NCLT Admits SREI Group NBFCs For Insolvency

The National Company Law Tribunal’s Kolkata bench has admitted SREI Group non-bank lenders for insolvency proceedings, according to a person with direct knowledge of the matter.

The admission came after the Reserve Bank of India filed petition against Srei Infrastructure Finance Ltd. and Srei Equipment Finance Ltd. at the tribunal earlier on Friday, the person told BloombergQuint on the condition of anonymity.

The central bank, in a statement, said a petition was filed under the special window for insolvency and liquidation proceedings. The NCLT, the RBI said, would declare a moratorium prohibiting any legal proceedings against and transfer or disposal of rights or assets by the two companies.

Earlier this week, the RBI superseded the boards of the two companies and appointed Rajneesh Sharma as the administrator to run affairs. The banking regulator said it was forced to take the decision owing to governance concerns and defaults by the SREI Group firms.

On Wednesday, SREI Group founder Hemant Kanoria and shareholder Adisri Commercial Pvt. challenged the regulator at the Bombay High Court. But the court rejected the plea after its first hearing on Thursday.

As of June 30, Srei Infrastructure Finance had total borrowings worth Rs 11,746 crore, while Srei Equipment Finance had liabilities worth Rs 20,411 crore, according to letters sent by RBI Executive Director Jayant Kumar Dash on Oct 1. The letters, added as part of the petition filed by SREI Group promoters, were written explaining the regulator’s rationale behind its action.

While Srei Infrastructure Finance had defaulted on repayments worth Rs 3,566 crore, Srei Equipment Finance’s default stood at Rs 10,457 crore, Dash said in his letters.

Also, the two companies had seen multiple violations of income recognition, asset classification and provisioning norms of the regulator, instances of evergreening, weak corporate governance, connected lending and poor compliance, among other issues.