Chennai, Nov 24
The Madras High Court, on Monday, opened a crucial discussion on the legality and ethicality of steep interest rates charged by film financiers, saying that rates as high as 30 per cent per annum could amount to exploitation even in high-value commercial transactions.
The court's intervention comes in the backdrop of a long-running financial dispute between actor-producer Vishal Krishna Reddy and Lyca Productions.
A division bench of Justices S.M. Subramaniam and Mohammed Shaffiq, hearing an appeal filed by Vishal, signalled concern over the prevalent practice in the Tamil film industry where lenders often impose heavy interest rates on loans extended to producers and actors.
The Bench remarked that prima facie, a 30 per cent annual interest rate appeared "exorbitant" and warranted judicial examination.
The case stems from a June 2025 order of a single judge directing Vishal to pay Rs 30.05 crore to Lyca Productions, along with 30 per cent interest from February 16, 2021.
During Monday's hearing, Lyca's counsel informed the Bench that the liability had since grown to Rs 54 crore.
In contrast, senior counsel A.K. Sriram, appearing for Vishal, said that the interest component alone had ballooned to around Rs 40 crore, highlighting the crushing financial burden.
The Bench questioned whether such massive interest demands were permissible under the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003, and related laws.
"A borrower may sign an agreement due to dire necessity, but the larger question is whether the law allows such interest to be charged," Justice Subramaniam said.
"No citizen can be allowed to be exploited by another citizen, irrespective of their financial status."
Granting interim relief to Vishal, the Bench stayed the single judge's decree on the condition that he deposit Rs 10 crore before the High Court.
The Registry was instructed to place the amount in an interest-bearing account while the appeal proceeds.
The appeal challenges the findings of Justice P.T. Asha, who had earlier upheld the 30 per cent interest clause, citing a 2010 precedent in Indiabulls Financial Services Ltd vs Jubilee Plots and Housing Private Ltd, where the High Court had refused to interfere with a 33 per cent interest rate.
Justice Asha had also reasoned that the 2003 Act was intended to protect small borrowers and not large commercial loans involving crores of rupees.
The division Bench, however, indicated that the broader principles of fairness and legality must govern all lending transactions, setting the stage for a deeper judicial review of high-interest financing practices in the Tamil film industry.
- IANS
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