Now Reading: Supreme Court: interest in suspense account part of recoverable debt
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Supreme Court: interest in suspense account part of recoverable debt
The Supreme Court on Wednesday held that interest accumulated in a separate suspense account after a loan is classified as a Non-Performing Asset remains part of the recoverable debt. A bench of…
The Story in Brief
The Supreme Court on Wednesday held that interest accumulated in a separate suspense account after a loan is classified as a Non-Performing Asset remains part of the recoverable debt. A bench of Justice Sanjay Kumar and Justice Sanjeev Sachdeva allowed Punjab National Bank's appeal against an Orissa High Court judgment that had ignored this interest component.
The case involved a Rs 5 crore loan sanctioned in 2011 to Shree Jyoti Education and Management Trust. After the account became NPA, the High Court accepted a PNB certificate showing Rs 31.99 lakh as outstanding and ordered settlement at Rs 29.55 lakh. The Supreme Court set aside that order, stressing that interest legally chargeable under the loan agreement and Section 2(g) of the Recovery of Debts and Bankruptcy Act cannot be excluded just because it is kept in a separate accounting head.
The Indian Opinion
This ruling cuts through the banking sector's habit of treating interest in suspense accounts as an accounting shadow. Borrowers and tribunals alike have tried to ignore that interest, pretending a loan's cost disappears when the account turns NPA. The court correctly anchors its reasoning in the statutory definition of debt under the 1993 Act. The real test now is whether banks will use this clarity to demand realistic settlements or repeat the opaque certificates that misled the Orissa High Court.
Source: livelaw.in
This story was synthesised by AI from the source linked above.
