RBI moves NCLT to initiate insolvency proceedings against SREI Group firms

The Reserve Bank of India (RBI) has moved National Company Law Tribunal (NCLT) to initiate the insolvency proceedings against SREI group firms, according to two persons familiar with the development.

This follows  Bombay High Court on October 7 dismissing SREI Group's plea against the Reserve Bank of India's (RBI) action on SREI Infrastructure Finance Ltd (SIFL) and Srei Equipment Finance Ltd (SEFL).

Neither of the two sources want to be named.

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SREI Group promoters, Adisri commercial private ltd, had filed a writ petition against the RBI challenging the order and had also sought a stay on initiating insolvency proceedings against SIFL and SEFL.

While dismissing the petition, the court said that it will give the reasons later, a person familiar with the development told Moneycontrol.

“The group will decide the future course of action after looking at the reasons,” the person said on condition of anonymity.

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.

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, the company said in a statement.

"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 group said in a statement.

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.