A day after the Bombay High Court dismissed a writ petition, the central bank on Friday referred the two companies to the Kolkata bench of the NCLT for initiating insolvency proceedings under the Insolvency and Bankruptcy Code (IBC). sarei Groups against the central bank’s move to supersede the boards of these two firms.
This is going to be the second significant loan resolution under IBC in the financial services sector after the successful resolution of Dewan Housing Finance Corporation.
As per the IBC rules, the Srei promoters are now barred from selling or selling any assets of SIFL and SEFL.
“It is really unfortunate for us. Our aim from the very beginning has been resolution, which is why we moved NCLT last year for payment to all creditors under Section 230 which was not considered,” said Hemant Kanoria, Founder, Srei Group reserve Bank of IndiaSteps to refer credit companies to NCLT.
The group had earlier submitted a proposal in October 2020 to clear the entire dues to banks under a scheme filed under Section 230 of the Companies Act 2013. The banks did not accept the offer, but were able to get a position to control the cash flow of the company. From November 2020.
Both the credit companies defaulted on loan repayments and other payment obligations as its cash flow completely dried up due to stress caused by the pandemic. However, the regulatory scrutiny report revealed that the group was facing disappointment even before the pandemic with SEFL’s capital adequacy turning negative at the end of FY21.
In October 2019, despite protests from several lenders, SIFL transferred its business along with assets and liabilities to SEFL through a bearish sale.
RBI had conducted a special audit on both SIFL and SEFL between December 2020 and January 2021 and raised concerns over violation of several prudential norms including income recognition, asset classification and provision, perpetuity of loans and corporate governance.
RBI took control of both the companies on 1 October by superseding the boards and appointing an administrator.
Mamta Binani, resolution professional and former chairman of the Institute of Company Secretaries of India, said, “The admission of the credit case in the NCLT opens a new chapter under the Insolvency and Bankruptcy Code.” “The lessons learned from DHFL’s debt resolution will act as a ready reckoner in this matter,” he said.
On Thursday, the Kolkata-based group had moved the Bombay High Court against the RBI. Kanoria said the group was in touch with investors to raise capital and had mainly moved the court to complete the investment process and move a resolution expeditiously and till that time the IBC proceedings were stayed. Can go
“However, as the court did not accept and RBI has moved NCLT today, we will fully cooperate with the regulator to arrive at a solution. We have full faith in our country’s regulator, government and judiciary that there will be fair justice.