The Reserve Bank of India-appointed administrator for the insolvent Srei group companies – Srei Infrastructure Finance and Srei Equipment Finance – has filed an application before the Kolkata bench of the National Company Law Tribunal (NCLT) against Delhi International Airport Ltd (DIAL), Srei Infrastructure Finance (SIFL) and its erstwhile promoters Hemant Kanoria and Sunil Kanoria, based on a report submitted by the transaction auditor regarding certain fraudulent transactions amounting to ₹223 crore.

“Based on the investigation and observations of the transaction auditor, the Administrator has filed an application impugning the security deposit paid to SIFL and Inter-corporate deposits received from Delhi International Airport Limited after round tripping of funds given as security deposit to SIFL by the company, before the Kolkata bench of the NCLT under Section 60(5) and Section 66 of the Code on January 5, 2023 against Delhi International Airport Limited, SIFL, Mr. Hemant Kanoria, and Mr. Sunil Kanoria,” a notification filed to stock exchanges said.

As per the transaction auditor report, the total impact of the transaction (excluding interest payment calculations) amounts to approximately ₹223 crore and the concerned transactions occurred during the financial year 2018-2019 to 2021-2022.

Meanwhile, Hemant Kanoria, founder and erstwhile promoter of the Srei group companies, has written a letter to the administrator of the companies, objecting to the intimations made by the latter to stock exchanges.  

Kanoria, in his letter, said that the Corporate Insolvency Resolution Process being conducted by the administrator was completely contrary to the code and with a “malafide intention and for oblique purposes”.

“This letter is being issued whereby the undersigned takes a very strong objection to your action of making unfounded allegations as contained in the intimations which are completely factually and legally incorrect and unsustainable and de hors to the provisions of the IBC Code and your said action therefore, is prejudicial and in violation of the vested fundamental rights of the undersigned. It seems that your action emerges from your and the transaction auditor’s inability to comprehend or understand the transactions made by the company by adopting the principle of infrastructure/structure/equipment finance,” Kanoria said in his letter.

According to him, the intimations under reply have completely glossed over the fact that all the company transactions in the past have been duly audited by renowned auditors as well as by the statutory auditors.

“The company has always conducted the business of the organisation in a professional manner and necessary audit/legal opinions have been taken regarding related parties and loan sanctions/disbursements have been done in compliance to the various policies. Your unilateral declaration of the borrower accounts as related parties and also stating that the company’s interests have been compromised vis a vis the borrowers clearly demonstrates malafide and an insidious intention,” he said.

A transaction audit report under the code is meaningless until and unless cognisance of the same is taken by a reasoned order passed by the NCLT on the same after issuing notice to all parties concerned following the principles of natural justice and after considering submissions of all the parties. The administrator’s hurried and unilateral declaration of transactions in the company as fraud to stock exchanges without the mandate of law is a harbinger of “derogatory practice and is defamatory in nature”, he pointed out.

“That such unilateral declaration of wrongful classification of transactions has completely overlooked the fact that the same has grave consequences on individuals and as well as the corporate entities. Such actions have been done without observance of natural justice or due process of law,” he said and added, “Since, the report of the said transactional auditor namely BDO, is yet to be validated by the Tribunal, your act of intimating/informing/disclosing any information which is pending adjudication could not have been made by you as the same is not permissible by the provisions of the code and hence the undersigned, is issuing the present response vehemently objecting against such allegations made in the intimation being completely contrary to the provisions of the Code.”

He further said that such allegations could derail the entire CIRP process of the company apart from getting the maximum value for the enterprises, thereby defeating the very objective of the Code.

“Therefore, it is requested that the said intimation be rescinded/recalled and/or withdrawn immediately within 24 hours, failing which we will have to take appropriate action advised in law. It is also requested to you not to issue any further such notices/intimations to the Stock Exchanges/Public which are premature and violative of principles of natural justice,” he said.

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