In a fresh twist to the insolvency saga of Essar Steel India, the largest stakeholder of the company has approached the National Company Law Appellate Tribunal (NCLAT) with a plea that ArcelorMittal India’s bid should be rejected as it had hid crucial facts regarding its shareholding in firms that have since turned non-performing assets (NPAs). The NCLAT has sought ArcelorMittal’s response to the petition and fixed May 13 as the next date of hearing.
In its plea before the NCLAT, Essar Steel Asia Holdings, which holds 72 per cent shares of Essar Steel, has alleged that ArcelorMittal’s promoter LN Mittal “misled courts” by declaring he had completely exited the Indian businesses of his family while continuing to remain a promoter of GPI Textiles, Balasore Alloys and Gontermann-Peipers. These firms, according to the petitioner, are run by Mittal’s brothers, Pramod and Vinod Mittal, and have been classified as NPA by banks.
Essar Steel Asia Holdings has also challenged an affidavit filed on October 17, 2018, by Sanjay Sharma on behalf of LN Mittal and ArcelorMittal which said that neither Mittal personally nor ArcelorMittal as a company had any shareholding in any of the companies where his brothers were promoters.
Since LN Mittal was still a promoter in the companies which had been declared NPAs, Essar Steel Asia Holdings’ petition said, his company should be declared ineligible to submit a bid under Section 29 (A) of the Insolvency and Bankruptcy Code (IBC).
Essar Steel Asia Holdings, in which Prashant Ruia is a director, claimed that as late as September 30, 2018, Mittal was the co-promoter of a company called Navoday Consultants, along with his brothers Pramod and Vinod. Navoday, the petition claims, was in turn a promoter of GPI Textiles, Balasore Alloys and Gontermann Piepers.
Reacting to the development, a spokesperson for ArcelorMittal said it was 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”.
“Allegations regarding ArcelorMittal’s ineligibility on account of companies associated with Mr Mittal’s brothers have already been raised by the promoters of Essar Steel before the Supreme Court, which refused to even entertain such assertions. 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,” the spokesperson said.
The NCLAT had on March 18 given a conditional go-ahead to ArcelorMittal’s Rs 42,000-crore resolution plan for debt-laden Essar Steel. A two-member Bench said the implementation would be subject to the final outcome of the various pending appeals. The financial and operational creditors of the company can be given the funds according to the resolution plan, a two-member bench led by Justice S J Mukhopadhaya had said.
While the appellate tribunal had said it would look into the issue of equitable distribution of funds to all financial and operational creditors, it had refused to stay the resolution process. In case the NCLAT found any discrepancies in distribution of funds, it would ask the respective parties to refund part of the money they had already got, the Bench had said.
ArcelorMittal's offer provides financial creditors Rs 41,987 crore out of their total claimed dues of Rs 49,395 crore. Operational creditors, under the plan, have been allotted only Rs 214 crore against their claim of Rs 4,976 crore. Former Essar Steel promoters, on the other hand, had challenged the NCLT Ahmedabad’s order, claiming the ArcelorMittal’s plan should be rejected as their offer of Rs 54,389 crore was much higher. The former promoters have also claimed that should their plan be implemented, neither the financial not the operational creditors would have to take any haircut on their dues.
Prashant Ruia’s contentions
- LN Mittal was promoter of GPI Textiles, Balasore Alloys, Gontermann-Peipers (India), which are NPAs
- His claim of having no connection to his brothers’ businesses false, misled courts
- He was co-promoter of Navoday Consultants till as late as Sep 30, 2018, but hid the fact
- Mittal used the same ploy for Uttam Galva Steels and KSS Petron; was forced to pay debts of both firms later