Kolkata-based Srei Group’s promoters have moved Bombay High Court against Reserve Bank of India’s (RBI) action on Srei Infrastructure Finance Ltd (SIFL) and Srei Equipment Finance Ltd (SEFL).
Srei Group promoters have sought stay on any insolvency proceedings against the two companies. Srei Group promoters, Adisri commercial private ltd, has filed a writ petition in Bombay high court against the RBI action.
Adisri is the holding company of Srei and has 60.36 per cent stake in Srei Infrastructure Finance Ltd.
On October 4, the RBI announced the takeover of the boards of directors of Srei Infra and Srei Equipment Finance Limited due to governance concerns and defaults by Srei Group companies. The RBI also appointed Rajneesh Sharma, the former Chief General Manager at Bank of Baroda, as administrator.
Reacting to this development, Srei group, in an official communication, had said expressed “shock” about the RBI move and said it will explore legal options. Srei Group said banks were regularly appropriating funds from the escrow account they controlled since November 2020. “Moreover, we have not received any communications from banks on any defaults,” the group said in a statement made available to Moneycontrol.
The RBI move came a week after creditors of Srei Group rejected the management’s proposal to grant the company a one-year standstill from any action—legal or otherwise—to recover dues estimated at around Rs 30,000 crore.
Srei Group said it 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. The banks neither accepted it nor proposed a payment schedule acceptable to them, it said.
“Banks have been controlling the company’s cash flow since November 2020. Almost Rs 3,000 crore has been collected by them, out of which they have been disbursing to themselves,” the statement said.
Over the last three decades, Srei has already paid Rs 30,000 crore as interest and another Rs 20,000 crore principal to banks, it said.
There has never been any delay in loan servicing by Srei in the past before Covid-19 ravaged the country, the group said.
“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/or regulators. We will take all necessary steps as advised by our lawyers in this regard,” the Group said.
The RBI would soon initiate the process of resolutions of the non-banking finance companies (NBFCs) under the Insolvency and Bankruptcy Rules 2019 and ask National Company Law Tribunal (NCLT) to appoint the administrator as the insolvency resolution professional, the central banks said in a statement.
With Srei group promoters moving court against the RBI decision, stage is set for a long legal battle.
Srei Group owes around Rs 30,000 crore to creditors. The group plunged into a crisis on account of severe liquidity crunch and mounting debt burden. Of the Rs30,000 crores, Srei owes about 18,000 crore to banks and the remaining to other creditors, a group spokesperson said.
On October 1, Moneycontrol reported that the lenders adjusted Rs 3,000 crore from Srei Equipment Finance Ltd’s cash flow against the loan dues in the last 10 months, drawing money from the trust and retention account.
Talks for debt realignment were still on and lenders were waiting for a forensic audit to take a call on realignment. The group has seen senior-level exits, including that of Srei Infrastructure Finance CEO Rakesh Bhutoria, in the last six months as the lenders imposed salary caps.