Lilavati Trust-HDFC Bank feud attracts high reputational risk amidst legal conflicts, say banking experts

New Indian Express

3 days ago

CHENNAI: As the feud between the Mehta family-owned Lilavati Kirtilal Mehta Medical Trust (LKMM Trust) and HDFC Bank intensifies, banking sector analysts believe that while the resolution will ultimately depend on the outcomes of ongoing legal proceedings, the case serves as a telling example of the challenges financial institutions face in managing reputational risks.
The Medical Trust has now come forward with a fresh set of allegations against HDFC Bank CEO Sashidhar Jagdishan, including claims of bribery and forgery, and a denial of any outstanding dues to HDFC Bank.
HDFC Bank on Sunday dismissed the Trust's previous allegations as 'malicious and baseless,' stating that the Mehta family, having exhausted all other options in the alleged loan default matter, is now 'launching personal attacks' on the bank and its executives in an effort to damage their reputation and pressure the bank into halting recovery efforts.
Two banking analysts told The New Indian Express that the escalating feud underscores the complexities of financial disputes involving prominent institutions. The recent allegations against HDFC Bank's CEO are considered particularly serious and could have far-reaching implications.
Both HDFC Bank and the LKMM Trust are now under intense public scrutiny. For HDFC Bank, accusations of harassment and fraud threaten its reputation as a leading financial institution. Meanwhile, the Trust's ongoing involvement in highly public legal battles may affect its image as a reputable healthcare provider.
According to reports, the dispute dates back to a loan default by Splendour Gems Limited, a company owned by the Mehta family. The company had taken loans from HDFC Bank and a consortium of other banks in 1995, which it defaulted on in 2001. Despite a recovery certificate issued by the Debt Recovery Tribunal in 2004 and several enforcement actions since, around ₹65.22 crore remains unpaid as of May 31, 2025.
On June 8, 2025, the LKMM Trust filed a First Information Report (FIR) against HDFC Bank's MD and CEO, Sashidhar Jagdishan, accusing him of financial fraud, criminal conspiracy, abuse of fiduciary duty, evidence tampering, and obstruction of justice. Among the accusations is a claim involving a ₹2.05 crore financial transaction allegedly intended to harass an elderly relative of a trustee, supported by entries in a seized cash diary. Law enforcement authorities are reportedly treating the matter seriously.
In a statement issued the same day, HDFC Bank firmly rejected the allegations, reiterating that they are 'malicious and baseless.' The bank emphasized that the Mehta family is now resorting to personal attacks in an effort to derail legitimate recovery proceedings.
'The resolution of this dispute will hinge on the outcomes of ongoing legal proceedings. Both parties are expected to continue using legal avenues to assert their positions,' analysts said.
They added that the case is a textbook example of the reputational risks that financial institutions face when entangled in legal battles. While HDFC Bank's strong rebuttal demonstrates its intent to defend its legal rights and uphold corporate governance standards, the public nature of the conflict may still cause reputational damage.
Legal experts concur that such high-profile disputes can erode stakeholder trust and investor confidence. Managing public perception will remain a major challenge for both sides.
As legal proceedings unfold, reputational risk will continue to be a critical concern for both HDFC Bank and the Lilavati Kirtilal Mehta Medical Trust, they added.