Delhi : Srei Infrastructure Finance Limited (SIFL) and Srei Equipment Finance Limited (SEFL), once leading contributors to India’s infrastructure financing landscape, are undergoing insolvency proceedings under the Insolvency and Bankruptcy Code (IBC). This has reignited the debate on the need for reforms and the potential role of mediation in resolving financial distress.
In October 2021, the Reserve Bank of India (RBI) superseded the boards of SIFL and SEFL, citing governance concerns and repayment defaults of approximately ₹28,000 crore. This led to the initiation of Corporate Insolvency Resolution Processes (CIRP) for both entities. Despite these actions, the insolvency proceedings have been mired in legal challenges, including appeals from Adisri Commercial, a shareholder of the Srei Group.
In June 2024, the Supreme Court dismissed Adisri Commercial’s petition challenging the CIRP admission, imposing a fine of ₹1 lakh for filing what it deemed a “frivolous petition.” The apex court upheld the National Company Law Appellate Tribunal’s (NCLAT) April 2024 decision rejecting Adisri’s arguments that the default fell within the suspension period under Section 10A of the IBC during COVID-19.
Legal complexities and prolonged litigations, as seen in Srei’s case, have underscored the limitations of the current resolution framework under the IBC. Experts are now calling for alternative approaches, such as mediation, to address financial distress more efficiently.
Vibhav Mishra, Advocate-on-Record, Supreme Court, remarked, “The Srei case exemplifies the urgent need to integrate mediation into India’s insolvency framework. Mediation allows stakeholders to collaboratively resolve disputes, preserving value for creditors and the corporate debtor. It is time India looks toward global best practices, where mediation has proven to be an effective tool for conflict resolution in financial cases.”
The NCLT-approved resolution plan submitted by the National Asset Reconstruction Company (NARCL) for ₹14,867.50 crore offers a path forward but highlights the need for more proactive and dialogue-based mechanisms in future insolvency cases.
The Srei insolvency has exposed critical issues in India’s financial resolution framework:
Non-Default Status: SEFL had no history of defaults, and SIFL was debt-free before insolvency proceedings began.
Governance Oversight: The RBI’s intervention and the freezing of bank accounts disrupted day-to-day operations, further complicating revival efforts.
Legal Delays: The prolonged litigation, including Adisri’s appeal, delayed resolution and stakeholder recovery.
Advocating for reforms, Mishra added, “Srei’s case should serve as a wake-up call for policymakers to enhance the IBC framework. By incorporating voluntary mediation, we can ensure quicker, fairer resolutions that benefit all stakeholders, while reducing reliance on protracted litigation.”