Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(SC) 912

SUPREME COURT OF INDIA
SANJAY KUMAR, SANJEEV SACHDEVA, JJ.
Punjab National Bank – Appellant
Versus
M/s. Shree Jyoti Education and Management Trust World and others – Respondents
Civil Appeal Nos. 10609-10610 of 2026 (@ Special Leave Petition (C) Nos. 27363-27364 of 2024)
Decided On : 12-08-2026

Advocates appeared:
For the Petitioner(s): Ms. Ekta Choudhary, AOR Ms. Rushali Sikand, Adv.
For the Respondent(s): Mr. Bharat Sangal, Sr. Adv. Ms. Snigdha Dash, Adv. Mr. Hemant Tripathi, Adv. Ms. Shreya Kasera, Adv. Mr. Sahil Tagotra, AOR

The High Court erred in ignoring the interest component reflected in the suspense account after loan became NPA; the bank's certificate showing only principal cannot override the statutory definition of debt which includes interest.

Headnote:(A) Recovery of Debts due to Banks and Financial Institutions Act, 1993 (now Recovery of Debts and Bankruptcy Act, 1993) - Sections 2(g), 19(2), 19(20) - Definition of debt inclusive of interest - Banking Regulation Act, 1949 - Section 21A - Rates of interest charged by banking companies - Central Bank of India v. Ravindra, (2002) 1 SCC 367 - Constitution Bench on capitalization of interest - Union of India v. Association of Unified Telecom Service Providers of India, (2020) 3 SCC 525 - Application of same principle.

(B) Non-Performing Asset (NPA) - Accounting system - After classification as NPA, bank maintains separate suspense account for interest due - Interest component no longer reflected in loan account statement but remains part of debt - Certificate of outstanding showing only principal not determinative of total dues.

(C) Recovery proceedings - High Court in writ jurisdiction oversimplified calculation by ignoring suspense account and relying solely on bank's certificate - Such approach unsustainable - Self-serving calculations by debtor contrary to bank records cannot be accepted.

Facts of the case:
A bank sanctioned a loan of Rs.5 crore to a trust for construction of a college building. The loan account was classified as a non-performing asset (NPA) on 30.06.2017. The bank predecessor filed an application before the Debts Recovery Tribunal (DRT) for recovery of dues. The DRT allowed recovery of only Rs.1,83,268. The bank appealed to the Debts Recovery Appellate Tribunal (DRAT), which determined the dues as Rs.54,90,413 with pendente lite and future simple interest at 9% per annum from 05.02.2018. The trust challenged the DRAT order before the High Court. The High Court, relying on a bank certificate dated 24.12.2020 showing outstanding principal of Rs.31,99,000, directed payment of Rs.29,55,678.02 as full and final settlement, ignoring the interest component in the suspense account. The bank's recall application was dismissed.

Findings of Court:
The Supreme Court held that the High Court erred in ignoring the accounting system for NPA accounts, whereby interest is transferred to a suspense account after the account becomes NPA. The certificate relied upon reflected only the principal outstanding and did not account for the interest component. The definition of 'debt' under Section 2(g) of the Act includes interest. The bank is entitled to claim both principal and interest. The DRAT's calculation, accepted by the bank, was correct. The trust's self-serving statement of account was erroneous and mischievous.

Issues: 1. Whether the High Court was justified in ignoring the interest component reflected in the suspense account and relying solely on the certificate showing only the principal outstanding. 2. Whether the trust's calculation of dues based on a selective reading of bank records was valid.

Ratio Decidendi: The interest component forms part of the debt due to the bank under Section 2(g) of the Act. Banks follow a recognized accounting system whereby interest after NPA classification is maintained in a suspense account, which cannot be disregarded. The High Court's simplification of the amount payable, ignoring the suspense account, was unsustainable. The DRAT's determination of dues and interest rate was restored. Result : Appeals allowed. The orders dated 11.01.2024 and 14.05.2024 of the High Court of Orissa are set aside. The order dated 01.09.2023 of the Debts Recovery Appellate Tribunal, Kolkata, in Appeal No. 16 of 2021 is restored. The bank is entitled to recover its dues in terms thereof, after giving credit to any payments made after that date. Parties shall bear their own costs.

Table of Content
1. what is the final order of the court? (Para 1 , 15)
2. what are the factual and procedural history of the loan dispute? (Para 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9)
3. is interest maintained in a suspense account part of the recoverable debt? (Para 10 , 11 , 12 , 13 , 14)

JUDGMENT :

SANJAY KUMAR, J.

1. Leave granted.

2. Punjab National Bank,¹[For short, ‘PNB’], the appellant, is aggrieved by the orders dated 11.01.2024 and 14.05.2024 passed by a Division Bench of the Orissa High Court. By the order dated 11.01.2024, the Division Bench directed PNB to receive a sum of Rs.29,55,678.02 paisa from M/s. Shree Jyoti Education and Management Trust World,²[For short, ‘the Trust’], a charitable trust, and Tara Prasad Satpathy, its managing trustee, respondent Nos. 1 and 2 herein, in full and final settlement of their dues so as to close their loan account, and disposed of Writ Petition (C) No. 32036 of 2023 filed by them. By its later order dated 14.05.2024 passed in I.A. No. 2279 of 2024 in W.P. (C) No. 32036 of 2023, the Division Bench dismissed the recall/modification application filed by PNB in the context of the earlier order dated 11.01.2024.

3. Facts relevant to this adjudication unfurl thus: United Bank of India, the predecessor-in-interest of PNB, sanctioned a loan of Rs.5 crore to the Trust, vide letter dated 27.06.2011, for construction of a college building. Tara Prasad Satpathy, its managing trustee, and other trustees, viz., respondent Nos. 2, 3, 4 and 5, stood as guarantors for the loan. The loan amount was disbursed over a period of two years. On 22.06.2017, United Bank of India issued a confirmation letter to the Trust informing it that, as on that day, the balance loan amount due and payable by it stood at Rs.1,27,33,669/-. The loan account of the Trust was, however, classified as a non-performing asset on 30.06.2017. United Bank of India, thereupon, filed O.A. No. 258 of 2018 before the Debts Recovery Tribunal,³[For short, ‘the DRT’], Cuttack, Odisha, for recovery of its outstanding dues, amounting to Rs.75,56,680/- as on 04.05.2018, along with future interest. Therein, the bank explained that the balance, in terms of the loan account, came to Rs.64,25,915/-, with interest calculated up to 29.06.2017, and the other component was the interest, calculated at the rate of 12.90%, from 30.06.2017 to 05.05.2018, which came to Rs.11,30,765/-. The total dues claimed, accordingly, came to Rs.75,56,680/-.

4. During the pendency of the proceedings before the DRT, United Bank of India was amalgamated with PNB on 01.04.2020. PNB issued certificate dated 24.12.2020, titled ‘To Whom It May Concern’, stating that the Trust had paid Rs.93,31,842/- since the date its loan account became a non-performing asset, i.e., from 30.06.2017 till 13.10.2020, and that, as on 13.10.2020, the outstanding amount of the loan was Rs.31,99,000/-.

5. While so, by judgment dated 05.02.2021, the DRT allowed O.A. No. 258 of 2018 only to the extent of permitting PNB to recover a sum of Rs.1,83,268/-, along with pendente lite and future simple interest @ 10% per annum. A recovery certificate was directed to be issued under Section 19(2) of the Recovery of Debts due to Banks and and Financial Institutions Act, 1993,⁴[For short ‘The Act of 1993’] (now, renamed as the Recovery of Debts and Bankruptcy Act, 1993).

6. We may note that the DRT took into account the fact that the Trust and its trustees, the defendants before it, had paid Rs.93,88,516/- after the account became a non-performing asset and arrived at the figure of Rs.1,83,268/- as the amount still due and payable by them. The calculation done by the DRT, as set out by it in its judgment dated 05.02.2021, reads as under:-

“The detailed calculation sheet is given below –

(i)	Originally the OA Is filed for recovery of Rs.75,56,680.00 along with interest calculated upto 05/05/2018
(ii)	The applicant bank is entitled to [sic] interest from 06/05/2018 till 05/02/

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2026 Supreme(SC) 912

SUPREME COURT OF INDIA SANJAY KUMAR, SANJEEV SACHDEVA, JJ.Punjab National Bank – AppellantVersusM/s. Shree Jyoti Education and Management Trust World and others – RespondentsCivil Appeal Nos. 10609-10610 of 2026 (@ Special Leave Petition (C) Nos. 27363-27364 of 2024)Decided On : 12-08-2026

The High Court erred in ignoring the interest component reflected in the suspense account after loan became NPA; the bank's certificate showing only principal cannot override the statutory definition of debt which includes interest.

Cases Referred (2)

SUPREME COURT OF INDIA
SANJAY KUMAR, SANJEEV SACHDEVA, JJ.
Punjab National Bank – Appellant
Versus
M/s. Shree Jyoti Education and Management Trust World and others – Respondents
Civil Appeal Nos. 10609-10610 of 2026 (@ Special Leave Petition (C) Nos. 27363-27364 of 2024)
Decided On : 12-08-2026