The Bombay High Court (HC) on Thursday dismissed a petition filed by promoters of Srei group against Reserve Bank of India’s (RBI) decision to supersede the boards of two non-banking finance companies (NBFCs) of the group and initiated insolvency proceedings in both cases.
In its plea, Adisri Commercial Pvt Ltd, promoter of the Srei group, had sought a stay on initiating insolvency proceedings against Srei Infrastructure Finance Ltd (SIFL) and Srei Equipment Finance Ltd (SEFL), whose boards have been superceded by RBI on Monday on account of governance concerns and defaults. The central bank had also appointed Rajneesh Sharma, former chief general manager (CGM) of Bank of Baroda as an administrator.
In a press release it had said, "The Reserve Bank also intends to shortly initiate the process of resolution of the two NBFCs under the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019 and would also apply to the National Company Law Tribunal (NCLT) for appointing the administrator as the insolvency resolution professional (IRP)."
Srei group, however, had expressed shock at the RBI decision. In a statement, a spokesperson of the Srei group says, "We are shocked by the RBI's move as banks have been regularly appropriating funds from the escrow account they have controlled since November 2020. Moreover, we have not received any communications from banks on any defaults. We are also surprised because the NCLT order for all creditors is still in process. There is also an order for "no coercive measures" by the creditors and regulators. We will take all necessary steps as advised by our lawyers in this regard."
However, he says, "we had submitted a proposal to pay the full amount to banks under a scheme filed under Section 230 of the Companies Act 2013 in October 2020. However, they have neither accepted the scheme nor proposed a payment schedule acceptable to them."
According to the spokesperson, banks have been controlling the company's cash-flow since November 2020. "Almost Rs3,000 crore has been collected by them, out of which they have been disbursing to themselves. Over the last three decades, Srei has already paid Rs30,000 crore as interest and another Rs20,000 crore principal to banks. There has never been any delay in loan servicing by Srei in the past before COVID-19 ravaged the country," he added. (Read: RBI Supersedes Boards of Srei Infrastructure Finance, Srei Equipment Finance