The Supreme Court has set aside an Orissa High Court order that had directed Punjab National Bank (PNB) to accept ₹29.55 lakh as full and final settlement of a loan account belonging to a charitable trust. The Court held that the High Court had overlooked interest maintained by the bank in a separate suspense account after the loan was classified as a non-performing asset.
A Bench of Justice Sanjay Kumar and Justice Sanjeev Sachdeva delivered the judgment on August 12, 2026.
Background of the Case
The dispute arose from a ₹5 crore loan sanctioned in 2011 by United Bank of India, which later merged with PNB, to M/s. Shree Jyoti Education and Management Trust World for construction of a college building. The managing trustee and other trustees stood as guarantors.
The loan account was classified as a non-performing asset on June 30, 2017. The bank subsequently approached the Debts Recovery Tribunal (DRT), Cuttack, seeking recovery of its outstanding dues.
In February 2021, the DRT determined that ₹1,83,268 remained payable after taking into account payments made by the Trust. PNB challenged that determination before the Debts Recovery Appellate Tribunal (DRAT), Kolkata.
The DRAT later found the dues to be ₹54,90,413, along with pendente lite and future simple interest at 9% per annum.
High Court Reduced the Amount
PNB accepted the DRAT decision, but the Trust approached the Orissa High Court. Relying on a 2020 certificate issued by PNB showing an outstanding amount of ₹31.99 lakh, the High Court calculated that subsequent payments reduced the dues to ₹29,55,678.02.
The High Court consequently directed the Trust to pay that amount in full and final settlement and ordered closure of the loan account.
PNB sought recall of the order, but its application was dismissed. The bank then approached the Supreme Court.
Supreme Court’s Observation
The Supreme Court closely examined the bank's account statements and found that the High Court had treated the ₹31.99 lakh figure in isolation.
The Bench explained that after the account became a non-performing asset, interest was maintained separately in a suspense account. Therefore, the figure shown in the loan account certificate did not represent the entire amount payable.
“The interest component no longer found reflection in the loan account statement,” the Court noted while explaining the accounting system followed by the bank.
The Court further observed that interest forms part of the legally recoverable debt. Referring to Section 2(g) of the Recovery of Debts and Bankruptcy Act, 1993, the Bench noted that the definition of “debt” includes liability towards interest claimed by a bank or financial institution.
The Court also noted that the Trust and its trustees had taken different positions regarding the amount payable at different stages of the proceedings.
Supreme Court’s Decision
The Supreme Court held that the High Court’s calculation, based only on the ₹31.99 lakh certificate and without considering the suspense-account interest, was unsustainable.
The Bench therefore allowed PNB’s appeals and set aside the Orissa High Court orders dated January 11, 2024 and May 14, 2024.
The Court restored the DRAT’s September 1, 2023 order determining the dues at ₹54,90,413, with simple interest at 9% per annum from February 5, 2018 until realization.
PNB was permitted to recover the dues after giving credit for any payments made by the Trust and its trustees after the DRAT’s order.
The parties were directed to bear their own costs.
Case Details
Case Title: Punjab National Bank v. M/s. Shree Jyoti Education and Management Trust World and Others
Case Number: Civil Appeal Nos. … of 2026 (@ SLP (C) Nos. 27363-27364 of 2024)
Judges: Justice Sanjay Kumar and Justice Sanjeev Sachdeva
Decision Date: August 12, 2026
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