Terms of contract are sacrosanct
2) refund of your money is as per mutual agreement
3) further if company is incurring g loss it is not liable to repay loan
Unsecured loan to company
Hello, My query is a bit long, apologies on this same, but I earnestly request you to please take the effort to read the compete details before you provide your valuable advice, as it is a matter of many lives and many attached families. Below is narration of the real story with help of an hypothetic example :- I am one of the directors of a Pvt Ltd company in India. And also a 35% shareholder in that same Pvt Ltd company. I provided an unsecured loan to a company worth Rs. 40 lakh... In numerous tranches within a span of 2 years. This loan was actually a form of investment, and I was not expecting return of the amount. This loan was an unsecured loan which is of zero interest with clauses stated in mutual agreement which I had voluntarily agreed and digitally signed as below :- 1. The amount and time of the return loan amount shall be as per mutual decision of both parties. 2. If the company goes in loss and goes bankrupt/shutdown, the directors are not liable to Repay the loan. Note: - All the funds of that I had invested were used only for the company, and no fraudulent or wrong practice was observed by any director. - All directors were honest and tried their best in interest of the company, but now, unfortunately the business has not done well due to bad luck, and maybe the customers did not like the product. - I was always involved in all the decisions taken in the company regarding business strategies and use of the funds. I was also party to al the credentials of the company. My QUESTION is:- Now, as the company has not been able to make business, In what way can I try to take my money back? Any ideas or expert suggestions?
Asked 4 years ago in Business Law
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11 Answers
The unsecured interest free loan was given to the company, without any guaranteer nor any collateral, and it is a non Registered agreement. I. E. Only on with digital signature on blank sheet. It was done with the intention that if the company makes profit, I will get returns, and also benefit of my shares. The directors are kind to me, and we all are trying their best to get further investments, or sell stake. However, is there any loophole or legal way for me to get the money from the other directors? Just by chance?
Asked 4 years ago
You would not get refund of your money as per terms of the agreement
What if I file a court case? Will it help? Note : the CA and CS were well aware that my intention was only to invest and not expect loan repayment during agreement. My interests have changed due to non performance of the business.
Asked 4 years ago
Filing of suit would be futile exercise
you may not get any refund of money
As you are bound by the contract you have signed, I suggest you ask your directors (on personal level) to decide on the return of loan amount and time. Once you have decided the same, pass a board resolution to that effect. As per the agreement, both company and you can mutually decide the amount and return time of the loan amount.
Once, everything is in writing, you’ll have better right to claim your unsecured loan.
In the first place your question is not long at all. Now the answer is you have no means to recover you loan. Even God cannot recover from a person/entity who/which does not have anything. Leave it to debtor, when he pays take it, no means to recover.
Since your agreement states tht you can get back your loan amount if the company is not performing well or goes in loss/bankrupt etc.
You may ask the company to return the loan amount as per the agreement.
The agreement is an evidence for the receipt of money by the company hence you may even contemplate to resort to legal process if the company is not returning the amount it had obtained from you.
The agreement copy, even if it is entered into by an unregistered document, is valid especially if it clearly evidences the receipt o amount from you.
You can first issue a legal demand notice demanding the return of the amount you offered/invested.
Let them give a reply with whatever reason they may rely upon.
You can then approach court of law to recover the amount by filing a money recovery suit.
You are repeating the same question in different manners.
You were advised to file a money recovery suit if the company is refusing to return the amount you had given them either by loan or for investment purpose.
The agreement copy available with you would be sufficient to file money recovery suit
this is going to be a difficult case
it is quite evident from the digitally signed so called 'loan agreement' that is not a loan agreement but an investment agreement since there is no rate of interest mentioned nor is the period of repayment specified
in such a scenario you will have to file a declaratory suit against the company that the digitally signed loan agreement is not binding on you and for a declaration that there was a parallel and actual loan agreement which was verbally agreed between the company and you and that such latter agreement is binding on the company
so you will have to prove the verbal loan agreement
Dear Sir,
1) In such a case if you have signed an agreement, that specifically states that if company goes into loss they are not liable to pay, you will be bound by terms of such agreement.
2) You will have to try and get a mutual agreement for return of your investment in writing to file a suit that will actually be fruitful.
3) If you file a suit now it will not be fruitful as the terms of the contract are very clear in regards to mutual decision as requirement and no return on loss.
Thank you
- The general law of contract is based on the conception, which the parties have, by an agreement, created legal rights and obligations, which are purely personal in their nature and are only enforceable by action against the party in default.
- Since, there is no default by other party in your case , then legally you are bond with the terms of the agreement dully entered by you with the clause that if the company goes in loss and goes bankrupt/shutdown, the directors are not liable to Repay the loan
- Hence, you cannot claim that loan amount from a company which has lost its business and you was also one of the Director therein .
- Further , you have no ground to file a court case against your losses for which you was also accountable.
- However, you can recover your losses after selling the fixed assets of the company .
