State-owned Union Bank of India is looking to initiate personal insolvency proceedings against the promoters of Dewan Housing Finance Limited (DHFL) for unpaid dues, two people familiar with the matter told CNBC-TV18.

The bank issued a demand notice to DHFL promoters- Dheeraj and Kapil Wadhawan- under Section 7(1) of the Insolvency and Bankruptcy Code last week, said one of the people quoted earlier. This person added that the notice allows the promoters 14 days to repay Union Bank of India its dues of over Rs 3,000 crores. If these are not paid at the end of the notice period, the bank will file a personal insolvency petition against the promoters for loans given to DHLF on the basis of their personal guarantees , the person added.

The Department of Financial Services (DFS) of the Finance Ministry had issued a letter to heads of various public sector banks in late August, directing them to institute a mechanism to monitor cases that may require initiation of personal insolvency. Following this nudge by the Finance Ministry, banks have prepared lists of defaulting firms where such action can be taken against promoters to recover dues.

This is the third such instance of banks filing personal insolvency petitions against promoters of defaulting firms, after SBI filed a similar plea against Anil Ambani and Bhushan Power promoter, Sanjay Singhal, earlier this month.

“If Union Bank’s personal insolvency petition against Wadhawans is admitted by the NCLT (National Company Law Tribunal), then the court can issue a public notice and other banks can also join in,” said an executive from one of the banks with large exposure to DHFL.

Dewan Housing Finance is facing claims of over Rs 89,000 crores from various financial creditors under the NCLT including State Bank of India, Union Bank of India, PNB, Bank of India, Yes Bank, and others.

First Published:Sept 18, 2020 1:39 PM IST