The Supreme Court on Monday dismissed Adisri Commercial’s appeal against the admission of insolvency proceedings against SREI Infrastructure Finance (SIFL) and SREI Equipment Finance (SEFL). It imposed a cost of Rs one lakh on the Srei Group shareholder for filing such a frivolous petition.
A bench led by Justices Prakash Kumar Mishra and KV Viswanathan upheld the National Company Law Appellate Tribunal’s (NCLAT) April decision rejecting the petition by Adisri Commercial seeking quashing of the CIRP initiated against the two SREI companies on the ground that the default alleged against the firms was barred under Section 10A (during Covid-19) of the Insolvency and Bankruptcy Code.
The appellate tribunal in its order had noted that it had powers to recall its decision in certain circumstances but did not have the power of review. The appellate tribunal said that the recall applications by Adisri Commercial were merely attempts to review the judgment on its merit, which the tribunal was not empowered to, as there was no procedural error in the order passed by the National Company Law Tribunal, Kolkata bench.
On August 11, the NCLT had approved the Rs 14,867.50 crore resolution plan submitted by state-backed National Asset Reconstruction Company (NARCL) for the two Srei firms.
The RBI’s move to initiate insolvency proceedings had come after the Srei group creditors had rejected the management’s proposal to grant the company one year standstill from any legal action to recover outstanding dues of around Rs 28,000 crore. The banking regulator had superseded the boards of the two companies due to governance concerns and repayment defaults and also appointed an administrator to run affairs.
According to the appeal, SIFL had transferred all its assets and liabilities to SEFL by way of a slump transfer in August 2019, but the RBI superseded the boards of both the firms on October 1, 2021 when they were still public listed companies.
“In the meanwhile the RBI filed an applications u/s 227 IBC which was admitted on October 8, 2021 for both SIFL and SEFL, for alleged defaults during the suspension period…,” the appeal stated, adding that the appellant had then sought recall of the October 2021 order of admission into CIRP before the NCLT and the same was rejected in August last year. “The unassailable fact in the case is that the dates of alleged default fall within the blackout period of Section 10A of the IBC,” Adisri stated.
“The argument on the bar of Section 10A IBC was not answered by the NCLAT. The Impugned order rather than giving a finding on the issue of the maintainability of a Section 227 application during the Section 10A period, instead gives a bald finding on jurisdiction and that the appellant had already exercised its remedy of appeal,” the appeal stated.
