NCLT admits RBI application for initiating CIRP against Srei Infra

The National Company Law Tribunal (NCLT), Kolkata Bench, admitted an application filed by Reserve Bank of India (RBI) for initiating insolvency proceedings against Srei Infrastructure Finance (SIFL) and Srei Equipment Finance (SEFL).

Rajneesh Sharma has been appointed administrator, but the order was not uploaded till the time of going to press. The central bank moved the tribunal on Friday after the Bombay High Court dismissed a writ petition by Adisri Commercial, a promoter entity of Srei, seeking a stay on insolvency proceedings, on Thursday.

The RBI in a statement said that it had filed applications for initiation of corporate insolvency resolution process (CIRP) against Srei Infrastructure Finance and Srei Equipment Finance at the Kolkata Bench of the NCLT.

An interim moratorium shall commence on and from the date of filing of the application till its admission or rejection, it said.

In a statement on the RBI moving the NCLT, Hemant Kanoria, founder Srei group, said, “It is indeed unfortunate for us. Our objective right from the beginning has been resolution, that is the reason we had moved to NCLT last year for payment to all creditors under section 230, which was not considered.”

“Subsequently when the administrator was appointed this Monday, we moved to the Bombay High Court primarily so that the investor process could be completed and a resolution is arrived at expeditiously and till that time the IBC proceedings could be stayed,” he added.

Kanoria, however, said that he would fully cooperate with the regulator to arrive at a solution. “We have full faith in our country's regulator, government and judiciary that fair justice would be done,” he added.

On October 4, the RBI superseded the boards of the two Srei companies owing to governance concerns and defaults by the companies in meeting various payment obligations.

The lead bank in the consortium, UCO Bank, had written to the RBI requesting to move under the insolvency code, counsel representing the RBI mentioned.

The date of default on the principal amount for UCO Bank was January, 2021 and interest default was February 1, 2021. But then the Insolvency and Bankruptcy Code (IBC) was under suspension.

Even after that nothing happened, the counsel pointed out. So, the RBI had to ultimately take control.

Srei was in talks with investors for raising equity capital. The company had received non-binding term sheets from Arena Investors and Makara Capital, who were ready to put in Rs 2,000 crore each.

However, Kanoria indicated recently they would make the investment if bankers agreed to debt realignment.

Srei’s total borrowings are to the tune of Rs 30,000 crore, which includes bank exposure. There are about 15 banks in the consortium.

A resolution will now be worked out within the framework of the Insolvency and Bankruptcy Code (IBC). This is the second instance of insolvency proceedings against a financial services provider after DHFL, which was recently acquired by Piramal Enterprises.