Srei files writ petition in Bombay High Court against RBI

Srei group promoters, Adisri Commerical Private Limited, has filed a writ petition against the Reserve Bank of India in the Bombay High Court against the regulator’s move to supersede the board of the two group companies. They are seeking a stay on the RBI prcoeedings against the two group companies. 

The matter will be heard on October 7.

The Reserve Bank of India earlier this week superseded the boards of Srei Infrastructure Finance and Srei Equipment Finance and said they will be taken for insolvency proceedings owing to governance concern and payment defaults by them.

Srei had expressed shock at the decision and has said it would pursue all legal options against the regulator’s decision.

““There has never been any delay in loan servicing by Srei in the past before Covid-19 ravaged the country. We are 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,” the Srei spokesperson had said. 

RBI appointed Rajneesh Sharma, former chief general manager of Bank of Baroda, administrator of the companies. The egulator also appointed a three-member advisory committee to advise the administrator. The members are R Subramaniakumar, former managing director and chief executive officer of Indian Overseas Bank; T T Srinivasaraghavan, former managing director of Sundaram Finance; and Farokh N Subedar, former chief operating officer of Tata Sons.

In an interview with Business Standard, Hemant Kanoria, promoter and former chairman of Srei Infrastructure, said “From the process side, wherever RBI suggested changes, we have immediately tried to address it. Therefore, we are surprised”. 

According to bankers, the company had been facing problems in business even prior to the Covid-19 pandemic. The implosion of IL&FS in 2018 led to a liquidity crisis in the financial sector for non-banking financial companies (NBFCs), including Srei. In addition, problems in the infrastructure sector – road and power – led to stress on the books for Srei on delays in payments by clients.

According to reports, UCO-Bank led consortium of lenders had reached out to the RBI, seeking a DHFL-like resolution for Srei. Apart from UCO, other banks with substantial exposures to Srei are State Bank of India, Bank of Baroda, Bank of India, Indian Bank, Punjab National Bank, Axis Bank, Canara Bank, and Union Bank of India.