Madras High Court: In a Civil Suit filed by the plaintiff, a production house, for the recovery of defaulted loan amount of Rs. 30 Crores from Actor Vishal Reddy, the single Judge Bench of P.T. Asha, J., noting the evasive nature of Vishal’s conduct from the beginning of the proceedings, decreed the suit in favour of the plaintiff while imposing costs on the Actor.
Background
The Plaintiff, a production house in the South film industry, is engaged in the production, distribution, and marketing of high-budget movies. The defendant is a sole proprietary concern established by Actor Vishal Krishna Reddy. Vishal Reddy produced the film “Marudhu” in 2016 and borrowed Rs. 21.29 Crores from Gopuram Films. Since Vishal could not pay the loan, he requested the plaintiff’s help to settle the outstanding amount with a promise to repay the same with interest.
The plaintiff took over the Vishal’s Rs. 21.29 Crore loan at 30% annual interest, which was entered into writing on 21-09-2019. Vishal Reddy promised to repay Rs. 7 Crores a week before the movie Thupparivalan II’s tentative release on 31-03-2020., or the full loan by 31-12-2020 if the film was not released.
The initial payment was due on 24-03-2020. No payment was made, and the plaintiff became aware that filming was canceled due to Vishal Reddy facing financial issues. Thus, the full loan was due on 31-12-2020. The COVID-19 pandemic severely impacted the plaintiff’s business, halting film production and causing significant financial strain due to Vishal Reddy’s non-payment. Vishal Reddy also became unresponsive to the letters and emails sent by the plaintiff.
According to Clause (4) of their loan agreement, until the full and final settlement of the loan amount is done, the plaintiff had the first lien over all titles and interests in the defendant’s future film projects and its associated rights, produced or financed by the defendant.
The plaintiff in the present suit had claimed that a sum of Rs. 30,05,68,137/- was payable by the defendant to the plaintiff which included the principal amount of Rs. 21.29 Crores along with a sum of Rs. 8,76,68,137/- as interest.
Analysis
On the issue of Vishal Reddy breaching his obligations under the loan Agreement dated 21-09-2019, the Court cited averments made by the Vishal Reddy in his affidavit wherein he not only admitted the execution of the agreement dated 21-09-2019 but also reiterated the terms of repayment. It was clear from the submissions by the parties that the plaintiff had taken over the loan due by the Vishal Reddy to Gopuram Films and that the same had been repaid. Further, the Court took note of the Vishal Reddy’s stand of force majeure Clause in the agreement due to the COVID-19 Pandemic which implied a breach of the agreement. Hence, the Court answered the issue of breach of agreement in favour of the plaintiff.
On the issue of plaintiff discharging loan of the Vishal Reddy with Gopuram Films, the Court considering the submissions made by plaintiff and absence of any demand by Gopuram Films, answered this issue in favour of the plaintiff.
In the light of the findings of the Court on these two issues in favour of the plaintiff, the Court concluded that the plaintiff was entitled to recover the principal amount from Vishal Reddy.
Regarding rate of interest 30% p.a. being exorbitant and violative of Exorbitant Interest Act (‘Act’), the Court cited Indiabulls Financial Services Limited v. M/s.Jibilee Plots and Housing Private Limited, 2010 SCC OnLine Mad 1887 wherein the Court had stated that acts such as this were brought in to address the grievance of gullible public who borrowed loan on exorbitant interest rates and not for the mammoth loan transactions of big magnitude based on negotiable instruments. Further, in reference the application of the Act the Court stated that, “The learned Judge in the Indiabulls case has also held that these two Acts would not apply to the money lenders who advanced loans on the basis of Negotiable Instruments exceeding Rs.10,000/-.” The Court referring to Indiabulls (Supra) answered the issue in favour of the plaintiff being entitled to the interest amount at 30% on Rs. 21.29 crores from the date of agreement.
The Court stated that, despite the legal notice and reminder letters the defendant failed to respond to the same. If the defendant was not liable to pay the said amount, he would have immediately responded to these notices stating that he did not owe any amount to the plaintiff. In fact under agreement the defendant is obliged to notify the plaintiff in case he is not in a position to repay the amount on time. The Court further pointed out that the conduct of the Vishal Reddy from the beginning of the suit proceeding was evasive.
The Court said that the Vishal Reddy had not been forthcoming about his bank records and even after receiving the money for his film Chakra had not repaid even a part of plaintiff’s dues. The Court therefore imposed cost on the Vishal Reddy and decreed the entire suit in favour of the plaintiff.
[Lyca Productions Private Limited v. Vishal Krishna Reddy, C.S. No. 59 of 2021, decided on 05-06-2025]
Advocates who appeared in this case:
For the petitioner: V.Raghavachari, Senior Counsel
For the respondent: A.K.Sriram, Senior Counsel
