A.S. Naidu, J.
1. The Orissa State Financial Corporation being aggrieved by an order dated 12.12.1997 passed by the District Judge, Cuttack in a proceeding initiated under Section 31 of the State Financial Corporations Act, 1951 (hereinafter referred to as 'the Act') has preferred this Miscellaneous Appeal invoking jurisdiction under Section 32(9) of the Act.
2. The Orissa State Financial Corporation (hereinafter referred to 'OSFC') filed an application under Section 31 of the Act for a direction to sell the properties attached by it for realisation of its outstanding dues towards loan and also to permit it to enforce the personal liability of the guarantor for realisation of the amount due along with agreed interest till realisation. The District Judge by the impugned order dismissed the Misc. Case against the loanee (opposite party-respondent No. 1) observing that the loanee cannot be held personally liable for payment of the outstanding dues, but the hypothecated property can be attached and allowed the OSFC to proceed against respondent No. 2, the surety, to realise the loan amount along with agreed interest till realisation. The OSFC was also permitted to sell the properties under Schedule 'B' to the Misc. Case petition and adjust the sale proceeds towards its dues and also to recover the balance amount, if any, from the surety. The said order, as stated earlier, is impugned in this appeal.
3. For better appreciation of the facts and law, it would be necessary to glance over Section 31 of the Act which is quoted hereinbelow :
'Section 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
(c) For an ad interim injunction 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, where such removal is apprehended.
(2) An application under Sub-section (1) shall state the nature and extent of the liability of the industrial concern to the Financial Corporation, the ground on which it is made and such other particulars as may be prescribed.'
4. But then, the learned District Judge while allowing the petition filed by OSFC under Section 31 of the Act for realisation of the outstanding amount, rejected the same so far as the loanee was concerned by observing as follows :
'Under Section 31 of the Act personal liability of the principal debtor, i.e. borrower, cannot be enforced. However, personal liability of the surety can be enforced.'
5. Learned Counsel appearing for OSFC took exception to the aforesaid observation and submitted that the said order of the District Judge is not sustainable in the eye of law.
6. Law is no more res integra that the liability of a surety is co-extensive with that of the principal debtor and a decree can be executed either against the principal debtor or the surety, at the discretion of the creditor. However, where the surety is made to discharge such liability of the principal debtor, such surety has got a right to be reimbursed by the principal debtor. Section 31 of the Act, quoted supra, contemplates several reliefs which can be granted on the basis of an application of a Financial Corporation. Clause (a) of Section 31(1) deals with the question of sale of property mortgaged, which does not preclude the Court to decide the liability of the Principal debtor. In view of the amended provision of Section 31, incorporated by the Amendment Act of 1985, there cannot be any iota of doubt that Section 31 can also be invoked for enforcing the liability of a surety. Before passing an order under any of the Clauses, i.e. (a), (aa), (b) and (c) of Section 31(1), it is incumbent upon the District Judge to find out the liability of the principal debtor first, and only after being satisfied about the liability of the principal debtor, i.e. the industrial concern, and regarding the default in payment of any Joan or advance as envisaged under Sub-section (1) of Section 31 has to pass appropriate order granting reliefs in accordance with the various clauses enumerated in Sub-section (1) of Section 31. The reliefs which can be granted under Clauses (a) and (aa) imply that the liability of the industrial concern has to be found out first. Though there is no provision in Section 31 to enforce the personal liability of an industrial concern, a cumulative reading of the Section leads to the conclusion that there is no bar to decide about such liability. Once such liability is found, the court can proceed in the manner contemplated in Sections 31 and 32 of the Act. On the basis of such finding, the Corporation can seek appropriate relief under Section 32G of the Act, or even alternatively can file a suit to enforce the liability. The view taken by me finds support from the earlier decision of this court in Misc. Appeal No. 670 of 1996 (OSFC v. Bani Prasanna Das and Anr.) decided on October 22, 1998.
7. In view of the clear position of law enunciated and the reasons stated above, I am not inclined to agree with the observation made by the District Judge. I am of the opinion that the loanee-respondent No. 1, i.e. the Industrial concern, is also liable for the amount due and the said amount can be recovered from respondent No. 1 by following the provisions of Section 32G of the Act.
8. The Miscellaneous Appeal is accordingly allowed to the extent indicated above. Since there is no appearance on behalf of the respondents, I make no order as to costs.