IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) WEDNESDAY, THE NINETEENTH DAY OF NOVEMBER TWO THOUSAND AND EIGHT PRESENT THE HON'BLE MR JUSTICE L.NARASIMHA REDDY WRIT PETITION NO : 7932 of 2002 Between: Ambathi Veeramma, W/o.Late Ambati Chandra Rao, Hindu, R/o,.Ganapathinagaram, Samalkota, East Godavari District. ..... PETITIONER AND 1 Andhra Pradesh Industrial Development Corporation Ltd., Rep. by its Executive Director, Parisrama Bhavanam, Fathe Maidan, Hyderabad-500 004. 2 S.L.S.Agro Tech(P) Limited, Rep. by its Managing Director, Rajapudi (V), Jaggampeta Mandal, East Godavari District. .....RESPONDENT(S) Petition under Article 226 of the constitution of India praying that in the circumstances stated in the Affidavit filed herein the High Court will be pleased to issue a Writ of Mandamus declaring the proposed action of the 1st respondent in putting petitioner's residential house bearing Door No.18-7-6 and 18-7-6/1 and admeasuring 0.12-1/2 cents, Sy.No.5/3, Ward No.18, situated at Ganapathinagaram, Samalkota offered by her as collateral securety for sale leaving other valuable properties including the factory of the 2nd respondent as illegal, arbitrary and violative of principles of natural justice and for a consequential order directing the 1st respondent drop all further proceedings in respect of the above house and to pass. Counsel for the Petitioner:MR.CH.DHANAMJAYA Counsel for the Respondent No.: . The Court made the following : THE HONOURABLE SRI JUSTICE L.NARASIMHA REDDY W.P.No.7932 OF 2002 ORDER: The petitioner is the owner of house bearing Nos.18-7-6 and 18-7-6/1 as well as 21 ½ cents of land in Survey No.5/3 of Ganapathinagaram, Samalkota. Her sons are Directors of S.L.S. Agro Tech (P) Limited-second respondent herein. The second respondent is said to have borrowed about Rs.62,00,000/- of amount from the first respondent. The petitioner stood as guarantor for repayment of the loan. The second respondent committed default in repayment of the loan. Therefore, the first respondent initiated proceedings against the second respondent as well as sureties. Notices in this regard were issued on 8.11.2001 and 21.12.2001 to the petitioner as well as other sureties, apart from the second respondent. The grievance of the petitioner is that though the assets held by the second respondent is sufficient to liquidate the liability towards the first respondent, steps are being initiated against her property by invoking Section 29 of the State Financial Corporations Act,1951 (for short ‘the Act’). It is urged that such a course is impermissible in law. Heard Sri Challa Dhanamjaya, learned counsel for the petitioner. Though notice is served on the respondents, none of them have entered appearance. The petitioner does not dispute the fact that she is the surety for repayment of loan availed by the second respondent from the first respondent. Her only objection is as to the invocation of Section 29 of the Act vis-a-vis her properties. It is not in dispute that the first respondent is a corporation governed by the provisions of the Act. The question as to whether the State Financial Corporation can invoke its power under Section 29 of the Act to recover the amount due from a surety was dealt with extensively by the Hon’ble Supreme Court in Karnataka State Financial Corporation v. N.Narasimahaiah and others[1]. Therein, it was held that the procedure prescribed under Section 29 of the Act cannot be invoked for recovery of the amount against a surety. It was held that in such cases, the procedure prescribed under Section 37 of the Act must be followed. The ratio laid down in the said judgment squarely applies to the facts of the case. Hence, the writ petition is allowed directing that the first respondent shall not be entitled to proceed against the petitioner under Section 29 of the Act. It shall open to it to take other steps in accordance with law. There shall be no order as to costs. ____________________ L.NARASIMHA REDDY, J 19.11.2008 Stp ..... REGISTRAR // TRUE COPY // SECTION OFFICER To 1.2CCs to 2.2CD copies Form-NIC-OGS/WP{MADHURI} [1] (2008) 5 SCC 176