Can a DRT Recovery Certificate Be the Basis for Insolvency Proceedings? Supreme Court Clarifies

Case Name: HDFC Bank Limited v. Kishore K. Mehta (Dead) through LRs.

Date of Judgment: 13 July 2026

Citation: 2026 INSC 688 | Civil Appeal No. 4211 of 2010 (Arising out of SLP (Civil) No. 18860 of 2008)

Bench: Justice Dipankar Datta and Justice Satish Chandra Sharma

Held: The Supreme Court held that a recovery certificate issued by the Debts Recovery Tribunal (DRT) before the 2016 amendment to the Recovery of Debts and Bankruptcy Act cannot be treated as a “decree or order” for the purpose of issuing an insolvency notice under Section 9(2) of the Presidency Towns Insolvency Act, 1909. The Court observed that the 2016 insertion of Section 19(22A), which deems a recovery certificate to be a decree for initiating insolvency proceedings, is prospective and cannot apply retrospectively.

Summary: The appellant bank obtained a recovery certificate from the Debts Recovery Tribunal against the respondent after default in repayment of credit facilities. Relying on the recovery certificate, the bank initiated insolvency proceedings by issuing an insolvency notice under Section 9(2) of the Presidency Towns Insolvency Act, 1909.

The respondent challenged the insolvency notice before the Bombay High Court, contending that a DRT recovery certificate was not equivalent to a “decree or order” contemplated under Section 9(2) of the Insolvency Act. The High Court accepted the contention and quashed the notice.

Before the Supreme Court, the bank argued that the expression “decree or order” was broad enough to include a DRT recovery certificate and relied upon the 2016 amendment introducing Section 19(22A) of the Recovery of Debts and Bankruptcy Act. Rejecting the contention, the Supreme Court held that Parliament introduced Section 19(22A) precisely because such equivalence did not exist earlier. The Court further reiterated that insolvency proceedings have serious civil consequences and the provisions of the Insolvency Act must be strictly construed.

Decision: The Supreme Court dismissed the appeal and upheld the Bombay High Court’s judgment. It held that a recovery certificate issued by the Debts Recovery Tribunal prior to the 2016 amendment could not form the basis for issuing an insolvency notice under Section 9(2) of the Presidency Towns Insolvency Act, 1909