The NCLT on Friday admitted the insolvency pleas moved by the banking sector regulator RBI against two SREI group firms and appointed an administrator, according to sources. A two-member Kolkata Bench admitted two separate petitions filed by the RBI for initiation of corporate insolvency resolution proceeding (CIRP) against two non-banking financial companies- SREI Infrastructure Finance and SREI Equipment Finance Ltd.
The NCLT also appointed Rajneesh Sharma as the administrator to run the companies, sources said. The order was passed in the open court and a detailed order is awaited, which would be uploaded on the website. The two petitions were filed by the RBI through its counsel Sanjay Ginodia, senior partner of R Ginodia & Co.
The two entities owe over Rs 30,000 crore to banks and financial institutions. This is the second insolvency proceeding against an NBFC 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 the RBI had initiated bankruptcy proceedings in 2019.
The Reserve Bank filed an application for initiation of corporate insolvency resolution process against two SREI group companies under Section 227 of the IBC. The RBI had moved NCLT, a day after the Bombay High Court dismissed SREI Group's plea against RBI action on SREI Infrastructure Finance Ltd (SIFL) and SREI Equipment Finance Ltd (SEFL). SREI group had challenged RBI's decision to supersede the boards of two of its non-banking financial companies and initiate insolvency proceedings against the two non-banking financial companies.
The RBI, on October 4, superseded the board of directors of SIFL and SEFL, owing to governance concerns and defaults by the companies in meeting payment obligations. There were adverse observation by Auditors for FY 2020-21. The statutory auditor's report on consolidated financial results of SIFL and SEFL for FY 2020-21 stated that the Group's net worth had eroded and it had not been able to comply with various regulatory ratios or limits. It had expressed concern that there is a material uncertainty which casts significant doubt about the Group's ability to continue as a "going concern" in foreseeable future.
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