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Delhi HC prevents Punjab & Sind Bank from acting on SREI loan reclassification


The Delhi High Court has barred Punjab & Sind Bank, which recently branded SREI loans as “fraud”, from taking further action on the basis of its reclassification until the next hearing.

In an order dated April 22, the court declared that until the next date, respondent no. 1 (Punjab & Sind Bank) shall refrain from taking any further step or action detrimental to the applicant based on the order declaring the applicant’s bank account as fraud. The petition was filed by SREI promoter Hemant Kanoria.



The case was listed as of August 23, 2022.

According to sources familiar with SREI’s promoters, this order will help SREI preserve the resolution process while protecting lenders and stakeholders from any erosion of value due to such unnecessary reclassification.

On April 19, Punjab & Sind Bank labeled the unpaid dues of SREI companies as fraud and notified the stock exchanges. The bank, in its filing, had said that NPA accounts, SREI Infrastructure Finance (SIFL) with arrears of Rs 510.16 crore and SREI Equipment Finance (SEFL) with arrears of Rs 724.18 crore were declared as fraud and reported to the RBI as per regulatory requirements.

Now, the court’s interim measure, sources close to the SREI promoters say, will act as a deterrent and stifle any effort by other lending banks – to act unilaterally and hastily to reclassify SREI loans – on the basis of KPMG’s forensic report which was challenged in court.

The lenders had appointed KPMG in April 2021 as a loan overhaul was considered for the SREI. However, in October the RBI replaced the boards of the two SREI companies and the process of resolving the companies’ insolvency was initiated.

Under this process, the total amount of admitted claims of commercial banks, as of January 31, 2022, stood at Rs 22,964.64 crore while the total amount of admitted claims including national institutions and lenders of the BCE, was Rs 31,918.46 crore.

In January, Kanoria challenged KPMG’s forensic report before the Kolkata bench of the National Company Law Tribunal (NCLT). An order in this regard is awaited.

However, in the meantime, Kanoria has also written to RBI Governor Shaktikanta Das asking him to advise banks and lenders not to act against the two SREI companies based on the “inconclusive” findings of the medical report. legal of KPMG.

In the letter, sent in March, Kanoria disputed KPMG’s report mainly because of a parallel audit and the lack of a proper process followed to complete the report. The question of the parallel audit arose when the administrator of the SREI had appointed BDO for an audit of the SREI.

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