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Cases/2026 INSC 688
Dismissed
2026 INSC 688 • Supreme Court of India

HDFC Bank v. Kishore K. Mehta

“A DRT Recovery Certificate Is Not a "Decree or Order": Supreme Court Bars Insolvency Notices Under the Presidency Towns Insolvency Act Based on Pre-2016 Recovery Certificates”

13 July 2026Justice Dipankar Datta, Justice Satish Chandra Sharma
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TL;DR

The Supreme Court held that an insolvency notice under Section 9(2) of the Presidency Towns Insolvency Act, 1909 cannot be issued on the strength of a recovery certificate issued by a Debts Recovery Tribunal (DRT) under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDB Act) as it stood before the 2016 amendment. Applying the wider ratio of Paramjeet Singh Patheja v. ICDS Ltd. (an arbitral award is not a "decree or order"), the Court held that "decree or order" in Section 9(2) must be read in light of the Code of Civil Procedure, that the Insolvency Act is to be strictly construed given the grave civil consequences of insolvency, and that an insolvency notice is not a mode of execution. It held that Section 19(22A) of the RDB Act, inserted in 2016 to deem a recovery certificate a decree or order for initiating insolvency proceedings, did not help HDFC Bank: it showed that the equivalence did not exist earlier, and the amendment was not retrospective, so the case had to be decided on the law as it stood when the litigation began. The Bank's appeal against the Bombay High Court was dismissed.

The Bottom Line

A bank holding a DRT recovery certificate from 2004 could not use it to serve an insolvency notice on a guarantor-director under the old Presidency Towns Insolvency Act. The Supreme Court ruled that a recovery certificate is not a "decree or order" for Section 9(2), and that the 2016 amendment, which expressly equates the two, cannot be read back into a case begun years earlier. Insolvency carries a drastic status change, the Court said, so the statute is read strictly. The Bank may pursue other remedies against the surviving certificate debtors in accordance with law, if not barred by limitation.

Case Timeline

The journey from FIR to Supreme Court verdict

order
26 Oct 2004

DRT Directs Issue of Recovery Certificate

The DRT, Bombay ordered a recovery certificate for Rs. 14,74,51,929.35 against the original respondent; the certificate was issued on 30.11.2004.

order
11 Jul 2008

Supreme Court Stays Proceedings

The Supreme Court stayed proceedings in Notice of Motion No. 40 of 2007; the stay was continued when leave was granted on 04.05.2010.

event
20 May 2024

Death of Original Respondent

The original respondent died during the pendency of the appeal; his legal representatives were substituted on 10.02.2025.

judgment
13 Jul 2026

Supreme Court Delivers Judgment

The Supreme Court dismissed the Bank's appeal, holding that a pre-amendment DRT recovery certificate cannot support an insolvency notice under Section 9(2) of the Insolvency Act.

The Story

The original respondent, Kishore K. Mehta, was a director of Beautiful Diamonds Ltd., which had availed credit facilities from a consortium of 15 banks, including HDFC Bank Limited (the Appellant-Bank), for its diamond business. The facilities were secured by mortgage through deposit of title deeds, and the original respondent, along with other directors, executed personal guarantees. On default, and after invocation of the personal guarantees failed, the Appellant-Bank approached the Debts Recovery Tribunal, Mumbai by Original Application No. 146 of 2002. By order dated 26.10.2004, the DRT directed issuance of a recovery certificate for Rs. 14,74,51,929.35 against the original respondent, followed by a recovery certificate dated 30.11.2004.

On the Bank's application, the Insolvency Registrar issued an insolvency notice (No. N/224 of 2006) under Section 9(2) of the Presidency Towns Insolvency Act, 1909 (Insolvency Act), based on the recovery certificate. The original respondent challenged it before the Bombay High Court by a Notice of Motion (No. 40 of 2007) under Section 9(5), contending that a DRT recovery certificate cannot form the basis of an insolvency notice. A Single Judge, keeping the Notice of Motion pending, decided this issue and held that no insolvency notice could be issued on the basis of a recovery certificate, and a Division Bench upheld that view, both following Paramjeet Singh Patheja v. ICDS Ltd., (2006) 13 SCC 322. The Bank appealed; leave was granted on 04.05.2010 and the proceedings in the Notice of Motion were stayed from 11.07.2008.

During the pendency of the appeal, the original respondent died on 20.05.2024. The Bank's application for substitution was allowed by the Registrar on 10.02.2025, and his wife and three sons were substituted as respondents 1.1 to 1.4. The question was whether "decree or order" in Section 9(2) of the Insolvency Act includes a recovery certificate issued by a DRT under the pre-amended RDB Act, and what effect Section 19(22A) of the RDB Act, inserted in 2016, has.

Legal Issues

Click each question to reveal the Supreme Court's answer

1Question

Whether an insolvency notice under Section 9(2) of the Presidency Towns Insolvency Act, 1909 can be issued on the basis of a recovery certificate issued by a Debts Recovery Tribunal under the RDB Act?

Tap to reveal answer
1SC Answer

No. Following the wider ratio of Paramjeet Singh Patheja v. ICDS Ltd., the Court held that the Insolvency Act must be strictly construed, that "decree or order" must be understood by the definitions in the Code of Civil Procedure, 1908, and that an insolvency notice is not a mode of execution or enforcement. A DRT recovery certificate, as the law stood when the litigation began, is not a "decree or order" for Section 9(2).

Extends the reasoning of Paramjeet Singh Patheja beyond arbitral awards to recovery certificates, closing a route sometimes used by banks to pressure debtors with insolvency notices.

2Question

Does Section 19(22A) of the RDB Act, inserted in 2016, which deems a recovery certificate a decree or order for insolvency proceedings, assist the Bank in this case?

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2SC Answer

No. The Court held that the insertion of Section 19(22A) shows that Parliament found it necessary to equate a recovery certificate with a decree or order, which is clear legislative recognition that such equivalence did not exist earlier. The amendment was not given retrospective effect, and a certificate issued before it could not form the basis for insolvency proceedings. Moreover, the Court agreed that even on its terms the provision would not help because the insolvency notice had already been quashed by the High Court before any "initiation" was complete.

Treats a later clarifying-looking amendment as evidence of a prior gap rather than a declaratory change, and refuses to supply a casus omissus.

3Question

Is the issue to be decided on the law as it stood when the litigation commenced, or on the law as amended during its pendency?

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3SC Answer

On the law as it stood when the litigation commenced. Relying on Rameshwar v. Jot Ram, P. Venkateswarlu v. Motor & General Traders and Beg Raj Singh v. State of U.P., the Court held that rights of parties crystallise on the date of institution, and that a claim untenable on that date cannot become tenable because of an event during pendency, unless the statute or equity of the case otherwise requires.

Applies the principle that the right to relief is judged as of the date the proceeding begins, in a symmetric way, so that a later change in law does not rescue an untenable claim.

Arguments

The battle of arguments before the Supreme Court

Petitioner

Vihaan Kumar

1

Section 9(2) uses "decree or order", not "decree or order of a Court"

HDFC Bank argued that Section 9(2) uses the words "decree or order" whereas Section 9(1)(e) and (h) refer to a "decree of any court", so the term in Section 9(2) is wide enough to cover a DRT recovery certificate. Using two different expressions in the same section indicates two different meanings.

Section 9(1)(e), 9(1)(h) and 9(2) Presidency Towns Insolvency Act, 1909
2

1978 amendment deliberately omitted "of any Court" and added "or order"

Before the 1978 amendment introducing Section 9(2) to 9(5), Section 9(1)(e) and (h) referred to a decree for payment of money "of any Court". On introducing Section 9(2), Parliament omitted "of any Court" and added "or order", showing a conscious intent to include orders passed by judicial, quasi-judicial or statutory authorities.

3

Paramjeet Singh Patheja was about arbitral awards, not the RDB Act

The Bank said the High Court wrongly relied on Paramjeet Singh Patheja, which dealt with arbitration and not recovery certificates under the RDB Act.

Paramjeet Singh Patheja v. ICDS Ltd. (2006) 13 SCC 322
4

DRT stands in the shoes of the civil court; the two Acts operate in different fields

The RDB Act transferred bank claims above Rs. 10 lakhs from civil courts to the DRT, which has all the trappings of a civil court, and it would be anomalous if a small civil court decree could support insolvency proceedings but a larger DRT recovery certificate could not. The Insolvency Act and RDB Act occupy different fields, so both must be allowed to operate. The Bank also relied on Section 19(22A) of the RDB Act (inserted in 2016).

Section 19(22A) RDB Act (Act 44 of 2016)

Respondent

State of Haryana

1

Paramjeet Singh Patheja applies and the Insolvency Act must be strictly construed

The respondents opposed the appeal and sought its dismissal. The Court records that Mr. Dhruv Mehta, senior counsel for some respondents, opposed the contentions. The Single Judge and Division Bench had followed Paramjeet Singh Patheja in holding that a recovery certificate cannot form the basis for an insolvency notice.

Paramjeet Singh Patheja v. ICDS Ltd. (2006) 13 SCC 322
2

Even on its own terms, Section 19(22A) gives the Bank no relief

The respondents contended that, even if Section 19(22A) applied, it speaks of deeming a recovery certificate a decree or order for the "initiation" of insolvency proceedings, whereas the insolvency notice itself stood quashed by the High Court, so the stage of initiation had not fructified.

Section 19(22A) RDB Act

Court's Analysis

How the Court reasoned its decision

The Court agreed with the Single Judge and Division Bench that Paramjeet Singh Patheja, though decided on an arbitral award, rests on a wider principle: (i) the Insolvency Act, with its consequence of "civil death", must be strictly construed; (ii) "decree or order" must be understood by reference to the Code of Civil Procedure definitions; and (iii) an insolvency notice is not a mode of execution or enforcement. The Court acknowledged that one reason for that decision (arbitration law already existed in 1909) is absent here since recovery certificates arose only after the RDB Act, but held the distinction made no difference in light of the wider ratio. Turning to Section 19(22A) of the RDB Act, the Court found it harmed rather than helped the Bank: by legislating in 2016 to equate a recovery certificate with a decree or order, Parliament recognised that the equivalence did not exist earlier, and to hold otherwise would supply a casus omissus. The amendment was not retrospective. The Court then held that the dispute must be decided on the law when the litigation commenced, drawing on Rameshwar v. Jot Ram, P. Venkateswarlu and Beg Raj Singh, and reasoning that the converse of the rule against denying relief for delays also holds: a claim untenable at the start cannot become tenable through a fortuitous event during trial. The Bank's counsel fairly noted that Paramjeet Singh Patheja had been doubted in Sundaram Finance Ltd. v. Ashok D. Soniminde, but a 3-Judge Bench on 23.04.2015 felt it did not require reconsideration. The appeal was dismissed.

True it is, the question involved in Paramjeet Singh Pathreja (supra) arose with respect to an arbitral award; nevertheless, its ratio rests on wider principle.

Para 11

Explains why the arbitral award decision governs a recovery certificate.

The fact that Parliament found it necessary in 2016 to insert sub-section (22A) in Section 19 of the RDB Act for the express purpose of equating a recovery certificate with a 'decree or order' is clear legislative recognition that such equivalence did not exist earlier.

Para 14

Reads the 2016 amendment as confirming the pre-existing gap rather than curing it retrospectively.

To hold otherwise would be to supply what the legislature omitted - a clear casus omissus.

Para 14

Applies the rule against judicial supply of legislative omissions.

the issue emerging from the present appeal must be decided on the basis of the law as it stood when the litigation commenced.

Para 15

Fixes the relevant date for determining the parties' rights.

A claim which was untenable on the date the suitor entered the portals of the Court cannot become tenable simply because a fortuitous event during the pendency of the trial has made it so.

Para 18

States the converse of the rule that delay should not defeat an otherwise valid claim.

Dismissed

The Verdict

Relief Granted

No relief was granted to the Bank. The insolvency notice, which the High Court had quashed, remained set aside. The Court left open the Bank's other remedies against the other certificate debtors, subject to limitation.

Directions Issued

  • The appeal was dismissed; Section 19(22A) of the RDB Act, inserted in 2016, does not aid the Appellant-Bank for a recovery certificate issued before it
  • Proceedings in the Notice of Motion before the Single Judge, if pending, stand closed qua the deceased original respondent
  • Respondents 1.1 and 1.3 (sons of the original respondent) were also certificate debtors, but the Bank had proceeded only against the original respondent; no order was needed against them, and the Bank, if so advised, can work out its remedies against them in accordance with law, if not barred by limitation or otherwise
  • Pending applications, if any, were disposed of

Key Legal Principles Established

1

A recovery certificate issued by a DRT under the pre-amended RDB Act is not a "decree or order" for the purpose of Section 9(2) of the Presidency Towns Insolvency Act, 1909.

2

The Insolvency Act, which can cause "civil death" for a debtor, must be strictly construed, and "decree or order" is to be read in the light of the definitions in the Code of Civil Procedure, 1908.

3

An insolvency notice is not a mode of execution or enforcement of a debt; enforcement lies through execution steps available under the CPC.

4

Section 19(22A) of the RDB Act, introduced in 2016, shows that the equivalence between a recovery certificate and a decree or order did not exist earlier, and it has no retrospective effect.

5

The rights of parties are to be determined by the law as it stood when the litigation commenced; a claim untenable at institution does not become tenable through later events, unless the statute or equity otherwise requires.

6

Insolvency proceedings against a debtor do not abate on his death in all cases, as the Court noted from Ebrahim Aboobaker v. Tek Chand Dolwani, though no order was needed here after the appeal was dismissed.

Key Takeaways

What different people should know from this case

  • Being a guarantor or director who owes money under a bank recovery certificate does not automatically allow the bank to serve you with an insolvency notice under the old Presidency Towns Insolvency Act.
  • Insolvency has very serious consequences for a person, so courts read the insolvency law narrowly, in favour of the person against whom it is invoked.
  • The rule of law changed in 2016: banks can now rely on Section 19(22A) of the RDB Act for recovery certificates, but this judgment applied the earlier position to a case that began long before.
  • Legal heirs can be brought on record if a party dies during the appeal; the Bank may still pursue other certificate debtors, within the limits of the law.
  • Cases can take many years. This one started with a 2004 recovery certificate and was decided in 2026.

Frequently Asked Questions

The Court held that an insolvency notice under Section 9(2) of the Presidency Towns Insolvency Act, 1909 cannot be issued on the basis of a recovery certificate issued by a Debts Recovery Tribunal under the RDB Act as it stood before the 2016 amendment, because such a certificate is not a "decree or order" within Section 9(2). The Bank's appeal was dismissed.
The Court held that the ratio of Paramjeet Singh Patheja v. ICDS Ltd. rests on a wider principle: the Insolvency Act must be strictly construed, "decree or order" is understood by the Code of Civil Procedure, and an insolvency notice is not a mode of execution. That reasoning applies equally to DRT recovery certificates, even though the earlier case concerned an arbitral award.
Section 19(22A), inserted in 2016, deems a recovery certificate to be a decree or order of the Court for the purpose of initiating winding up or insolvency proceedings. The Court held that it did not help the Bank here because it was not retrospective, and the case had to be decided on the law as it stood when the litigation commenced.
The Court reasoned that Parliament would not have needed to insert Section 19(22A) to equate a recovery certificate with a decree or order unless that equivalence did not exist earlier. Holding otherwise would supply what the legislature had omitted, a casus omissus.
The Court held that the issue must be decided on the law as it stood when the litigation commenced, relying on cases such as Rameshwar v. Jot Ram and Beg Raj Singh v. State of U.P. A claim that was untenable on that date cannot become tenable because of a later event during the case.
The Court said no order was required against the two sons who were also certificate debtors, since the Bank had proceeded only against the original respondent. The Bank, if so advised, can work out its remedies against them in accordance with law, if not barred by limitation or otherwise.

DISCLAIMER: This case summary is for educational and informational purposes only. It does not constitute legal advice. For advice on your specific situation, please consult a qualified advocate. JurisOptima is not responsible for any actions taken based on this information.

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