JUDGMENT : This Miscellaneous First Appeal filed under S.32(9) of the State Financial Corporations Act, 1951 (for short, 'the Act') is directed against the Order dated 02.11.2012 passed in Misc. No.802/1999 by the XXXVII City Civil and Sessions Judge, Bangalore City, whereby, a petition filed by Karnataka State Financial Corporation, for recovery of amount with interest and costs was allowed and the KSFC was held entitled to recover its dues with costs and interest at the rate of 16.5% per annum from the date of presentation of the petition till realization from the appellants and the respondent Nos.2 and 3 herein. 2. The KSFC filed the aforesaid petition by stating that M/s. Cozy Polystone (P) Ltd. had approached it for sanction of term loans. The loans having been sanctioned, by executing the loan documents and after creating equitable mortgage by recording Memorandum of Entry and also on the execution of Deeds of guarantee by the guarantors, the loans were availed. There being default in repaying the loan in terms of the loan agreements, action under S.29 of the Act was taken. Rs.75,27,089/- was realized by way of issuing a sale notice under S.30 of the Act. Even after adjustment of the sale proceeds the amount being insufficient for discharge of the loans, KSFC invoked the personal guarantee against the guarantors by issuing a cause notice. The guarantors having failed to discharge the dues, Misc. No.802/1999 was filed. 3. The petition was opposed by filing separate statement of objections. Several grounds were raised as against the claim made by the KSFC. Inter alia, it was stated that KSFC having already adjusted its dues out of sale proceeds of the company M/s. Cozy Polythene (P) Ltd., the petition filed against the guarantors is not maintainable. 4. KSFC in order to substantiate the case, examined its official Sri C.M. Shashikanth as PW1 and marked the loan documents executed by the borrower Company and the Guarantors as Exs.P1 to P11. Sri D. Srinivasan, impleaded as respondent No.2 in the petition i.e., appellant No.2 herein got examined himself as DW1. However, no documentary evidence was brought on record. At the conclusion of the enquiry and after hearing of the arguments, following points were raised for consideration by the learned City Civil Judge:- 1. Sri D. Srinivasan, impleaded as respondent No.2 in the petition i.e., appellant No.2 herein got examined himself as DW1. However, no documentary evidence was brought on record. At the conclusion of the enquiry and after hearing of the arguments, following points were raised for consideration by the learned City Civil Judge:- 1. Whether the Petitioner Corporation proves that, on 19.5.1987 it has sanctioned a term loan of Rs.55.00 lakhs and on 15.6.1990 it has sanctioned additional loan of Rs.5.00 lakhs to the Respondent No.1 Company has stated in the petition? 2. Whether the Petitioner Corporation proves that, at the time of availment of term loan and additional loan the Respondents have agreed to repay the due amount with interest at the rate of 15% p.a. compoundable at quarterly rest with penal interest at the rate of 1.50% as contended in the petition? 3. Whether the Petitioner Corporation proves that, on 26.5.1988 the Respondents No.2 to 4 have executed loan agreement and guarantee deed in favour of the Petitioner Corporation to discharge its dues with cost, interest, charges etc., as contended in the petition? 4. Whether the Petitioner Corporation proves that, on 27.5.1991 the Respondents No.2, 4 and 5 have executed guarantee deed and hypothecation deed in favour of the Petitioner Corporation to discharge its dues with cost, interest, charges etc., as contended in the petition? 5. Whether the Petitioner Corporation proves that, this petition is in time? 6. Whether the Petitioner Corporation proves that, it is entitle for recovery of petition claim amount? 7. What order? Upon consideration of the materials on record, by reason of the Order dated 02.11.2012, Misc. No.802/1999 was allowed with cost and KSFC was held entitled to recover its dues with interest at 16.5% per annum. 5. Smt. S. Susheela, learned advocate for the appellants contended that the impugned order being against the record of the case is unsustainable. She submitted that the order impugned herein is bad in law as the amount allegedly due to be recovered was not specified. She further submitted that the impugned order suffers from infirmity and calls for interference. 6. Sri Bipin Hegde, learned advocate for KSFC, on the other hand contended that the petition filed having shown the amount to be recovered at Rs.1,09,01,595/-, the order passed entitling KSFC for recovery of the dues with interest does not call for interference. She further submitted that the impugned order suffers from infirmity and calls for interference. 6. Sri Bipin Hegde, learned advocate for KSFC, on the other hand contended that the petition filed having shown the amount to be recovered at Rs.1,09,01,595/-, the order passed entitling KSFC for recovery of the dues with interest does not call for interference. Learned counsel made submissions in justification of the order passed by the Court below and sought dismissal of the appeal. 7. Having heard the learned advocates and perused the record, the question that would arise for our consideration is, whether the order passed by the learned City Civil Judge, under S.32(7)(da) of the Act, warrants interference? 8. Undisputedly, KSFC by filing the petition, under S.31 of the Act, sought for an order for enforcing liability of sureties i.e., the appellants and the other respondents in this appeal. Under S.31(1)(aa) of the Act, KSFC can seek for an order for enforcing liability of any surety without prejudice to its powers under S.29 of the Act and S.69 of the Transfer of Property Act, 1882. S.31(1) of the Act empowers the financial Corporation to enforce its claims by presenting a petition before the Dist. Judge and S.32 of the Act lays down the procedure to be followed by the Dist. Judge. The provision makes clear that the learned District Judge is required to inquire into the matter before passing the final order. 9. With regard to the object behind enactment of S.31 and the purpose for which an application could be filed by the financial Corporation, in the case of A.P. State Financial Corporation Vs. M/s. Gar Rerolling Mills & Another, (1994) 2 SCC 647 , Apex Court has held as follows:- “10. Section 31 of the Act has been enacted also to take care of a situation where any industrial concern, in breach of any agreement, makes default in repayment of the loan or advance or any instalment thereof or the Corporation requires immediate repayment which the defaulting industrial concern fails to make. Section 31 of the Act has been enacted also to take care of a situation where any industrial concern, in breach of any agreement, makes default in repayment of the loan or advance or any instalment thereof or the Corporation requires immediate repayment which the defaulting industrial concern fails to make. The Corporation may in any such event without prejudice to its rights and remedies under Section 29 of the Act, apply to the District Judge within the local limits of whose jurisdiction, the industrial concern carries on the whole or a substantial part of its business inter alia for any of the following orders- (a) for the sale of the property pledged, mortgaged, hypothecated or assigned to the Corporation as security for the loan or advance; (b) for transferring the management of the industrial concern to the Corporation; and (c) for an ad interim injunction restraining the defaulting industrial concern from transferring or removing its machinery or plant or equipment or any other material from the premises of the concern without the permission of the Board.” 10. While dealing with the provisions of S.31 and 32 of the Act, in the case of Gujarat State Financial Corporation Vs. Natson Manufacturing Co. Pvt. Ltd. & Others, (1979) 1 SCC 193 , Apex Court has held as follows:- “9. Section 31(1) prescribes a special procedure for enforcement of claims by the Financial Corporation. The Corporation is to make an application for the reliefs set out in Section 31(1). The reliefs that a Court can grant under Section 31(1) are the sale of the property mortgaged, etc. to a Financial Corporation as security for the loan or advance; transfer of the management of the industrial concern to the Financial Corporation or restraining the industrial concern from transferring or removing its machinery or plant or equipment from the premises of the industrial concern without the permission of the Board of the Financial Corporation. An application for such a relief is certainly not a plaint in a suit for recovery of mortgage money by sale of mortgaged property. An application for such a relief is certainly not a plaint in a suit for recovery of mortgage money by sale of mortgaged property. On a breach of an agreement by an industrial concern the Corporation can seek one or more of the three reliefs set out in Section 31(1).” ***** ***** ***** On the question as to whether in an application under S.31(1) of the Act, the Corporation can pray for a decree for its outstanding dues, it has been held as follows:- “9…..At any rate, in an application under Section 31(1) the Corporation does not and cannot pray for a decree for its outstanding dues. It can make an application for one of the three reliefs, none of which, if granted, results in a money decree, or decree for recovery of outstanding loan or advance.” 11. In the case of Deepak Bhandari Vs. Himachal Pradesh State Industrial Development Corporation Limited, (2015) 5 SCC 518 , Apex Court while considering the question of law pertaining to the starting point of limitation for filing of the suit for recovery by the State Financial Corporations constituted under the State Financial Corporations Act has held that the period of limitation is to be counted from the date when the assets of the company was sold and not when the recall notice was given. To arrive at the said conclusion, it was held as follows:- “27. We thus, hold that when the Corporation takes steps for recovery of the amount by resorting to the provisions of Section 29 of the Act, the limitation period for recovery of the balance amount would start only after adjusting the proceeds from the sale of assets of the industrial concern. As the Corporation would be in a position to know as to whether there is a shortfall or there is excess amount realised, only after the sale of the mortgaged/hypothecated assets. This is clear from the language of subsection (1) of Section 29 which makes the position abundantly clear and is quoted below:- “29. Rights of Financial Corporation in case of default. This is clear from the language of subsection (1) of Section 29 which makes the position abundantly clear and is quoted below:- “29. Rights of Financial Corporation in case of default. (1) Where any industrial concern, which is under a liability to the Financial Corporation under an 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, the Financial Corporation shall have the right to take over the management or possession or both of the industrial concern, as well as the right to transfer by way of lease or sale and realise the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation.” 28. It is thus clear that merely because the Corporation acted under Section 29 of the State Financial Corporation Act did not mean that the contract of indemnity came to an end. Section 29 merely enabled the Corporation to take possession and sell the assets for recovery of the dues under the main contract. It may be that on the Corporation taking action under Section 29 and on their taking possession they became deemed owners. The mortgage may have come to an end, but the contract of indemnity, which was an independent contract, did not. The right to claim for the balance arose, under the contract of indemnity, only when the sale proceeds were found to be insufficient. The right to sue on the contract of indemnity arose after the assets were sold. The present case would fall under Article 55 of the Limitation Act, 1963 which corresponds to old Articles 115 and 116 of the old Limitation Act, 1908. The right to sue on a contract of indemnity/guarantee would arise when the contract is broken.” 12. The Court below while passing the order impugned herein, has not kept in view the settled position of law. There is failure to specify the amount which has to be recovered by proceeding against the secured asset. Hence, the order suffers from legal infirmity and is unsustainable. The Court below while passing the order impugned herein, has not kept in view the settled position of law. There is failure to specify the amount which has to be recovered by proceeding against the secured asset. Hence, the order suffers from legal infirmity and is unsustainable. Further it was required for the Court to examine that after the adjustment of the amount realised, what is the amount recoverable and as to whether defences raised by the appellants herein/respondents therein are acceptable or not and the reasons thereof. In the result, appeal is allowed and the order dated 02.11.2012 passed in Misc. No. 802 of 1999 by the XXXVII Addl. City Civil and Sessions Judge, Bengaluru City is set aside. As the case has not been decided in accordance with law, Misc. No.802/1999 stands remanded to the Court below for consideration by keeping in view the observations made supra. All the contentions of both parties are left open. Having regard to the facts and circumstances of the case, the parties are directed to bear their respective costs in this appeal. Both parties shall appear before the Trial Court on 18.03.2017 and receive orders. The case having been instituted long ago, the Court below shall decide the same as early as possible preferably within a period of six months from 18.03.2017.