NCLT Kolkata: Directions issued for initiations of Corporate Insolvency Resolution Process against a major Financial Service Provider’s Default

Reserve Bank of India vs Srei Infrastructure Finance Limited; National Company Law Tribunal; Kolkata Bench; Kolkata; CP(IB) No. 295/KB/2021; 08.10.2021

Present application filed by the Reserve Bank of India (Appropriate Regulator) under section 227 read with section 239(2(zk) of the Insolvency and Bankruptcy Code, 2016 (in short “IBC”) for initiations of Corporate Insolvency Resolution Process (in short “CIRP”) against Srei Infrastructure Finance Limited (in short “SIFL”), the Financial Service Provider.

RBI’s contentions:

• On the basis of credit information available to it, the Reserve Bank of India (in short “RBI”) came to the conclusion that SIFL has committed defaults of significant amount in relation to the financial debt availed by it from various financial creditors;
• In particular, UCO Bank has intimated vide its letter dated 07/10/2021 that the amount claimed to be in default in relation to working capital demand loan facility is ₹165,56,30,967.99. Of this the principal amount due is to the tune of ₹150.00 crore and the interest amount due is to the tune of ₹15,56,30,967.99.
• Date of default with reference to repayment of principal sum is stated to be 13/02/2021. The default with reference to the interest amount is stated to be 01/11/2020. I was submitted that this was the earliest date of default, and that there are continuing defaults since then.

Observations and findings:

• The documents placed on records prima facie prove that there has been a default and that the sum involved in such default is in excess of the threshold limit of one crore rupees prescribed at present under section 4(1) of the Code. Moreover, since the sanction letters are in the year 2018 onwards and date of default from November 2021, the petition is not hit by limitation.
• In view of the aforesaid, it was concluded by the bench that this was a fit case for initiation proceedings under section 227 read with rule 5 of the Rules ibid, since the debt in question qualifies as financial debt under section 5(8) read with section 3(11) of the Code.
• It was further observed that the Petition made by the Reserve Bank of India was complete in all respects as required by law. It clearly shows that the Respondent/FSP is in default of a debt due and payable, and the default is more than the minimum amount as stipulated under section 4(1) of the Code. Therefore, the default stands established and there was no reason to deny the admission of the Petition and issue directions in terms of the prescribed provisions.

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