The Indian Supreme Court has decided to examine whether SREI Equipment Finance Limited, backed by a government entity, is bound to comply with circulars issued by the Reserve Bank of India (RBI).
In a significant development, a bench of Justices Ujjwal Bhuyan and K Vinod Chandran passed an order on the issue and also imposed an interim stay on the proposed debt assignment initiated by SREI under the Swiss Challenge Method relating to United Asian Traders Limited. The next hearing is scheduled for August 5, 2025.
“The respondents shall not finalise the invitation for expression of interest for assignment of debt under the Swiss Challenge Method on 16.04.2025,”— ordered the Supreme Court
Read also: Why did the Supreme Court Grant Anticipatory Bail to Tamil Nadu MLA Jegan Murthy in Minor Kidnapping
The case arises out of a judgment delivered by the Calcutta High Court on June 9, 2025, which reversed a trial court’s interim injunction against SREI’s expression of interest (EoI). The High Court held that International Financial Service Limited (IFSL) lacked locus standi as it had not submitted a bid or proved eligibility to participate in the debt bid.
The High Court also upheld the validity of the Swiss Challenge method as a valid mechanism for debt resolution, as per the RBI’s 2021 Master Circular and as per the precedent set in Ravi Development vs Sri Krishna Pratishthan, (2009) 7 SCC 462. However, to give IFSL an opportunity to appeal, it had imposed a 15-day stay, which enabled the present appeal before the Supreme Court.
“We find no standing of IFSL in the bidding process,”—Calkatta High Court ruled
Before the Supreme Court, senior advocate Vikram Nankani, representing IFSL, argued that since SREI has been acquired by National Asset Reconstruction Company Limited (NARCL) – a government-backed body – it should be treated as a government company. Therefore, it should follow RBI norms requiring transparency, such as due diligence period, appointment of two external evaluators for loans above ₹100 crore and clear disclosure of selection criteria for anchor bidders.
On the other hand, senior advocate Rajan Bachhawat, appearing for SREI, challenged the maintainability of the petition. He argued that IFSL is neither a borrower nor a bidder and hence has no legal basis to question the process, a conclusion that the high court has already upheld.
Read also: BCI Issues Stern Warning Against Online, Distance and Executive LLM Courses Without Approval
“The petitioner is neither a borrower nor a participant, and has no locus standi to challenge it,” - argued SREI counsel
After hearing both sides, the Supreme Court agreed to examine the matter further in August. It also issued notices to the respondents and maintained status quo on the EoI process till the next hearing.
The outcome of this case could have a significant impact on how loan assignments are handled by government-backed financial entities under regulatory frameworks such as the RBI.
Case Title: INTERNATIONAL FINANCIAL SERVICE LIMITED VERSUS SREI EQUIPMENT FINANCE LIMITED & ANR.
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.