Kolkata’s Kanoria family, the erstwhile promoters of insolvency-bound SREI group, has slammed the firm’s transaction auditor’s report for calling over Rs 3,000 crore of loans to the power sector as fraudulent, saying legal options to challenge the report in a court are being explored, sources said on Wednesday.
SREI group of companies comprises SREI Infrastructure Finance Ltd (SIFL) and its wholly-owned subsidiary SREI Equipment Finance Ltd (SEFL).
The Reserve Bank of India (RBI) had in October 2021 superseded the boards of the two companies and appointed an administrator under its watch.
It then appointed a three-member advisory committee to assist the administrator of the two crisis-ridden firms.
The SREI group companies came under duress during the coronavirus-induced lockdown as non-payment from its customers led to asset-liability mismatches.
A professional agency, BDO India LLP (BDO or transaction auditor), is conducting an investigation into the affairs of the company (Srei Equipment Finance) in respect of transactions qualified under sections 43 to 51, and sections 65 and 66 of the Insolvency and Bankruptcy Code, 2016.
“The BDO report has unfortunately shown loans given to the power sector labeling them as fraudulent, while many of them have been either regularly servicing these loans or have sought restructuring in view of the Covid issues from last year.
“The Kanorias have decided to challenge the BDI report,” said a source close to the Kanoria family.
They may either challenge the BDO report at the Kolkata bench of the National Company Law Tribunal (NCLT) where the insolvency proceedings are underway or may also approach the Delhi High Court.
Sources said the report, which has tried to showcase regular business practices between power companies as fraud, has also adopted an opaque approach, violating the principle of natural justice.
“It is a travesty of fate of how the auditors have made it a habit of coming out with reports (earlier by KPMG and now BDO) that are improper and one sided, thus causing damage to the reputation of everyone. The report seems to have been drawn up without having had any discussion with the erstwhile management or borrowers,” said another person close to the Kanoria family.
The methodology adopted by BDO is clearly against the principles of natural justice and fairness. Legal sources have said that the report will not stand the scrutiny of the adjudicating authority, the person cited above added further.
Earlier on Monday, SREI Equipment Finance said its administrator has received a report from the transaction auditor about certain fraud transactions in FY20 and FY21, bearing a monetary impact of over Rs 3,025 crore on the SREI group.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)