Loan from a friend who is now taking advantage

I had taken a loan from a friend of 1 lakh in August 2013. I couldn't return the loan money by January 2014 and a verbal understanding was made between he and me that I shall be giving my car to him, which he will be using for commercial purpose and also adjust Rs 5000 for per month from the loan amount. After using the car for 1 year during January 2014 to January 2015 he started demanding whole 1 lakh rupee and completely denied any such understanding made regarding loan account adjustment. Recently he filed a complaints at the police station stating that I have taken a loan and not returning money. The sub inspector in the P.S seemed biased to me. He didn't listen or gave any importance to what I was saying.. He said everything I am saying got no evidence so they won't listen. The S.I forced / threatened me to write a letter saying I had taken the loan and I shall return the whole amount in 5 installments failure of which law can take its course.. He said he wouldn't let me know until and unless I agree to pay and write a letter. I had went alone to the Police station not expecting such a one side look into the matter, I succumbed under threat and pressure and had to write that letter. Please tell me what should I be doing here? How can Police be this blinded or biased towards one party?? I am very worried and unable to sleep during nights.. Thanks