Unsecured loan
This query is : Resolved
10 March 2012
CAN A SHAREHOLDER SUE A PVT COMPANY FOR NON PAYMENT OF INTEREST ON UNSECURED LOAN?
10 March 2012
If a formal loan agreement was entered and the agreement provided for payment of interest on loan, then the lender can take action agaisnt the company.
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12 March 2012
Dear Mr Bhardwaj,
No loan agreement were executed and no lending members were paid any interest over the years due to inadequate profits.
Can a member still claim rights to interest
No loan agreement were executed and no lending members were paid any interest over the years due to inadequate profits.
Can a member still claim rights to interest
02 August 2025
In the absence of a formal loan agreement specifying interest, the position gets a bit complex:
* **If no formal loan agreement exists and no interest has been paid or agreed upon**, generally the shareholder **cannot claim interest** as a right because interest is a contractual obligation.
* The shareholder **can only claim repayment of the principal loan amount**.
* However, if there is **any documented communication (emails, minutes, resolutions) indicating interest was agreed or expected**, that could strengthen the claim.
* Also, under **Indian Contract Law**, if a loan is provided without specifying interest, the loan is presumed to be interest-free.
* But if the company is **making profits and the shareholder feels unfairly treated**, the shareholder might pursue remedy under the **Company Law** for oppression and mismanagement (Section 241, Companies Act 2013), though this is generally for more serious disputes.
**Summary:**
| Situation | Shareholder's Right |
| ----------------------------------- | ------------------------------------ |
| Formal loan agreement with interest | Can sue for interest & principal |
| No agreement, no interest paid | Can only claim principal loan |
| Some evidence of interest agreed | May claim interest based on evidence |
If your friend wants to take legal action, **consulting a company law expert or advocate** would be best for tailored advice.
Would you like me to help draft a legal notice template or guide you on next steps?
* **If no formal loan agreement exists and no interest has been paid or agreed upon**, generally the shareholder **cannot claim interest** as a right because interest is a contractual obligation.
* The shareholder **can only claim repayment of the principal loan amount**.
* However, if there is **any documented communication (emails, minutes, resolutions) indicating interest was agreed or expected**, that could strengthen the claim.
* Also, under **Indian Contract Law**, if a loan is provided without specifying interest, the loan is presumed to be interest-free.
* But if the company is **making profits and the shareholder feels unfairly treated**, the shareholder might pursue remedy under the **Company Law** for oppression and mismanagement (Section 241, Companies Act 2013), though this is generally for more serious disputes.
**Summary:**
| Situation | Shareholder's Right |
| ----------------------------------- | ------------------------------------ |
| Formal loan agreement with interest | Can sue for interest & principal |
| No agreement, no interest paid | Can only claim principal loan |
| Some evidence of interest agreed | May claim interest based on evidence |
If your friend wants to take legal action, **consulting a company law expert or advocate** would be best for tailored advice.
Would you like me to help draft a legal notice template or guide you on next steps?
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