Srei group: Bombay HC dismisses Srei Group petition against RBI bankruptcy move – The Economic Times

Clipped from: https://economictimes.indiatimes.com/industry/banking/finance/bombay-hc-dismisses-srei-group-petition-against-rbi-bankruptcy-move/articleshow/86835760.cmsSynopsis

A division bench of Justices Ujjal Bhuyan and Madhav Jamdar, after hearing both sides dismissed the petition in an oral order and observed that the court is not inclined to entertain the matter further as there was no merit to it.

The Bombay High Court on Thursday dismissed the writ petition filed by Manoj Kanoria, promoter of Srei Group against the Reserve Bank of India’s (RBI) move to supersede the board of the two group companies.

A division bench of Justices Ujjal Bhuyan and Madhav Jamdar, after hearing both sides dismissed the petition in an oral order and observed that the court is not inclined to entertain the matter further as there was no merit to it.

Lawyers representing the Srei group had argued that the company had acted upon RBI’s red flags and were in talks with two strategic investors who were ready to bring in capital of more than Rs 4,000 crore.

The counsels also argued that the shortlisted investors were ready to invest in the company, if the RBI gives them some time rather than initiating insolvency proceedings. The promoter is ready to give up control to bring about a resolution of the company, they argued.

Manoj Kanoria, promoter of Srei Group, has challenged the decision of the RBI to initiate bankruptcy proceedings against the group in the Bombay High Court through his company Adisri Commercial Pvt Ltd.

While countering this, counsel representing the RBI argued that the Central Bank is pointing out governance issues in the two Non-Banking Finance Companies (NBFCs) as early as 2016 and the company had enough time to put its house in order.

The counsel for the RBI further argued that the inspection reports indicate that the group was involved in related party transactions and was also indulging in the evergreening of loans.

The banking regulator had on Monday superseded the boards of directors of Srei Infrastructure Finance and Srei Equipment Finance citing governance concerns and defaults and said it will initiate insolvency proceedings against the two firms with the National Company Law Tribunal (NCLT).

The central bank has appointed Rajneesh Sharma, a former chief general manager at Bank of Baroda, as the administrator of the two companies.

Senior advocate Ravi Kadam and law firm Udwadia & Co appeared for the RBI in the case. While Kanoria was being represented by Senior advocate Janak Dwarkadas along with Ameet Naik of law firm Naik Naik & Co the case.

Srei is the second finance company against which the RBI has initiated insolvency proceedings after Dewan Housing Finance Corporation Ltd (DHFL).

The central bank action comes in the wake of a consortium of lenders led by UCO Bank classifying the Srei firms’ loans as non-performing assets.

In June, Srei companies had informed stock exchanges that an RBI inspection had flagged loans worth Rs 8,576 crore as related party loans. These accounted for nearly 30% of the group’s consolidated debt of Rs 28,700 crore. Overall, the group has a debt of over Rs 35,000 crore.

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