Madras High Court to examine legality of film financiers charging 30% interest rate for loans

The Madras High Court, on Monday (November 24, 2025), decided to examine in detail as to whether the financiers in the film industry could be allowed to demand and collect interest at a very high rate of 30% per annum for the loans extended by them to producers, actors and others.

A Division Bench of Justices S.M. Subramaniam and Mohammed Shaffiq prima facie agreed with senior counsel A.K. Sriram, representing actor-producer Vishal Krishna Reddy, that it was usurious to demand 30% interest even if the loan amount happend to run for a few crores of rupees.

The judges were hearing an original side appeal filed by Mr. Reddy of Vishal Film Factory against a single judge’s June 2025 order directing him to pay ₹30.05 crore to Lyca Productions, along with interest at the rate of 30% from February 16, 2021, until the date of payment.

During the course of hearing, the counsel for Lyca Productions told the Division Bench that the liability of the actor was ₹30.05 crore in 2021 when the suit for recovery of money was filed and that it had now increased to ₹54 crore. On the other hand, Mr. Sriram said, the interest component alone was around ₹40 crore.

Wondering if the film financiers could be allowed to charge such exorbitant interest, the Division Bench said, it would have to be examined in detail as to whether such a demand would be against the provisions of the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003 and other laws governing the issue.

“The borrower may have signed the agreement, expressing his willingness to pay any interest rate, because of the dire necessity to obtain the loan, but can such interest be levied against the law of the land is the question that has to be answered by this court,” Justice Subramaniam said.

“No citizen can be allowed to be exploited by another citizen. The appellant may be a producer or actor. He may be a rich man or a man without sufficient means. Those things do not matter. We are only disturbed to find the charging of interest at an exorbitant rate of 30% per annum,” the judge added.

His Bench entertained Mr. Reddy’s appeal, ordered notice to Lyca Productions and granted an interim stay of the single judge’s order on condition that the appellant must deposit ₹10 crore to the credit of the case pending before the High Court. They directed the Registry to deposit the money in an interest bearing account.

Single judge’s order

The appeal had been preferred against the decree passed by Justice P.T. Asha who had refused to accept the argument of Mr. Reddy that the levy of 30% interest by film financiers was usurious and against the provisions of the 2003 Act which prohibits exorbitant interest.

The single judge had relied upon a judgement passed by the High Court in Indiabulls Financial Services Limited versus Jubilee Plots and Housing Private Limited (2010) wherein the the court had refused to interefere with the levy of 33% interest and held that it would not be violative of the 2003 Act.

The judge had also observed that the 2003 Act was intended to protect gullible people who borrow small amounts of loan and get slapped with usurious interest rates and not for mammoth loan transactions carried out for huge sums under the Negotiable Instruments Act of 1881.

“In the instant case, the defendant (Mr. Reddy) has signed the dotted lines agreeing to pay interest at 30% p.a… After having promised the plaintiff (Lyca) that the amount would be repaid with interest at 30% p.a., the defendant is now attempting to renege on his agreement,” Justice Asha had concluded.