In a packed courtroom on Tuesday morning, the Supreme Court refused to intervene in a long-running loan dispute between Sri Lakshmi Hotel Pvt. Ltd. and Sriram City Union Finance Ltd., effectively shutting the last door for the borrower who had been fighting the arbitral award for more than a decade. The bench of Justices J.B. Pardiwala and K.V. Viswanathan delivered a crisp but layered judgment, repeatedly emphasising the borrowers’ “persistent defaults” and the narrow scope of judicial review under arbitration law.
Background
The dispute dates back to 2006, when the Chennai-based hotel company and its managing director, V.S. Palanivel, borrowed a total of ₹1.57 crore from the NBFC. The loans carried 24% annual interest-high, but not unusual for risky commercial lending. Things soured quickly. By 2007, repayments stopped. Notices followed, as did a bounced cheque of nearly ₹1.9 crore in 2008 that, according to the lender, was issued as a supposed “full and final settlement.” Arbitration was eventually invoked in 2009.
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The arbitrator, a retired district judge, passed an award in 2014 directing the hotel to pay over ₹2.21 crore plus 24% interest. Multiple rounds of challenge in the Madras High Court failed. When the company still did not pay, insolvency proceedings began; liquidation followed. By 2020, the lender had recovered only around ₹8.2 crore-far short of what the award required after years of interest buildup.
Court’s Observations
The bench took note of the borrower’s argument that 24% interest was “usurious” and allegedly inserted into blank loan forms. The judges, however, appeared unconvinced. At one point the bench observed, “These allegations were tested by the arbitrator, and both courts below found no substance. We cannot re-appreciate evidence under Section 34 or Section 37.”
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On the plea that such a steep interest rate violates public policy, the Court offered a measured but firm response. “Commercial lenders take higher risks with defaulting borrowers. Morality of interest rates depends on context,” the bench noted, adding that high interest alone cannot be called contrary to fundamental Indian legal policy.
The judges also rejected reliance on the century-old Usurious Loans Act, remarking that modern arbitration law has overtaken such statutes. “Those enactments belong to a different era,” the bench said. “Once parties knowingly enter a commercial contract, courts cannot rewrite interest terms unless they shock the conscience-and this one doesn’t.”
A significant portion of the judgment focused on post-award interest. The Court reiterated that under Section 31(7)(b) of the Arbitration Act, post-award interest is mandatory unless the arbitrator specifies a different rate. Here, the arbitrator applied the same 24% rate mentioned in the agreements. Calling this legally permissible, the Court pointed out how delays by the borrowers had already deprived the lender of timely recovery. “Post-award interest exists for precisely this reason,” the bench remarked.
Notably, the Court placed weight on the debtor’s conduct-unfulfilled assurances, defaults, and a dishonoured cheque. “Such behaviour hardly warrants judicial sympathy,” one portion of the judgment stated bluntly.
Decision
With these observations, the Supreme Court dismissed the appeal, upholding all previous findings and allowing the 24% interest rate to stand. The judgment ends decisively: the Court sees “no reason to interfere.”
Case Title: Sri Lakshmi Hotel Pvt. Ltd. & Anr. v. Sriram City Union Finance Ltd. & Anr. (2025)
Court: Supreme Court of India
Bench: Justices J.B. Pardiwala and K.V. Viswanathan
Date of Judgment: 18 November 2025