Russia's VTB Bank-promoted firm NuMetal has alleged in the Supreme Court that NCLAT "wrongly" applied legal provisions to enable its rival bidder ArcelorMittal to pay the dues of two debt-ridden firms even after it had bid for Essar Steel.
A Bench of Justices R F Nariman and Indu Malhotra has been hearing the cross appeals of NuMetal and steel and mining major ArcelorMittal against the order of the National Company Law Appellate Tribunal (NCLAT).
"The present Appeal is preferred under ...the Insolvency and Bankruptcy Code against the Judgment passed by the National Company Law Appellate Tribunal..., whereby the NCLAT has wrongly applied Section 30(4) of the Code to enable one ArcellorMittal India Limited (AM India) to pay overdue amounts of non-performing assets even after submission of its Resolution Plan(s) for the resolution of the insolvency of Essar Steel India Limited (the Corporate Debtor or ESIL) allowing AM India to cure its ineligibility," NuMetal said in its plea.
The Appeal is on limited grounds as the NCLAT has committed "a fundamental error" in interpreting the provisions of the Code and allowed time to pay the dues to the tune of Rs 70 billion of two firms -Uttam Galva and KSS Petron, the plea said.
The Bench would hear the matters on September 25.
On its part, ArcelorMittal had earlier claimed that NuMetal was not eligible to bid for Essar Steel on several grounds, including that it was a "shell company" created by a firm in which Essar group promoters had majority shares.
NuMetal, which was asked by the top court to establish its "subterfuge" charge against ArcelorMittal, had alleged that contrary to claims that no bank ever asked the L N Mittal group firm to pay the dues of the two companies, a consortium of banks led by SBI had written to it to pay.
The apex court had taken note of the submissions of both the parties with a word of caution saying the charges and counter-charges by the two firms, seeking to bid for Essar Steel, against each other, would open a "pandora's box".
It had asked NuMetal to establish its claim that there was "subterfuge" on part of rival ArcelorMittal in divesting its shares in two debt-ridden firms before bidding for Essar Steel.
Senior advocate Mukul Rohatgi, appearing for NuMetal, had also referred to the non-disposal undertaking agreement and said that ArcelorMittal should have taken permission of the lenders before disposing off its shares in Uttam Galva and moreover, this information was not disclosed to the public and the Bombay Stock Exchange.
Referring to the legal provisions, he had said ArcelorMittal suffered "triple disqualifications" on three counts as it was the promoter in Uttam Galva and was managing and also exercising control over the company.
Sale of Rs 800 million worth of shares at Rs 19.50 per share as on February 7, 2018 were disposed of at an aggregate value of Re 1, he had alleged, adding that ArcelorMittal was not a philanthropist.
To save Rs 60 billion dues of Uttam Galva, the company (ArcelorMittal) walked out by just booking a loss of Rs 800 million, he had claimed, saying "you are equally guilty by passive negligence. There are no sleeping or working promoter, promoter is a promoter as per the Companies Act".
"The one rupee business is the fraud. Misleading the public, BSE, banks and the court is the fraud," Rohatgi said, adding that his submissions alleging the role of ArcelorMittal in Uttam Galva was equally applicable in the case of KSS Petron, in which it had stakes.
He said NuMetal had brought the facts about the non disposal agreement of Uttam Galva with the banks before NCLT and NCLAT, but they did not take this into account and gave ArcelorMittal time to pay off the dues for securing the eligibility.
NuMetal, a consortium of Russia's VTB-JSW, has also filed an appeal challenging the National Company Law Appellate Tribunal (NCLAT) order allowing ArcelorMittal to take part in the bid and alleged that the firm stood disqualified due non-deposition of the money.
It had ruled that NuMetal's second bid for Essar Steel was eligible but the same by ArcelorMittal will qualify only if it cleared the Rs 70 billion dues of the two firms it was previously associated with.