Bombay HC dismisses plea filed by Srei Group promoters against RBI

Bombay HC dismisses plea filed by Srei Group promoters against RBI


The on Thursday dismissed the writ petition filed by the promoters against the Reserve Bank of India’s (RBI) recent move to supersede the boards of two group

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of National Company Law Tribunal for initiating insolvency proceedings against the two companies, whose boards it had superseded earlier this week, citing governance issues.

RBI said it has been pointing out governance issues in the as early as 2016 and has given the 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 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The RBI earlier this week superseded the boards of Srei Infrastructure Finance and Srei Equipment Finance and said they will be taken for insolvency proceedings owing to governance concern and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.

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