Essar Steel Asia Holdings Ltd (ESAHL), which holds a significant stake in Essar Steel, has moved National Company Law Appellate Tribunal (NCLAT) seeking rejection of ArcelorMittal’s Rs 42,000 crore bid to acquire the bankrupt steelmaker, alleging that its promoter Lakshmi Mittal hid his association with loan defaulting firms run by his brothers.
Seeking ArcelorMittal (AM) be declared ineligible to bid for Essar Steel, the petition cited Section 29A of the Insolvency and Bankruptcy Code (IBC) which bars promoters of defaulting companies from bidding for stressed assets. NCLAT which agreed to hear the plea by Essar Steel Asia Holdings and asked ArcelorMittal to respond to the plea, fixed May 13 as the next date of hearing.
Essar Steel Asia’s plea comes weeks after the insolvency court cleared ArcelorMittal’s bid for Essar Steel, which was auctioned by lenders to recover unpaid loans. It alleged that Mittal was a promoter of GPI Textiles Ltd, Balasore Alloys Ltd and Gontermann Piepers (India) Ltd — firms which are run by his brothers Pramod and Vinod Mittal — which were classified as non-performing assets (NPAs) by banks.
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 Re 1 a share. According to an Essar Steel Asia statement, ESAHL enclosed with its application various documents which show that as late as September 30, 2018, Lakshmi Mittal was a co-promoter of Navoday Consultants Ltd (Navoday) along with his brothers Pramod Mittal and Vinod Mittal, and that Navoday was in turn a promoter of GPI Textiles, Balasore Alloys and Gontermann Piepers. “ESAHL has stated that these facts make it clear that AM has suppressed and concealed from the CoC and all courts that its promoter Lakshmi Mittal continued to have business relations with his brothers Pramod Mittal and Vinod Mittal, and accordingly AM was ineligible to submit a resolution plan under Section 29A of the IBC,” it said.
Fresh plea adds a new layer of complexity
The Essar Steel Asia Holding’s plea to reject ArcelorMittal’s Rs 42,000 crore bid for Essar Steel has added a fresh twist to the already stretched resolution process of the firm. While insolvency proceedings were initiated against Essar Steel India Limited in June 2017 and admitted in August 2017, it has breached the mandated 270 days resolution norm by almost a year. While ArcelorMittal is yet to deposit Rs 42,000 crore despite instructions from National Company Law Appellate Tribunal (NCLAT), the plea submitted on Tuesday adds another layer of complexity over a near-term resolution of the case.
ESAHL has further stated that AM was fully aware of such ongoing business association and consequent ineligibility and in order to hide this fact, Mittal sold his shareholding in Navoday between October 1, 2018 and December 31, 2018 and stopped showing himself as promoter of Navoday. “This is the same tactic that was previously used by AM 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,” it said.
“ESAHL had offered Rs 54,389 crore to the lenders of the company. The proposal was submitted to the CoC under Section 12A of the IBC and would have led to full upfront recovery of loans for the lenders, and maximum recovery for all other classes of creditors. This proposal was rejected by the CoC,” ESAHL said.
It is learnt that Senior Counsel Mukul Rohatgi asked the court to allow him five minutes to argue that would bring out startling facts that may lead to rejection of the plan as they (AM) has suppressed and committed fraud on CoC, adjudicating authority and the Supreme Court. He said that they have suppressed their connection with the companies that are NPA.