Unsecured loan

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Vikash Agarwal

Vikash Agarwal (Querist)
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10 March 2012 CAN A SHAREHOLDER SUE A PVT COMPANY FOR NON PAYMENT OF INTEREST ON UNSECURED LOAN?

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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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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Vikash Agarwal

Vikash Agarwal (Querist)
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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

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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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?

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