High Court orders bidding to declare accounts fraudulent: Karnataka Bank withdraws

Hemant Kanoria, founder of Srei, has been granted an interim relief by the Delhi High Court, which has barred private sector lender Karnataka Bank from taking any credit facility extended to Srei Equipment Finance and any investment in Srei Infrastructure Finance. Steps or steps on the basis of declaring the accounts as fraud.

Kanoria filed a petition in the High Court after Karnataka Bank reported the alleged fraud to the RBI. In an order dated May 18, the court said that until the next date of hearing, the bank refrained from taking any action or action that would be detrimental to the applicant on the basis of the order declaring the applicant’s bank account as fraudulent.

Significantly, in a stock exchange filing on May 10, Karnataka Bank stated that it had declared arrears of almost Rs.12.81 crore to Srei Equipment Finance (SEFL) as fraud. It also reported a fraud with respect toRs 10 crore has been invested in non-convertible debentures issued by SREI Infrastructure Finance (SIFL).

The High Court’s decision is consistent with its earlier order on Kanoria’s appeal against state-run Punjab and Sindhu Bank.

In an order dated April 22, the Delhi High Court restrained Punjab and Sindh Bank from declaring the bank accounts of Srei companies as fraudulent after Kanoria sought legal leave. The matter has been scheduled for hearing on August 23.

Union Bank of India also classified the accounts of Srei Equipment Finance and Srei Infrastructure Finance as fraudulent, alleging withdrawal of funds. The bank said in a May 19 stock exchange filing that it would begin “appropriate legal proceedings” in due course.

Notably, the Calcutta bench of the National Company Law Tribunal (NCLT) on May 17 dismissed a petition filed by Kanoria challenging the forensic audit conducted by KPMG, which had appointed two Srei firms as lenders. The bench also dismissed his contempt plea against Punjab and Sindhu Bank for violating an interim order of the tribunal by declaring the accounts of the two companies as ‘fraudulent’ and informing the stock exchange.

Commenting on the NCLT order, Kanoria Foundation spokesperson Dhruv Valla said, “We are evaluating the order and will be finalizing our next steps soon. All options, including filing in the High Court, are open for consideration. ”

Bankruptcy proceedings against SIFL and SEFL, two NBFCs, started in October last year, after the bankruptcy petitions filed by the Reserve Bank of India were approved by the Calcutta Bench of NCLT.

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