NCLT accepts insolvency petition against two Shrey Group companies: Report

RBI has referred two Srei group non-bank financiers to the Kolkata bench of the NCLT after it superseded their boards and seized control.

The Reserve Bank had on Monday attached Srei Infrastructure Finance and Srei Equipment Finance Ltd, citing governance issues and default in payments.

The Srei Group had challenged the RBI’s decision to supersede the boards of two of its NBFCs and initiate insolvency proceedings against the two NBFCs.

Srei Equipment and Srei Infrastructure have simultaneous bank loans ₹28,030 crore and bonds ₹1,210 crore, all of which were given default ratings by Care Ratings in March. Several lenders have now classified their loans to Srei as non-performing in the September quarter, which requires additional provisions.

The Kolkata Bench admitted two separate petitions for initiating Corporate Insolvency Resolution Proceedings (CIRP) against two non-banking financial companies- Srei Infrastructure Finance and Srei Equipment Finance Ltd.

The NCLT also appointed Rajneesh Sharma as an administrator to run the companies. The order was passed in open court and a detailed order is awaited, which will be uploaded on the website.

This is the second insolvency proceedings against NBFCs initiated by the RBI under the Insolvency and Bankruptcy Code (IBC).

Debt-ridden mortgage firm Dewan Housing Finance (DHFL) was the first NBFC against which RBI initiated bankruptcy proceedings in 2019.

The Reserve Bank filed an application under section 227 of the IBC against two companies of the Shreya group for initiation of corporate insolvency resolution process.

The RBI had moved the NCLT a day after the Bombay High Court dismissed the Srei Group’s plea against the RBI’s action on Srei Infrastructure Finance Ltd (SIFL) and Srei Equipment Finance Ltd (SEFL).

The RBI superseded the board of directors of SIFL and SEFL on October 4 due to governance concerns and defaults by the companies in meeting payment obligations. The adverse observation was made by the auditors for the financial year 2020-21.

The statutory auditor’s report on the consolidated financial results of SIFL and SEFL for the financial year 2020-21 stated that the net worth of the group was reduced and it was not able to comply with various regulatory ratios or limits.

It expressed concern that there is a material uncertainty that raises significant doubts about the group’s potential as a “going concern” in the near future.