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Punjab National Bank v. M/s. Shree Jyoti Education and Management Trust World

Civil Appeal · 2026 INSC 836Decided 12 Aug 2026
Civil Appeals (arising out of SLP(C) Nos. 27363-27364 of 2024)
Justice Sanjay Kumar · Justice Sanjeev Sachdeva

Background

United Bank of India (later amalgamated into PNB) had lent Rs. 5 crore to a charitable trust for constructing a college building, with the trustees standing as guarantors. After the loan became a non-performing asset in 2017, the bank pursued recovery before the Debts Recovery Tribunal (DRT), and the matter moved through the DRT, the Debts Recovery Appellate Tribunal (DRAT), and finally the Orissa High Court, with each forum reaching a different figure for what the trust still owed. The Orissa High Court, relying on a PNB certificate stating dues of Rs. 31,99,000 as of October 2020, accepted the trust's claim that after further payments only about Rs. 29.5 lakh remained payable, and ordered the loan account closed on that basis, over PNB's objection.

Decision Breakdown

The Supreme Court found the High Court's calculation "clearly unsustainable" because it ignored how banks account for NPAs: once a loan account is classified as non-performing, further interest is tracked separately in a "suspense account" rather than in the main loan ledger, so a certificate reflecting only the ledger balance (like the 2020 certificate the High Court relied on) understates the true dues by omitting accrued interest. The Court noted the trust itself had given inconsistent, self-serving figures at different stages of litigation, and that under the Recovery of Debts and Bankruptcy Act, 1993 and settled precedent (including the Constitution Bench ruling in Central Bank of India v. Ravindra), interest is unquestionably part of the recoverable "debt." The Court restored the DRAT's more carefully reasoned 2023 calculation: dues of Rs. 54,90,413 with 9% per annum interest from 5.02.2018 until realisation, setting aside both High Court orders, and allowed PNB to pursue recovery on that basis, giving credit for any further payments made.

Lesson Learnt

When a bank loan turns into a non-performing asset, a borrower cannot rely on a partial account-statement figure (which may exclude interest tracked in a separate suspense account) to claim their dues are lower than they actually are: the full debt, including such interest, remains legally recoverable, and courts must look at the bank's actual accounting system rather than a single certificate in isolation.

Official source (sci.gov.in)View Judgment (PDF)

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