The main legal point established in the judgment is the interpretation and application of the terms of the loan agreement and the provisions of the Limitation Act, 1963 in determining the entitlement to recovery of the loan amount.

The suit is filed by the plaintiff against the defendant for recovery of money of Rs. 1,45,93,508.31 together with interest thereon at the rate of 24% on Rs. 59,87,400/- from the date of plaint till realisation, based on the document styled as loan agreement.

2. The plaintiff states that the defendant along with one S.N. Natarajan promoted a Company under the name of Neptune Inflatables Limited, with an authorised capital of Rs. 3,50,00,000/- made up of 3,50,000 equity shares at Rs. 10/- per share. It is stated that the defendant applied for a personal loan of Rs. 59,87,400/- to the plaintiff for purchase of 3,52,200 equity shares of Rs. 10/- at a premium of Rs. 7/- each and the loan was also sanctioned by the plaintiff. Thereafter, a loan agreement was executed between the plaintiff and the defendant on 11.01.1996. As per the said agreement, the defendant had agreed to pledge 3,52,000 equity shares purchased by him as security for the amount borrowed by the defendant and the same would be kept pledged till the amount was repaid. Accordingly, the shares purchased by the defendant vide Certificate Nos.23884 to 27405 (consolidated) were pledged with the plaintiff. Despite several demands, the defendant failed to repay the loan amount.

3. According to the plaintiff, it was not in a position to sell the shares pledged, since the shares of Neptune Inflatables Limited were not listed. The defendant also had admitted the liability vide letter dated 06.01.1999 under Ex.P3. The plaintiff, therefore sent a notice on 06.12.2001, calling upon the defendant to pay the loan amount, with interest at 24% per annum. As there was no response, the suit has been filed.

4. The defendant had not filed his written statement on time. Therefore, an application to condone the delay in filing the written statement in A.No.849 of 2009 was filed. The said application was dismissed on 30.06.2009 and was challenged in O.S.A. No. 113 of 2011. The Division Bench also dismissed the appeal and the same was confirmed in Special Leave Petition before the Honourable Supreme Court. While dismissing the Special Leave Petition, the defendant was given permission to participate in the trial and cross examine the plaintiff's witness questioning the legality of his claim. Thus, the defendant was not allowed to put forth his claim and only challenged the legal issues by way of cross examination.

5. The only question that has to be decided is whether the plaintiff is entitled to a decree as prayed for by him.

6. The plaintiff has marked the loan agreement as Ex.P2 and the letter written by the defendant admitting the liability dated 06.01.1999 was marked as Ex.P3. It is relevant to advert to the terms of agreement under Ex.P2 for the purpose of deciding the case:

“3. The Borrower shall repay the Loan on demand by the Lender:

(OR)

In case the Borrower fails to repay any part of loan when demanded by the Lender, not withstanding any other provisions of this agreement the Lender at his option shall have a right to purchase the shares pledged as security at a price of Rs. 17/- per share and on such purchase the loan amount shall be reduced by the ratio of the shares transferred bears to the total of shares pledged.

4. The Lender has agreed not to charge interest on the amount of the Loan on condition that if on a sale of the said shares, the Lender realises by way of net proceeds, an amount which is in excess of what is due under the Loan account, the Borrower is not entitled to claim Payment from the Lender the amount in excess. The Borrower agrees and undertakes that in the event of sale of the said shares by the Lender resulting in the realisation of proceeds which are in excess of the amount due under the Loan account, the Borrower shall not make any claim/demand in respect of the said excess amount.

5. The Borrower agrees that so long as the Pledged shares appreciate in value, he shall not have the right to liquidate the loan and claim redemption of the pledge