[2025:RJ-JP:47415-DB]

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Civil First Appeal No. 1068/2025 State Bank Of India, Body Corporate Constituted Under The State Bank Of India Act, 1955, Having Its Corporate Office At State Bank Bhawan, Madam Cama Road, Nariman Point, Mumbai, Maharashtra 400021 And Local Head Office At Tilak Marg, C-Scheme, Jaipur And Branches All Over India Amongst Other Branch Offices One Of Its Branch Office At Having Its S.m.e.c. Branch Office At Plot No. Sp-1 Road No. 1, Vkia, Sikar Road Jaipur Through Its Chief Manager Heera Lal Choudhari, S/o Sh Dularam Choudhari Aged About 49 Years, Occupation Service At S.m.e.c. Branch Office At Plot No. Sp-1, Road No. Vkia, Sikar Road, Jaipur. ----Appellant Versus

1. M/s Chawalwala Madhuwala Foods, Through Its Proprietor Smt. Madhubala W/o Mahendra Prakash At B-9, Chitrakoot Stadium, Vaishali Nagar, Jaipur (Rajasthan)

302021.

2. Smt. Madhubala W/o Mahendra Prakash, Proprietor Of Chavalwala Madhubala Foods Resident Of Plot No 379, Near Gas Godam, Daulat Nagar, Bundi 323001 (Rajasthan) And At 1-3, 38-39, Bhairuji Residency, Vaishali Nagar, Jaipur (Rajasthan) 302021.

----Respondents For Appellant(s) : Mr.Jayant Vaze Jaipuria, Adv.

For Respondent(s) :

HON'BLE THE ACTING CHIEF JUSTICE MR. SANJEEV PRAKASH SHARMA HON'BLE MR. JUSTICE MANEESH SHARMA

Order

24/11/2025

1. The present appeal assails the order passed by the Commercial Court No.4, Jaipur Metropolitan-II dated 29.01.2025 solely on the ground that the Commercial Court has failed to interpret the Circular issued by the Reserve Bank of India dated 01^st September, 2001 and has wrongly held that interest cannot be charged after loan account has been declared as Non-Performing Assets (‘NPA’).

2. Learned counsel for the appellant submits that Clause 3.1.1 states otherwise and interest ought to be allowed.

3. We noticed that by the impugned judgment, the learned Commercial Court framed the following issues:-

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4. The above issue No.1 has to be examined in the light of Circular issued by the Reserve Bank of India which is binding on the appellant. As per the Circular dated 01.09.2001, the Reserve Bank of India issued instructions relating to the Prudential Norms on Income Recognition, Asset, Classification and Provisioning-Pertaining to Advances having defined Non-Performing Assets in Clause 2.1. It was proceeded to examine the income recognition aspect. It would be apposite to quote Clause 3.1 for the above purpose:-

“3.1 Income Recognition – Policy

3.1.1 The policy of income recognition has to be objective and based on the record of recovery internationally income from non-performing assets (NPA) is not recognised on accrual basis but is booked as income only when it is actually received. Therefore, the banks should not charge and take to income account interest on any NPA.

3.1.2 However, interest on advances against term deposits, NSCs, IVPs, KVPs and Life policies may be taken to income account of the due date, provided adequate margin is available in the accounts.

3.1.3 Fees and commissions earned by the banks as a result of re-negotiations or rescheduling of outstanding debts should be recognised on an accrual basis over the period of time covered by the re-negotiated or rescheduled extension of credit.

3.1.4 If Government guaranteed advances become NPA, the interest on such advances should not be taken to income account unless the interest has been realised.”

5. Clause 3.1.1, as quoted above, is unambiguous and without going into any complexities if we read the langu