The Supreme Court held on August 12 that interest accumulated in a suspense account after a loan account is declared a Non-Performing Asset remains recoverable as part of the 'debt' under the SARFAESI Act and the Recovery of Debts and Bankruptcy Act. The Court clarified that mere transfer of interest to a suspense account for accounting purposes does not extinguish the borrower's liability. The ruling directly affects banks' recovery proceedings before Debt Recovery Tribunals.

When a bank classifies a loan as a Non-Performing Asset under RBI prudential norms, it stops crediting interest income to its profit and loss account and instead parks accrued interest in an 'interest suspense account.' This is a pure accounting treatment mandated by RBI — it reflects conservative income recognition, not a waiver of the underlying contractual obligation.

The Supreme Court's ruling resolves a contested question: does this accounting shift affect the legal character of the debt? The Court said no. The definition of 'debt' under Section 2(g) of the Recovery of Debts and Bankruptcy Act, 1993 is broad enough to include all amounts legally due, including interest. The fact that interest sits in a suspense account rather than the income ledger does not mean the bank has forgiven or waived it.

For CLAT PG, the exam-relevant doctrine is the intersection of contractual obligation and statutory definition. The examiner will likely test: (1) whether a change in accounting treatment alters legal liability — it does not; (2) the statutory definition of 'debt' under the RDB Act; and (3) the distinction between waiver (a voluntary relinquishment of a known right) and accounting reclassification. This ruling is particularly useful for passage-based questions where a set of banking facts are given and aspirants must identify which obligations survive NPA classification.