Coercive action against SREI Equipment Finance Ltd
SREI EQUIPMENT FINANCE: NCLAT LIFTS RESTRICTIONS IN THE RBI Action: The National Company Law Appellate Tribunal (NCL) has ordered the Interim Stay in a certain section of the Order of the Kolkata National Law Tribunal (NCLT) Order, which prevents the Reserve of Bank of India (RBI) from taking coercive action against SREI Equipment Finance Ltd. An Interim stay (partial assistance to the RBI), according to the order, will remain effective until the RBI application.
Orders by NCLAT’s two-judge bench observed that any opinion about the power of NCLT to pass an order against RBI can affect the benefits of appeal and the court is considered suitable to forward interim orders.
Non-bank financial company based in Kolkata (NBFC)
Last week, the central bank had moved the court that challenged the NCLT order on December 30, 2020, which enabled the non-bank financial company based in Kolkata (NBFC) to skip repayments between January 1 and June 30, 2021, and quoted that it was not made as a party for cases in Kolkata NCLT.
NCLT rules to pass an order contrary to the RBI
RBI’s also said the direction that was passed by the Kolkata bench was contrary to the law because he exceeded his jurisdiction when passing the order. Counsel for the central bank further referred to that NCLT was not empowered under NCLT rules to pass an order contrary to the RBI July 2015 master circular on prudential norms and asset classification norms.
RBI said even though it received a copy of the NCLT order from SREI on January 1, 2021, it was unable to appeal against NCLT orders in the period of restrictions for 45 days due to Covid.
Section 230 of the Companies Act
Counsel for SREI argued that the RBI involved in ‘forum shopping’ and the master circular does not apply to applications submitted based on section 230 of the Companies Act, which deals with compromise schemes or regulations, and also that the class of creditor that is covered by this scheme is not regulated by the RBI.
“In paragraph 34 of the sequence derived from the direction of following it remains to this appeal,” NCLAT said in the order on March 31, 2021.
Petitioner’s company creditors covered in the scheme must maintain the status quo
Paragraph 34 of the NCLT Kolkata order stated, “We direct that in the meantime until further orders, the Petitioner’s company creditors covered in the scheme must maintain the status quo in connection with their contractual terms claiming and creditors and all regulatory authorities will be distributed from taking any coercion steps including reporting in any form and/or changing the status of the company’s account from becoming a standard asset that will affect the company and/or sanctions and or implementation of the scheme “.
Expression of interest (EOIS) from foreign investors for the proposed capital infusion
As of March 31, SREI EQUIPMENT FINANCE LTD (SEFL) claimed that it received an expression of interest (EOIS) from foreign investors for the proposed capital infusion. The company has not made a comment about the NCLAT sequence that comes out early on the same day.
Impact on retail and institutional investors
Rating agencies and Debenture Trusteeships also previously appealed from orders that limit them from considering non-payment of contributions by the company as default. Debenture Trustees Axis Trustee Services Ltd and Catalyst Trusteeship Ltd., which represents bondholders, jointly appealed in NCLT on the order of NCLT December 30, 2020, which has an impact on retail and institutional investors. The rating agency has appealed the part of the order that limits them from considering non-payment of dues by the company as default.
Infrastructure of the SREI Finance
Kolkata Bench NCLT has provided orders on December 30, 2020, that no payment that is not paid by the infrastructure of the SREI Finance and Finance of SREI equipment will not be recognized as the default event until the settings scheme is signed by all creditors, which include lenders and bondholders.
Regulatory authorities and rating agencies action against SREI Group
NCLT orders also hold all regulatory authorities and rating agencies from taking any action against SREI Group or changing their account status while providing a payment moratorium blanket from January 1 to 30 June. Under the scheme, the company has proposed to make a payment to various categories of debt holders during the extended period.
The SREI Group has faced liquidity issues over the past two years and Covid has influenced further
