Supreme Court Restores DRAT Order, Holds High Court Erred by Ignoring Interest Component in Suspense Account

Case Snapshot

Case Name: Punjab National Bank v. M/s Shree Jyoti Education and Management Trust World & Ors

Citation: 2026 INSC 836

Bench: Justice Sanjay Kumar & Justice Sanjeev Sachdeva

Date of Judgment: August 12, 2026

Area of Law: Banking Law, Recovery of Debts, Interest, Suspense Accounts

The Judgment in One Line

High Court erred in ignoring the interest component maintained in a suspense account while calculating outstanding loan dues based solely on a bank certificate.

Why This Judgment Matters

This judgment clarifies the accounting treatment of interest in banking transactions, particularly when a loan account is classified as a non-performing asset (NPA). The Supreme Court held that when a loan account becomes an NPA, the interest component is transferred to a suspense account but remains part of the debt. Banks are entitled to claim this interest along with the principal amount. The Court criticized the High Court for oversimplifying the calculation by ignoring the suspense account and relying solely on a bank certificate. The judgment also reaffirms that borrowers cannot selectively interpret bank certificates or account statements to suit their interests.

Background

United Bank of India (predecessor of PNB) sanctioned a ₹5 crore loan to the Trust for construction of a college building. The loan

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