ArcelorMittal's bid for Essar Steel has been challenged by the Ruias yet again. Essar Steel Asia Holdings Ltd (ESAHL), which owns a 72% stake in the beleaguered company, alleged on Tuesday that L.N. Mittal, ArcelorMittal's chairman and chief executive officer, had suppressed vital facts that would otherwise render him ineligible for bidding under Section 29A of the Insolvency and Bankruptcy Code (IBC).
This new twist came up at a hearing of the resolution plan for Essar Steel before the National Company Law Appellate Tribunal (NCLAT). The company's operational creditors and other stakeholders are not happy with the distribution of Rs 42,000 crore coming in from ArcelorMittal and have been fighting for a more equitable share of the pie.
During the hearing, Ruia-owned ESAHL presented documents which show that as late as September 30, 2018, Mittal had been a co-promoter of Navoday Consultants along with his brothers Pramod and Vinod Mittal, The Financial Express reported. Navoday, in turn, was a promoter of defaulting firms GPI Textiles, Balasore Alloys and Gontermann Piepers.
Interestingly, in September, Numetal - another contender for Essar Steel - had also brought up Mittal's association with the three above-mentioned firms before the resolution professional. However, these claims had been dismissed back then.
In its application, ESAHL cited a sworn affidavit filed by ArcelorMittal last October, which said that there had been no business association between Lakshmi Mittal and his brothers and their companies since the family business was split in 1994. The affidavit further claimed that neither the company nor its CEO had any shareholding in the Indian firms run by his brothers.
"These facts make it clear that ArcelorMittal [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," ESAHL said in a statement. The entity further alleged that to hide this fact, Mittal had sold his shareholding in Navoday between October 1, 2018, and December 31, 2018, while the Essar Steel resolution process was ongoing.
According to ESAHL, this was the same tactic that ArcelorMittal previously used to avoid clearing the overdue debts of Uttam Galva Steels and KSS Petron - two other NPAs where Mittal owned a stake. In October, the Supreme Court had finally exercised its extraordinary power under Article 142 of the Constitution to allow ArcelorMittal and Numetal to submit fresh bids for Essar Steel provided they clear their NPA dues in two weeks. So Mittal-led ArcelorMittal had to shell out Rs 7,469 crore to clear the outstanding debt of these two companies in order to be considered eligible to bid for Essar Steel.
The NCLAT yesterday agreed to hear ESAHL's plea and asked ArcelorMittal to file its reply. The next hearing is reportedly scheduled for May 13.
ArcelorMittal, on its part, has strongly responded to ESAHL's allegations. "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," said a company spokesperson, reiterating that "there is absolutely no business connection" between the Mittal brothers.
According to the company, the latest allegations of the Essar Steel promoters are irrelevant, misleading and "yet another attempt to subvert the directions of the Supreme Court and the IBC". The spokesperson added that the allegations regarding ArcelorMittal's ineligibility on account of companies associated with Mittal's brothers "had already been raised by the promoters of Essar Steel before the Supreme Court, which refused to even entertain such assertions".
With this latest twist in the battle for Essar Steel, only one thing is for sure: The insolvency resolution process, which has already stretched out for nearly two years, is unlikely to end anytime soon. It was one of the initial 12 companies identified by the RBI for insolvency proceedings back in 2017 and the debt pile has now grown to over Rs 63,000 crore.
With PTI inputs