As the erstwhile promoter company of two insolvent Srei firms urged the National Company Law Tribunal (NCLT) to set aside its order for initiating insolvency proceedings, solicitor general Tushar Mehta, appearing on behalf of the RBI-appointed administrator, on Friday argued that the plea was not maintainable because defaults had continued even after the period when initiation of the corporate insolvency resolution process (CIRP) was barred.
Adisri Commercial, which has around 60% stake in Srei Infrastructure Finance (SIFL), earlier questioned the NCLT’s order of initiating the CIRP against SIFL and its subsidiary Srei Equipment Finance (SEFL), since it disclosed “error apparent on face of records” as the dates of defaults mentioned in the order allegedly fell within a period when initiation of the CIRP was barred under Section 10A of the Insolvency and Bankruptcy Code.
In his submission before the Kolkata bench of the NCLT, Mehta said, “During the Covid period, there was a window provided that if there is a default in that period, no CIRP to be initiated. But in the present case, the default continued even thereafter. And, therefore, Section 10A even remotely would not support them… The default has continued even after the window given by 10A.”
Mehta contended that the “jurisdictional error” of the tribunal has a separate connotation in law, and when a question of recall of an earlier order comes, there are two aspects that the tribunal needs to examine. “Whether the tribunal itself possesses the power of recall and whether the grounds urged would fall within the powers. If the applicant fails in the first step, then the second question of whether it is jurisdictional error, etc will not be relevant,” he argued.
Earlier, Adisri Commercial argued that SIFL did not owe any debt to lenders as a business transfer agreement had allowed SIFL to transfer its lending, interest earning and lease businesses, among others, as a going concern to its wholly owned subsidiary, Srei Equipment Finance, through a slump exchange.
On Friday, Arun Kathpalia, representing the consolidated committee of creditors (CoC), submitted before the bench that the lenders did not sanction the business transfer agreement.
The matters will come up for further hearing on April 10.
Notably, the consolidated CoC approved the resolution plan of National Asset Reconstruction Company (NARCL) with the highest voting among the bidders. The approved resolution plan was submitted by the administrator, Rajneesh Sharma, to the NCLT on February 18 for its approval.