Is SREI Equipment Finance Ltd Bound By RBI Circulars? Supreme Court To Consider

The Supreme Court is set to consider the issue whether SREI Equipment Finance Limited is bound by the circulars issued by the Reserve Bank of India, being a company backed by the Government of India.

The Court also ordered an interim stay on the proposed debt assignment process initiated by SREI Equipment Finance Limited under the Swiss Challenge Method for the assignment of debt concerning United Asian Traders Limited until the next hearing, scheduled for August 5, 2025.

The order passed by a partial court working days bench comprising Justices Ujjal Bhuyan and K. Vinod Chandran came amidst allegations of regulatory non-compliance and questions over the locus standi of the petitioner, International Financial Service Limited (IFSL). Further, the Court directed SREI to refrain from finalizing the Expression of Interest (EoI).

The case originated from a judgment delivered by the Calcutta High Court on June 9, 2025, which overturned an interim injunction granted by the trial court against SREI's EoI. The High Court found that IFSL lacked the necessary locus standi to challenge the process, as it had neither submitted a bid nor established eligibility to participate in the Swiss Challenge bidding.

The High Court further upheld the Swiss Challenge Method as a legitimate debt resolution mechanism, validated under the Reserve Bank of India's 2021 Master Circular and supported by the Supreme Court's judgment of Ravi Development v. Shree Krishna Prathisthan, (2009) 7 SCC 462. Nevertheless, acknowledging the arguability of certain legal points, the High Court granted a 15-day stay on the operation of its order, allowing IFSL to seek relief from the Supreme Court. Following this, IFSL moved to the Supreme Court.

During the proceedings, the Court heard arguments on both the nature of SREI's ownership and its obligations under the RBI regulatory framework.

Senior Advocate Vikram Nankani, appearing for IFSL, submitted that SREI, having been taken over by the National Asset Reconstruction Company Limited (NARCL), a government-backed entity, qualifies as a “government company” and is therefore bound by enhanced transparency requirements under RBI guidelines. It was further argued that SREI's debt assignment process did not comply with RBI-mandated safeguards, including reasonable due diligence timelines, appointment of two external valuers for debts above ₹100 crore, and clear disclosure of criteria used to select the anchor bidder.

On the other hand, Senior Advocate Rajan Bachawat, appearing for SREI, strongly opposed the maintainability of the petition. He contended that IFSL, being neither a borrower nor a participating bidder, has no legal right to intervene in the process, a finding already endorsed by the High Court. He also asserted that there is no merit at all in the petition as the Petitioner is neither a borrower nor a bidder. Therefore, the petitioner lacks locus standi to institute the suit.

Considering the importance of the matter, the Court agreed to examine a set of critical issues at the next hearing in August, and issued notice to the Respondents returnable on Aug. 5, 2024, and ordered that “respondent(s) shall not finalise the invitation for expression of interest for assignment of debt under the Swiss Challenge Method dated 16.04.2025.”

Case Title: INTERNATIONAL FINANCIAL SERVICE LIMITED VERSUS SREI EQUIPMENT FINANCE LIMITED & ANR.

Click here to read/download the order

Appearance:

For Petitioner(s) :Mr. Vikram Nankani, Sr. Adv. Ms. Rooh-e-hina Dua, AOR Mr. Tanay Agarwal, Adv.

For Respondent(s) :Mr. Rajan Bachawat, Sr. Adv. Mr. Saurav Agarwal, Adv. Mr. Paritosh Sinha, Adv. Mr. Shounak Mukhopaddhay, Adv. Mr. Saubhik Chowdhury, Adv. Ms. Priyata Chakraborty, Adv. Ms. Tapasika Bose, Adv. Mr. Tavish Bhushan Prasad, AOR Mr. Mehak Joshi, Adv.