A clear written loan agreement cannot be recharacterised as a share purchase through contrary oral claims.

The respondent sued to recover ₹1,45,93,508.31, including ₹59,87,400 advanced under an agreement dated 11 January 1996, with interest.

The agreement provided for 3,52,200 shares in Neptune Inflatables Limited to be pledged as security; the defendant later acknowledged liability by letter dated 6 January 1999.

He did not file a written statement but was permitted to participate in the trial and cross-examine the plaintiff’s witness.

The Single Judge decreed the suit, and the defendant’s legal representatives pursued this appeal after his death.

The appellant contended that the agreement was, in substance, a share-purchase arrangement rather than a loan, and that interest was not payable under the agreement.

Whether Ex.P2 was a loan agreement secured by pledged shares or a share-purchase agreement.

Whether interest could be awarded where Ex.P2 did not expressly provide for interest and its clause 4 addressed interest in connection with sale of the pledged shares.

Section 92 of the Indian Evidence Act restricts the use of oral evidence to contradict, vary, add to, or subtract from the terms of a written instrument; the Court applied that rule to the appellant’s attempt to characterise Ex.P2 contrary to its written terms.

The Court also referred to the Interest Act, 1978, holding that where an agreement is silent on interest, interest may be awarded at a rate not exceeding the current rate, and to Section 34 of the Code of Civil Procedure as the basis for the Single Judge’s exercise of discretion to award interest.

Clause 4 of Ex.P2 provided that interest would not be charged in the specified circumstances concerning proceeds from sale of the pledged shares.

The Court found that Ex.P2 expressly recorded a loan of ₹59,87,400 secured by the pledge of 3,52,200 shares, and that the defendant had not denied executing it. His letter acknowledging liability further supported the plaintiff’s case.

In the absence of documentary proof to displace those terms, the Court rejected the contention that the transaction was a share purchase; it also held that Section 92 precluded reliance on oral submissions to contradict the written agreement.

As the plaintiff had been unable to sell the shares or realise proceeds, the Court held that clause 4 did not bar interest in the circumstances.

It therefore found no reason to disturb the interest awarded by the Single Judge under Section 34 CPC, applying the Interest Act to the agreement’s silence on interest.

Finding no basis to interfere with the Single Judge’s decree, it dismissed the appeal and closed the connected miscellaneous petition, with no order as to costs.