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Battle for Essar Steel: Ruias move NCLAT against ArcelorMittal bid

Surya Sarathi Ray
Lakshmi Mittal, Essar Steel, Ruias, NCLAT, ArcelorMittal, financial express, financial express epaper, financial express newspaper, financial express today

Surya Sarathi RayEven as the National Company Law Appellate Tribunal (NCLAT) hears the matter relating to the distribution of upfront payment plan of Rs 42,000 crore by ArcelorMittal between the financial and operational creditors of the bankrupt Essar Steel, a matter challenging the Lakshmi Mittal-led company s eligibility to bid was moved before the tribunal on Tuesday.

Essar Steel Asia Holdings (ESAHL), which holds 72% shares of Essar Steel (basically the erstwhile promoters, Ruias), sought rejection of ArcelorMittal s bid, alleging that its promoter Lakshmi Mittal hid his association with loan defaulting firms run by his brothers, making his firm ineligible to participate in the insolvency proceedings.

The NCLAT agreed to hear ESAHL s plea and asked ArcelorMittal to file its reply and fixed May 13 as the next date of hearing. The charge was strongly rebutted by ArcelorMittal, which in a statement said, This is the latest in a long line of frivolous attempts by the defaulting promoters of Essar Steel to distract from the central fact that Indian lenders have declared ArcelorMittal as the most credible owner of Essar Steel…The latest allegations of the Essar Steel promoters are yet another attempt to subvert the directions of the Supreme Court and the IBC, a critical government legislation. Their assertions are irrelevant, misleading and will be rebutted in the strongest possible terms.

As is known, ArcelorMittal s resolution plan for Essar Steel has already been approved by the Ahmedabad bench of the National Company Law Tribunal but the final payment to the creditors is still stuck as operational creditors want a better share for themselves vis-a-vis the financial creditors and the appellate tribunal is hearing the matter.

In its plea before the NCLAT, ESAHL alleged that Lakshmi Mittal was a promoter of GPI Textiles, Balasore Alloys and Gontermann Piepers firms run by his brothers Pramod and Vinod Mittal that had been classified as non-performing assets or bad loans by banks.

Insolvency and Bankruptcy Code (IBC) rules had previously compelled Lakshmi Mittal to shell out an extra Rs 7,000 crore to clear bank dues of Uttam Galva Steels and KSS Petron where he held some stake and reportedly sold his holdings in one of them for Rs 1 a share.
In its petition, ESAHL said Arcelor Mittal India and its promoter Lakshmi Mittal had misled the Supreme Court, lenders and the insolvency court into believing that they had ceased to have any business association with Pramod and Vinod Mittal and their companies. It challenged a sworn affidavit filed by Sanjay Sharma on behalf of Lakshmi Mittal and ArcelorMittal on October 17, 2018, that stated that there was no business association between Mittal and/or Arcelor and his brothers and their companies for more than 20 years and that Lakshmi Mittal and/or Arcelor has no shareholding in any of the companies where his brothers are promoters, including GPI Textiles, Balasore Alloys and Gontermann Piepers.

ESAHL enclosed with its application various documents to show that as late as September 30, 2018, Lakshmi Mittal was a co-promoter of one Navoday Consultants (Navoday) along with his brothers Pramod and Vinod, and that Navoday was, in turn, a promoter of GPI Textiles, Balasore Alloys and Gontermann Piepers.

ESAHL stated that these facts make it clear that ArcelorMittal had suppressed and concealed from the CoC of Essar Steel and all courts that its promoter Lakshmi Mittal continued to have business relations with his brothers Pramod and Vinod and accordingly, ArcelorMittal was ineligible to submit a resolution plan under Section 29A of the IBC.

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ESAHL alleged that ArcelorMittal was fully aware of such ongoing business association and consequent ineligibility. And in order to hide this, Mittal sold his shareholding in Navoday between October 1, 2018, and December 31, 2018, and stopped showing himself as the promoter of the company. This, it said, was the same tactic that was previously used by ArcelorMittal to avoid making payment of the overdue debts of Uttam Galva Steels and KSS Petron and that the Supreme Court had previously held to be unlawful.

Both Gontermann Peipers and GPI Textiles are classified as NPA and due to an alleged association of Mittal with these companies, ArcelorMittal would be a related party of these companies, making it ineligible under the provisions of the IBC, the petition said. Denying the charges levelled by Ruias, ArcelorMittal further said, Following the Supreme Court judgment of October 2018, ArcelorMittal paid Rs 7,500 crore to the lenders of Uttam Galva and KSS Petron to become eligible to bid for Essar Steel. In contrast, the promoters of Essar Steel, who are responsible for leading the company into insolvency, have failed to repay any amount to lenders and reverse their ineligibility as required by the Supreme Court.

ArcelorMittal has stated on numerous occasions that there is absolutely no business connection between Lakshmi Mittal and his brothers. Allegations regarding ArcelorMittal s ineligibility on account of companies associated with Mittal s brothers have already been raised by the promoters of Essar Steel before the Supreme Court, which refused to even entertain such assertions. ArcelorMittal has reiterated to the courts its commitment to make an upfront payment of Rs 42,000 crore to Essar Steel s creditors.