Punjab National Bank v. M/s. Shree Jyoti Education and Management Trust World and others — 2026 INSC 836 (12 August 2026)
What the case was about
This appeal asked whether interest accrued after a loan is declared a non-performing asset (NPA) can be ignored simply because a bank parks it in a separate “suspense account” rather than the main loan ledger. The Supreme Court held that such interest remains part of the “debt” recoverable under law and cannot be brushed aside by courts or borrowers relying on principal-only statements. The ruling overturned an Orissa High Court order that had directed Punjab National Bank (PNB) to accept roughly ₹29.5 lakhs as full and final settlement, setting aside a larger recovery determined by the Debts Recovery Appellate Tribunal (DRAT) (para 2, para 15).
The key facts
In 2011, United Bank of India—amalgamated with PNB in April 2020—sanctioned a ₹5 crore loan to Shree Jyoti Education and Management Trust for constructing a college building (para 3). The account turned irregular and was classified as an NPA on 30 June 2017 (para 3). The bank then filed a recovery application before the Debts Recovery Tribunal (DRT), Cuttack, claiming ₹75,56,680. It explained that as on the date of filing, ₹64,25,915 was outstanding in the loan account and ₹11,30,765 represented interest accumulated after the NPA date, held in a suspense account (para 3, para 10).
The DRT restricted recovery to ₹1,83,268, after giving credit for payments made by the Trust following the NPA classification, and awarded pendente lite and future simple interest at 10 per cent per annum (para 5, para 6). PNB appealed, and before the DRAT in Kolkata it filed an affidavit dated 7 August 2023 updating the calculations (para 7). The DRAT partly allowed the appeal, fixing the Trust’s liability at ₹54,90,413 with pendente lite and future simple interest at 9 per cent per annum from 5 February 2018 until realisation (para 7, para 8).
Instead of complying, the Trust moved the Orissa High Court. It produced a PNB certificate dated 24 December 2020 stating that the outstanding loan amount as on 13 October 2020 was ₹31,99,000 (para 4). The High Court treated this as the total debt, deducted ₹2,43,321.98 that the Trust had deposited after that date, and directed PNB to accept ₹29,55,678.02 in full and final settlement (para 9). PNB’s application to recall or modify the order was dismissed (para 2).
The questions before the Court
PNB’s appeal raised three connected questions. First, did the High Court err by relying solely on the principal amount shown in the December 2020 certificate while ignoring the separate suspense account maintained for interest that had accrued after the NPA date (para 11)? Second, does such interest form part of the “debt” recoverable by a bank under Section 2(g) of the Recovery of Debts and Bankruptcy Act, 1993 (para 12)? And third, could the Trust disregard the bank’s statutory accounting system and put forward self-serving calculations that contradicted its own earlier stands and the bank’s records (para 11, para 14)?
What the Court decided and why
A bench of Justices Sanjay Kumar and Sanjeev Sachdeva allowed PNB’s appeals, set aside the Orissa High Court’s orders dated 11 January 2024 and 14 May 2024, and restored the DRAT’s order of 1 September 2023 (para 15).
The Court began by explaining the accounting practice that governs NPAs. Once a loan account is classified as an NPA, interest ceases to be reflected in the running loan account and is instead maintained in a separate suspense account in accordance with applicable guidelines (para 10). As on the date of classification—30 June 2017—the principal together with interest calculated up to that date stood at ₹1,25,30,842 (para 10). Thereafter, the interest component sat in the suspense account and no longer appeared in the loan account statement. Consequently, the PNB certificate showing an outstanding balance of ₹31,99,000 as on 13 October 2020 captured only the principal and did not include the interest reflected in the suspense account (para 10). The High Court’s calculation, which treated this principal-only figure as the total debt, was therefore an “oversimplification” that was “clearly unsustainable” (para 11).
The Court then turned to the statutory position. Section 2(g) of the Recovery of Debts and Bankruptcy Act, 1993 defines “debt” to mean any liability inclusive of interest claimed as due by a bank or financial institution (para 12). Because the interest in the suspense account was indisputably part of the liability claimed by PNB, it fell squarely within the definition of debt and could not be ignored (para 12).
The judgment also found the Trust’s conduct problematic. The borrowers could not “blithely ignore the accounting system followed by banks and come up with different calculations at different points of time to suit their own interests” (para 11). The Court noted that before the DRT, the Trust had argued it was liable to pay ₹32,63,899.65 rather than the claimed ₹57,01,917.32, yet before the High Court it relied on the certificate to claim only ₹29,55,678.02 (para 11). It described the Trust’s attempt to produce a self-serving statement contradicting the bank’s records as patently erroneous and mischievous (para 14).
In support, the Court relied on Central Bank of India v. Ravindra, where a Constitution Bench held that banks must file transparent statements of account showing debit entries and interest particulars, and that interest may be charged on periodical rests and capitalised (para 13). It also cited Union of India v. Association of Unified Telecom Service Providers of India, where a three-judge bench affirmed that capitalised interest can form part of the principal sum adjudged on the date of suit (para 13).
Ultimately, the Court restored the DRAT’s determination of ₹54,90,413 with pendente lite and future simple interest at 9 per cent per annum, permitting PNB to recover the amount after giving credit for any payments made by the Trust after the DRAT’s order (para 15). The parties were left to bear their own costs (para 15).
Why it matters
The judgment clarifies that the classification of a loan as an NPA is an accounting event, not a waiver of accumulated interest. By holding that interest maintained in a suspense account remains recoverable “debt,” the Supreme Court has prevented borrowers from using principal-only certificates to secure reduced settlements that ignore the full liability. The ruling reinforces that courts must respect the statutory accounting system followed by banks and cannot be swayed by oversimplified arithmetic when adjudicating dues. It also protects the integrity of recovery proceedings before DRTs and DRATs, signalling that High Courts should not re-appreciate evidence in a manner that disregards established banking norms when entertaining writ petitions against tribunal orders. For lenders and borrowers alike, the principle is straightforward: unless expressly waived, interest does not disappear merely because it is no longer visible on the main loan statement.