Authority: Calcutta High Court (Constitutional Writ Jurisdiction)

Order Date: 23 September 2026

Case Overview

  • Parties: Petitioners – Kitply Industries Limited & Ors.; Respondent No. 2 – SREI Equipment Finance Limited (SEFL) (with reference to Reserve Bank of India as regulator).
  • Nature of proceedings: Writ petition (W.P.A. No. 24869 of 2026) challenging a Show‑Cause Notice dated 17 June 2026 issued by SEFL, which threatened to declare the petitioners wilful defaulters.
  • Background:
  • In May 2024 SEFL initiated insolvency proceedings under Section 7 of the IBC before the NCLT, Guwahati Bench, alleging default of Rs 333,58,76,382 on two loan agreements dated 24 January 2019.
  • During the insolvency case, SEFL filed a Section 9 Arbitration & Conciliation Act application seeking injunction over Kitply’s immovable properties and equity shares. The Court granted interim injunction.
  • SEFL later filed a Section 11 application; a sole arbitrator was appointed. The arbitrator extended the interim injunction (order dated 19 December 2025).
  • On 2 June 2026 the NCLT Guwahati Bench dismissed the insolvency petition, noting that the transactions were under arbitration and questioning their genuineness.
  • After the dismissal, SEFL issued the Show‑Cause Notice on 17 June 2026 alleging wrongful sale or non‑accountability of 256 hectares of land mortgaged to SEFL.
  • Kitply filed an application under Section 17 of the Arbitration Act and sought an interim stay of the Show‑Cause Notice; the arbitrator declined to stay it but observed that the wilful‑defaulter issue remains open before the arbitrator.
  • SEFL, via a letter dated 19 August 2026, reiterated that failure to reply within 21 days would lead to declaration as wilful defaulter.
  • Legal arguments:
  • Petitioners argued the Show‑Cause Notice was issued to over‑reach the arbitration and should be stayed.
  • Respondent counsel argued the writ is premature; the petitioners should first reply to the notice, after which the Review Committee can decide, and that the wilful‑defaulter determination is statutory and independent of the arbitration.
  • The court cited RBI Master Direction dated 30 July 2024, which defines wilful default and states that disposal of secured assets without lender approval constitutes wilful default.
  • The court also relied on precedent (Kaustuv Ray vs IDBI Bank, 2023 SCC OnLine Cal 656) stating that courts should not interfere with a Show‑Cause Notice before a reply is filed.

Final Outcome

  • The Calcutta High Court dismissed the writ petition (WPA No. 24869 of 2026).
  • The Court upheld the validity of SEFL’s Show‑Cause Notice and declined to stay any further proceedings.
  • The reply period for the petitioners was extended by two weeks from the date of the order.
  • Parties may now proceed under the existing Review Committee mechanism as per RBI guidelines.

Topics: Court Order, Wilful Defaulter, Arbitration