The Bombay High Court on Thursday dismissed the writ petition filed by the Srei Group promoters against the Reserve Bank of India’s (RBI) recent move to supersede the boards of two group companies.
The High Court said it is not inclined to entertain the matter after hearing the arguments from both sides.
The RBI can now move the Calcutta bench of National Company Law Tribunal for initiating insolvency proceedings against the two Srei Group companies, whose boards it had superseded earlier this week, citing governance issues.
RBI said it has been pointing out governance issues in the Srei Group companies as early as 2016 and has given the companies enough time to get their house in order. It said inspection reports have showed that the Srei Group companies were involved in related party transactions, disbursed loans to existing NPA accounts via round tripping of funds, and have also indulged in evergreening of loans.
Their capital adequacy, net owned funds, and profitability were all in the red and they reported high divergence when it comes to NPAs.
RBI said it had been repeatedly asking the group to infuse capital in the companies but they failed to do so.
Srei Group alleged that it acted upon RBI’s red flags and was in talks with two strategic investors who are ready to bring in capital of more than Rs 4,000 crore. It further said the investors are ready to invest now 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, the Group argued.
Srei Group promoters, Adisri Commerical Private Limited, had filed a writ petition against the RBI in the Bombay High Court against the regulator’s move to supersede the board of the two group companies. They were seeking a stay on the RBI prcoeedings against the two group companies.
The RBI earlier this week superseded the boards of Srei Infrastructure Finance and Srei Equipment Finance and said they will be taken for insolvency proceedings owing to governance concern and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 seeking a stay on the RBI prcoeedings against the two group companies.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.