The Supreme Court docket on Wednesday (August 12) held that an curiosity accrued in a separate suspense account, pursuant to the declaration of the debtor’s account as a Non-Performing Asset, will be recovered by the banks as the identical continues to type a part of the “debt” due from the borrower and can’t be ignored whereas calculating excellent dues.
“PNB is entitled to say the curiosity due, which was calculated and maintained in a separate suspense account, along with the excellent principal mortgage quantity…”, noticed a bench of Justice Sanjay Kumar and Justice Sanjeev Sachdeva, whereas permitting the Punjab Nationwide Financial institution’s enchantment towards the Orissa Excessive Court docket’s judgment which denied curiosity to the financial institution maintained within the suspense account for the curiosity due on the excellent mortgage quantity.
The dispute arose from a ₹5 crore mortgage sanctioned in 2011 by United Financial institution of India (now merged with PNB) to the Respondent for building of a faculty constructing.
After the account was labeled as an NPA, the financial institution initiated restoration proceedings earlier than the Money owed Restoration Tribunal (DRT). Whereas the DRT considerably diminished the quantity recoverable by the financial institution, the DRAT later recalculated the dues at ₹54.90 lakh together with curiosity maintained within the suspense account.
Nonetheless, the Orissa Excessive Court docket relied upon a certificates issued by PNB in December 2020 that mirrored an impressive quantity of round ₹31.99 lakh and directed the financial institution to simply accept ₹29.55 lakh as full settlement of the account.
PNB challenged the Excessive Court docket’s orders earlier than the Supreme Court docket.
Setting apart the impugned judgment, the judgment authored by Justice Sanjay Kumar restored the tribunal’s resolution, noting that the Excessive Cour erred in overlooking the curiosity element that had been transferred to a suspense account after the mortgage turned an NPA.
“Oversimplification of calculation by the Excessive Court docket with respect to the quantity payable, ignoring the existence of the suspense account for the curiosity element because the date of classification of the mortgage account as a non-performing asset, and giving impact solely to the determine talked about within the PNB’s certificates dated 24.12.2020, viz., ₹31,99,000/-, thereby accepting the plea of the Belief that the sum of ₹2,43,321.98 paisa paid by it wanted to be deducted therefrom decreasing its dues to ₹29,55,678.02 paisa, is due to this fact clearly unsustainable. The Belief and its trustees can’t blithely ignore the accounting system adopted by banks and give you completely different calculations at completely different factors of time to swimsuit their very own pursuits.”, the Court docket noticed.
The Court docket careworn that the mere incontrovertible fact that such curiosity not seems within the common mortgage account assertion doesn’t imply it ceases to be payable.
Referring to Part 2(g) of the Restoration of Money owed and Chapter Act, 1993, the Court docket emphasised that the statutory definition of “debt” expressly contains curiosity.
The Court docket noticed that when curiosity is legally chargeable underneath the mortgage settlement and banking rules, it can’t be excluded merely as a result of it’s maintained in a separate accounting head.
“Part 2(g) of the Act of 1993 defines ‘debt’ to imply, amongst different issues, any legal responsibility (inclusive of curiosity) which is claimed as due from any individual by a financial institution or a monetary establishment. Due to this fact, there will be no dispute as to the curiosity element being a part of the debt as a result of PNB.”, the Court docket stated.
Resultantly, the enchantment was allowed.
Trigger Title: Punjab Nationwide Financial institution versus M/s. Shree Jyoti Schooling and Administration Belief World and others
Quotation : 2026 LiveLaw (SC) 796
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Look:
For Petitioner(s) Ms. Ekta Choudhary, AOR Ms. Rushali Sikand, Adv. Mr. Gaurav Grover, Adv.
For Respondent(s) Mr. Bharat Sangal, Sr. Adv. Ms. Snigdha Sprint, Adv. Mr. Hemant Tripathi, Adv. Ms. Shreya Kasera, Adv. Mr. Sahil Tagotra, AOR
