth. The bank according to the hypothecation agreement dated May 21, 1997, granted a sum of Rs. 95,000 to enable the first respondent to purchase a xerox machine. The terms of the agreement were that the sum advanced was subject to a minimum of 14 per cent. interest p.a. A sum of Rs. 7,500 was also given as capital subsidy as provided by the Government and it was kept in term deposit. As per the clauses in the agreement the bank was entitled to take possession or recover the security or sell by public auction or by private contract or otherwise deal with security and appropriate the proceeds towards the outstanding loan. This was without prejudice to the bank taking action for the recovery of the loan by other means. The first respondent according to the bank had committed default and notice was sent in accordance with the terms of the hypothecation agreement and no reply was forthcoming from the first respondent. This was without prejudice to the bank taking action for the recovery of the loan by other means. The first respondent according to the bank had committed default and notice was sent in accordance with the terms of the hypothecation agreement and no reply was forthcoming from the first respondent. Even with regard to the xerox machine which was brought for auction, notice was issued to the first respondent and the first respondent did not reply to the notice. It was only after that that the xerox machine was sold in public auction. When there are contractual obligations entered into between the first respondent and the bank, it would not be open for this court to interfere with the enforcement of the contract unless such enforcement is contrary to the terms of the contract. Reliance was placed on a number of judgments of this court. Particularly in Shivayya Basayya Mathad v. Vijaya Bank [1998] 94 Comp Cas 16 where this court took the view that in such situation as is presently before us, it would not be open for this court under article 226 of the Constitution of India to grant relief on disputed questions of fact. The Division Bench of Andhra Pradesh High Court in State Bank of India v. S.B. Shah Ali, AIR 1995 AP 134 also took the view that the power of hypothecation to sell a hypothecated property ultimately depends on the terms of hypothecation agreement. Mr. Gopalakrishna, who argued on behalf of the first respondent submitted that the hypothecation agreement entered into between the first respondent and the bank cannot be the basis for the bank to take action, since the bank has violated various circulars. It was further submitted that the bank has taken the law into its own hands and has appropriated the xerox machine without giving an opportunity to the first respondent to settle the account. It was further submitted that the accounts furnished by the bank are erroneous and that the bank had no right to appropriate other savings accounts. We are not able to persuade ourselves to accept the submissions of Mr. Gopalakrishna. If there are any instances where the bank has not complied with the regulations that would be a matter for the Reserve Bank of India to take suitable steps. We are not able to persuade ourselves to accept the submissions of Mr. Gopalakrishna. If there are any instances where the bank has not complied with the regulations that would be a matter for the Reserve Bank of India to take suitable steps. On this aspect, reliance was placed on the judgment of the Supreme Court in Bank of India Finance Ltd. v. Custodian [1997] 89 Comp Cas 74. There is no dispute that there was a default on the part of the first respondent. There is also no dispute that there was a hypothecation agreement by which a xerox machine was hypothecated to the bank. There is also no dispute that before the xerox machine was sought to be auctioned the first respondent was put on notice. It is also not in dispute that the first respondent was called upon to clear the arrears. In the light of these circumstances it is difficult to think that the court can take upon itself the role of an arbitrator and direct fresh loans to be issued to the borrower and also to direct the bank to give a new xerox machine to the first respondent. All these aspects are purely contractual and are disputed questions of fact. There are no materials prima facie to show that the bank acted contrary to the terms of the hypothecation agreement. Once it is established that the bank and the first respondent are bound by the hypothecation agreement then consequences must flow from the terms of the agreement. The circulars referred to by Mr. Gopalakrishna cannot be read in isolation of the contract entered into between the bank and the first respondent. It was also submitted by Mr. Gopalakrishna that auctions should have been taken under the provisions of the Karnataka Public Moneys (Recovery of Dues) Act, 1979 (Karnataka Act No. 16 of 1980). This submission cannot be accepted since section 4 of the Act clearly exempts a banking company from the provisions of this Act. In that view of the matter the order of the learned single judge is set aside. This however will not foreclose the first respondent's right to claim damages if permissible under law. There will be no order as to costs. Order set aside.