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Delhi HC stays Punjab & Sind Bank from taking further action on Srei

In a relief to Srei Group and its founder Hemant Kanoria, the Delhi High Court has ordered Punjab & Sind Bank to restrain itself from taking any further action on the company.

This comes after a recent classification of Srei loans as fraud by the state-owned lender, which took its decision on the basis of a forensic audit report by KPMG.

The lender had on April 19 declared the two Srei group loan accounts as frauds, following which Kanoria made a petition against the bank.

“Till the next date, the respondent no.1 bank (Punjab & Sind Bank in this case) will stand restrained from taking any further steps or action prejudicial to the petitioner on the basis of the order declaring the petitioner’s bank account as fraud,” Justice Rekha Palli said in her order dated April 22.

People close to the Kanoria family expect that the court order would act as a deterrent and “nip any such effort by other lending banks from acting unilaterally and in haste in reclassifying Srei loans — based on KPMG forensic report that has been challenged in court”.

Punjab & Sind Bank had declared both the non-performing loan accounts of Srei Infrastructure Finance and SREI Equipment Finance as frauds and reported these to the Reserve Bank of India (RBI) as per regulation. This is despite the promoter’s challenge against the KMPG report. Kanoria had also urged the Reserve

to advise banks not to take any step against the companies as the matter is sub judice.

The latest Delhi High Court order also noted that the issue raised in the present petition is already pending adjudication in a batch of petitions before Judge Prateek Jalan which are now listed on May 2.

Srei Infrastructure has an outstanding due of Rs 510 crore to Punjab & Sind Bank. The dues of its wholly-owned subsidiary, Srei Equipment Finance, run to Rs 724 crore.

The two Srei companies, with total outstanding dues of nearly Rs 32,000 crore are undergoing insolvency proceedings. The RBI appointed administrator has received ‘expression of interest’ from bidders such as

, Jindal Power, Asset Reconstruction Company (India), JM Financial Asset Reconstruction Company, and Edelweiss Alternative Asset Advisors.

The National Company Law Tribunal approved a consolidated corporate insolvency resolution process for the two debt-laden companies.

The KPMG report pointed out that Rs 8,158 crore of loans were given by the Srei companies to “connected parties”. They included “refinancing” of loans to “evergreen” them, and disbursal of low-interest loans of long moratorium to multiple borrowers “without adequate justification.”

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