NBFC cannot recognize interest income on inter-corporate deposits classified as Non-Performing Assets under RBI provisions

The SC upheld the HC decision regarding accrual of interest income on inter-corporate deposits for a Non-Banking Financial Company (NBFC). The HC correctly held that interest income cannot be considered accrued when the deposit becomes a Non-Performing Asset (NPA) under RBI Act provisions and Prudential Norms. Since the interest was not received and recovery prospects were negligible, the income had not accrued to the assessee. The SC agreed with the HC's reasoning that NBFCs are governed by RBI Act provisions, which prevent recognition of interest income on NPAs where actual receipt is doubtful and recovery is virtually impossible.

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Issues:
1. Consideration of the question in the impugned judgment.
2. Error apparent in the judgment regarding segregation of facts by the High Court.

Analysis:

1. The Supreme Court, comprising Mr. Rohinton Fali Nariman and Mr. Navin Sinha, JJ., reviewed multiple civil appeals, including Civil Appeal No. 5813 of 2012, 998 of 2013, 2450 of 2017, 2449 of 2017, 4555 of 2017, 8977 of 2017, 18059 of 2017, and others. After examining the impugned judgment in these appeals, the Court found that the consideration of the question had been adequately addressed with full and meaningful reasoning. Consequently, the Court decided to dismiss all the mentioned appeals based on their assessment of the judgment.

2. In the specific case of Civil Appeal No. 998 of 2013 and SLP(C) No. 28678-28682 of 2017, the appellant's counsel raised a concern regarding an error apparent in the judgment. The counsel argued that the facts of this case were similar to those of other cases, but the High Court had incorrectly segregated this case and claimed the facts were different. Acknowledging this contention, the Court allowed the appellant to file a review petition before the High Court. The Court stipulated that if the review petition was submitted within four weeks from the date of the judgment, the High Court would assess it on its merits.

This comprehensive analysis covers the issues raised in the legal judgment, detailing the Court's findings and directives concerning the impugned judgment and the specific error apparent in the segregation of facts by the High Court in one of the appeals.

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