HDFC Bank moves SC over insolvency laws

The Supreme Court will decide whether banks can initiate insolvency proceedings while recovering dues from individual defaulters as private sector lender HDFC Bank has sought the apex court's intervention in this regard.

The decision will have far reaching ramifications as it would expedite the loan recovery process.

HDFC Bank has challenged the Bombay High Court judgement in a debt recovery case in which it was held that an insolvency notice cannot be issued on the basis of a recovery certificate issued by a Debt Recovery Tribunal.

The case relates to recovery of Rs 29 crore (Rs 290 million) from Kishore K Mehta of Lilavati Hospital in Mumbai.

The insolvency proceedings against individual defaulters are similar to winding up procedures against companies. In both the cases, the court-appointed receivers take charge of the assets and auction the same to recover dues.

The apex court bench headed by Justice S H Kapadia has issued notice to Mehta and had earlier stayed the High Court ruling which dismissed the HDFC Bank's appeal.