![DRT Recovery Certificate Before 2016 Is Not a 'Decree or Order' for Insolvency Notice Under Section 9(2): Supreme Court in HDFC Bank v. Kishore K. Mehta [2026 INSC 688]](/assets/images/article-corporate.svg)
Quick Answer: A recovery certificate issued by a Debts Recovery Tribunal before the 2016 amendment is not a "decree or order" on which an insolvency notice can be issued under Section 9(2) of the Presidency Towns Insolvency Act, 1909. The Supreme Court followed Paramjeet Singh Patheja v. ICDS Ltd., held that Section 19(22A) of the RDB Act (inserted in 2016) does not help the bank, and dismissed HDFC Bank's appeal.
In H.D.F.C. Bank Limited v. Kishore K. Mehta (Dead) Thr. LRs. (2026 INSC 688), the Supreme Court held that a "decree or order" under Section 9(2) of the Presidency Towns Insolvency Act, 1909 does not include a recovery certificate issued by a DRT under the pre-amended Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (paras 3, 10–12, 20). The insertion of Section 19(22A) in 2016, deeming such a certificate to be a decree or order for insolvency proceedings, is legislative recognition that the equivalence did not exist earlier, and the amendment is not retrospective (para 14). The lis must be decided on the law as it stood when the litigation began (paras 15–19). A Bench of Justice Dipankar Datta and Justice Satish Chandra Sharma dismissed the bank's appeal (para 23).
Status: High Court's view that no insolvency notice could issue on a DRT recovery certificate upheld; Civil Appeal No. 4211 of 2010 dismissed; notice of motion proceedings, if pending, closed qua the deceased original respondent; bank left free to work out remedies against the other certificate debtors in accordance with law (paras 23–24).
Headnote: DRT Recovery Certificate and Insolvency Notice
Presidency Towns Insolvency Act, 1909 – Section 9(2) and 9(5) – Insolvency notice – "Decree or order" – Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (now Recovery of Debts and Bankruptcy Act) – Section 19(22A), inserted by Act 44 of 2016 – DRT recovery certificate – Strict construction of insolvency law – Rights crystallised on date of institution – Casus omissus.
Held: (i) The ratio of Paramjeet Singh Patheja v. ICDS Ltd. rests on a wider principle: the Insolvency Act must be strictly construed because insolvency has grave civil consequences; "decree or order" must be understood in light of the Code of Civil Procedure, 1908; and an insolvency notice is not a mode of execution (paras 10–11).
(ii) The fact that the recovery certificate is a creature of the 1993 Act, unlike the arbitral award in Paramjeet Singh Patheja, is of no consequence in view of that wider ratio (para 12).
(iii) Parliament's insertion of Section 19(22A) in 2016 to equate a recovery certificate with a "decree or order" shows that such equivalence did not exist earlier; reading it into the pre-amendment law would supply a casus omissus, and the amendment has not been given retrospective effect (paras 13–14).
(iv) The issue must be decided on the law as it stood when the litigation commenced; a claim untenable on the date of institution cannot become tenable because of a later event during pendency (paras 15–18).
(v) Section 19(22A) therefore does not aid the bank, and Paramjeet Singh Patheja applies with full force; a 3-Judge Bench has earlier declined to reconsider that decision (paras 19–21).
(vi) Even on its own terms, Section 19(22A) speaks of "initiation" of insolvency proceedings, and here the insolvency notice itself stood quashed by the High Court (para 22).
(paras 10–24)
Case Details: HDFC Bank v. Kishore K. Mehta (2026 INSC 688)
Final Outcome: Civil Appeal dismissed; insolvency notice based on DRT recovery certificate held not maintainable; bank free to pursue other remedies against the remaining certificate debtors in accordance with law.
Case: H.D.F.C. Bank Limited v. Kishore K. Mehta (Dead) Thr. LRs.
Neutral Citation: 2026 INSC 688
Case No.: Civil Appeal No. 4211 of 2010 (arising out of SLP (Civil) No. 18860 of 2008)
Court: Supreme Court of India (Civil Appellate Jurisdiction) – Reportable
Date of Decision: 13 July 2026
Bench: Justice Dipankar Datta (author) and Justice Satish Chandra Sharma
Relevant Acts & Sections: Presidency Towns Insolvency Act, 1909 – Sections 9(1)(e), 9(1)(h), 9(2) and 9(5); Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (Recovery of Debts and Bankruptcy Act) – Section 19(22) and 19(22A); Code of Civil Procedure, 1908 – Sections 2(2) and 2(14)
Impugned Order: Judgment and order dated 30th June 2007 in Appeal No. 710/2007 of the Division Bench of the High Court of Judicature at Bombay, upholding the Single Judge's view that no insolvency notice could be issued on the basis of a recovery certificate (para 4 and footnotes 12–13)
Counsel: Mr. Gopal Jain, Senior Counsel, for the appellant-bank; Mr. Dhruv Mehta, Senior Counsel, for some of the respondents (paras 8–9)
Source: Supreme Court of India
Key Holdings of the Supreme Court
- A DRT recovery certificate issued under the pre-amended RDB Act is not a "decree or order" under Section 9(2) of the Presidency Towns Insolvency Act (paras 3, 10–12, 20).
- Paramjeet Singh Patheja, though rendered on arbitral awards, rests on a wider principle that governs this case (paras 11–12).
- Section 19(22A) of the RDB Act, inserted in 2016, is clear legislative recognition that the equivalence did not exist earlier and is not retrospective (para 14).
- Rights and liabilities are judged as on the date of institution of the proceedings; later developments cannot make an untenable claim tenable (paras 15–18).
- Even under Section 19(22A), there was no surviving "initiation" since the insolvency notice stood quashed (para 22).
Brief Facts of the Case
The original respondent was a director of Beautiful Diamonds Ltd., which had availed credit facilities from a consortium of 15 banks including HDFC Bank, and he had executed a personal guarantee. On default, the bank approached the DRT, Mumbai, which on 26th October 2004 directed issuance of a recovery certificate for Rs. 14,74,51,929.35 against him, followed by a recovery certificate dated 30th November 2004 (para 4).
On the bank's approach, the Insolvency Registrar issued an insolvency notice under Section 9(2) of the Insolvency Act based on the recovery certificate. The original respondent challenged it by a Notice of Motion under Section 9(5) before the Bombay High Court. The Single Judge held that no insolvency notice could be issued on a recovery certificate, and the Division Bench upheld that view, both relying on Paramjeet Singh Patheja (paras 4, 6).
Leave was granted on 4th May 2010. The original respondent died on 20th May 2024 during pendency, and his wife and three sons were substituted as legal representatives (paras 4–5).
Issues Before the Supreme Court
- Whether an insolvency notice under Section 9(2) of the Presidency Towns Insolvency Act can be issued on the basis of a recovery certificate issued by a DRT under the pre-amended RDB Act (paras 1, 3).
- Whether Section 19(22A) of the RDB Act, inserted in 2016, supports the bank's case (paras 13–19, 22).
Court's Findings and Reasoning
Bank's arguments (para 7): The bank argued that Section 9(2) uses "decree or order" and not "decree of any Court", that the 1978 amendment consciously omitted "of any Court", that Paramjeet Singh Patheja concerned arbitration, and that the DRT has the trappings of a civil court for high-value bank claims.
Wider ratio of Paramjeet Singh Patheja (paras 10–12): The Court found no reason to disagree with the High Court. The earlier decision held that the Insolvency Act must be strictly construed, that "decree or order" takes its meaning from the CPC, and that an insolvency notice is not a mode of enforcing a debt. That the recovery certificate came into existence only with the 1993 Act was of no consequence given this wider ratio.
Section 19(22A) demolishes the bank's case (paras 13–14): Far from supporting the bank, the 2016 insertion of Section 19(22A) shows that Parliament found it necessary to create the equivalence expressly. A pre-2016 recovery certificate could not, by necessary implication, form the basis for insolvency proceedings; holding otherwise would supply a casus omissus, and the amendment is not retrospective.
Law on the date of institution (paras 15–19): Relying on Rameshwar v. Jot Ram (quoting P. Venkateswarlu v. Motor & General Traders) and Beg Raj Singh v. State of U.P., the Court held that rights crystallise on the date the suitor enters the court. By the same logic, a claim untenable on that date cannot become tenable because of a fortuitous later event, unless statute or equity requires otherwise.
No reconsideration of Paramjeet Singh Patheja (paras 20–21): The Court recorded the bank's fair submission that Paramjeet Singh Patheja had been doubted in Sundaram Finance Limited v. Ashok D Soniminde, but noted that a 3-Judge Bench, by order dated 23rd April 2015, held that it did not require reconsideration.
No initiation in any event (para 22): The Court accepted the respondents' point that Section 19(22A) speaks of a deemed decree for "initiation" of insolvency proceedings, and that stage did not fructify because the insolvency notice itself stood quashed by the High Court.
Other certificate debtors (para 24): Two sons of the original respondent were also certificate debtors, but the bank proceeded only against the father. Citing Ebrahim Aboobaker v. Tek Chand Dolwani, the Court noted that the lis survived his death, but no order was needed against them in view of the dismissal.
Final Outcome and Directions
- Civil Appeal No. 4211 of 2010 dismissed (para 23).
- Proceedings in the notice of motion before the Single Judge, if pending, stand closed qua the deceased original respondent (para 23).
- The bank, if so advised, may work out its remedies against Respondents 1.1 and 1.3 in accordance with law, if not barred by limitation or otherwise (para 24).
- Pending applications disposed of (para 25).
Legal Principle Laid Down
An insolvency notice under Section 9(2) of the Presidency Towns Insolvency Act, 1909 can be founded only on a "decree or order" in the sense understood under the CPC. A recovery certificate issued by a DRT before the insertion of Section 19(22A) of the RDB Act in 2016 does not qualify, and the deeming provision does not apply retrospectively. A claim must be judged on the law as it stood on the date the proceedings were instituted (paras 11–12, 14–20).
Precedents Relied Upon
- Paramjeet Singh Patheja v. ICDS Ltd., (2006) 13 SCC 322 – Followed – arbitral award is not a "decree or order" under Section 9(2); Insolvency Act to be strictly construed. Discussed at paras 6, 10–12, 20–21.
- Rameshwar v. Jot Ram, AIR 1976 SC 49 – Relied upon – right to relief judged as on the date of institution. Discussed at para 16.
- P. Venkateswarlu v. Motor & General Traders, AIR 1975 SC 1409 – Relied upon (as quoted in Rameshwar) – same principle. Discussed at para 16.
- Beg Raj Singh v. State of U.P., (2003) 1 SCC 726 – Relied upon – rights of parties crystallise on the date of commencement of litigation. Discussed at para 17.
- Sundaram Finance Limited v. Ashok D Soniminde – Noted – had doubted Paramjeet Singh Patheja; a 3-Judge Bench later held no reconsideration was needed. Discussed at para 21.
- Ebrahim Aboobaker v. Tek Chand Dolwani, (1953) 1 SCC 621 – Referred to – death of the debtor during pendency does not cause insolvency proceedings to abate. Discussed at para 24.
Important Paragraphs of the Judgment
Verbatim extracts from the judgment. For the full text, refer to the judgment PDF below.
Para 11: "This Court noted that: (i) the Insolvency Act must be strictly construed as insolvency has grave civil consequences; (ii) the term “decree or order" must be understood in light of the definition contained in the Code of Civil Procedure, 1908; and (iii) insolvency notice is not a mode of execution/enforcement."
Para 14: "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: "By necessary implication, a recovery certificate issued prior to the 2016 amendment could not form the basis for initiating insolvency proceedings."
Para 15: "Additionally, we hold that the issue emerging from the present appeal must be decided on the basis of the law as it stood when the litigation commenced."
Para 18: "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 20: "Consequently, the law laid down in Paramjeet Singh Patheja (supra) applies with full force."
Practical Impact of the Ruling
- For banks and financial institutions: Insolvency notices under the Presidency Towns Insolvency Act founded on pre-2016 DRT recovery certificates are not maintainable; recovery must proceed through other remedies (paras 14, 19–20, 24).
- For guarantors and certificate debtors: The deeming fiction in Section 19(22A) cannot be applied to certificates issued before 2016 (para 14).
- For litigants generally: A legislative change during pendency does not convert an untenable claim into a tenable one unless the statute or equity so requires (para 18).
- For courts: Paramjeet Singh Patheja remains good law on the meaning of "decree or order" in Section 9(2) (paras 20–21).
FAQs on DRT Recovery Certificates and Insolvency Notices
1. What did the Supreme Court decide in HDFC Bank v. Kishore K. Mehta?
It held that an insolvency notice under Section 9(2) of the Presidency Towns Insolvency Act could not be issued on a DRT recovery certificate under the pre-amended RDB Act, and dismissed the bank's appeal (paras 3, 20, 23).
2. Is a DRT recovery certificate a "decree or order"?
Not under the pre-2016 law. "Decree or order" is understood in the CPC sense, and the Insolvency Act is strictly construed (paras 11–12).
3. Does Section 19(22A) of the RDB Act change the position?
Section 19(22A), inserted in 2016, deems a recovery certificate to be a decree or order for insolvency proceedings, but it is not retrospective, and its insertion shows that the equivalence did not exist earlier (paras 13–14, 19).
4. Which law applies when a statute changes during litigation?
The issue is decided on the law as it stood when the litigation commenced, unless the statute or equity otherwise requires (paras 15, 18).
5. Can the bank still recover from the other guarantors?
Yes. The Court left the bank free to work out its remedies against the two sons who were also certificate debtors, if not barred by limitation or otherwise (para 24).
Keywords: 2026 INSC 688, HDFC Bank v. Kishore K. Mehta, Presidency Towns Insolvency Act, Section 9(2), insolvency notice, decree or order, DRT recovery certificate, RDB Act, Section 19(22A), Paramjeet Singh Patheja, casus omissus, rights crystallise on date of institution, Justice Dipankar Datta, Justice Satish Chandra Sharma, Supreme Court judgment
Related on LegalTaxGuru
Download Judgment PDF – HDFC Bank v. Kishore K. Mehta
Source: Supreme Court of India (official website).