Essar Steel Asia Holdings Ltd (ESAHL) – a shareholder in Essar Steel – has alleged that LN Mittal, Chairman and CEO of ArcelorMittal, has suppressed vital facts that would otherwise render him ineligible to offer a buyout plan for the distressed steel mill under Section 29A of the Insolvency and Bankruptcy Code ( IBC).
At a hearing of the resolution plan for Essar Steel at the National Company Law Appellate Tribunal ( NCLAT) on Tuesday, ESAHL, a Ruia family-controlled entity, alleged that until December 31, 2018, LN Mittal was a shareholder of Navoday Consultants, which in turn was a shareholder in certain companies run by his brothers Pramod and Vinod Mittal that have defaulted on bank loans. LN Mittal’s association with these companies would make him ineligible to act as a bidder
The companies in question are Gontermann Peipers India, GPI Textiles and Balasore Alloys, of which the first two are classified as non-performing assets by their lenders. In previous affidavits submitted on behalf of LN Mittal by Rajan Tandon, head of LN Mittal’s family office, and Sanjay Sharma, Director of ArcelorMittal India, Mittal said that since the family business was split in 1994, neither he nor his company ArcelorMittal had any shareholding in the Indian firms run by his brothers.
Significantly, Numetal, which was also in the fray to acquire Essar Steel, had brought up LN Mittal’s association with Gontermann Peipers India, GPI Textiles and Balasore Alloys in September last year. However, these claims were then dismissed by the resolution professional for Essar Steel.
But now, ESAHL has alleged that LN Mittal was a co-promoter of Navoday Consultants Ltd as late as September 30, 2018, along with his brothers Pramod Mittal and Vinod Mittal, and that Navoday was in turn a promoter of GPI Textiles, Balasore Alloys and Gontermann Peipers.
On Tuesday, ESAHL said in a statement that LN Mittal sold his shareholding in Navoday between October 1 and December 31, 2018, while the Essar Steel resolution process was under way.The court has asked ArcelorMittal to reply to the latest charges.
Last October, ArcelorMittal paid ₹7,469 crore to settle outstanding dues of Uttam Galva and KSS Petron to financial creditors in order to qualify as a bidder for Essar Steel, when the Supreme Court found LN Mittal to be a related party to the two defaulting companies.
Responding to the charges, an Arcelor Mittal spokesperson 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… ArcelorMittal has stated on numerous occasions that there is absolutely no business connection between Mr Lakshmi Mittal and his brothers. 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."
ArcelorMittal has offered an upfront cash settlement of ₹42,000 crore to lenders of Essar Steel and ₹8,000 crore capital infusion into the plant at Hazira in Gujarat with an annual nameplate capacity of 10 million tonnes. However, the resolution in this case has run longer than 2 years due to attempts by former promoters to stymie the process as well as by operational creditors, which are unhappy with the settlement offered to them.
ESAHL has also made a standing offer of ₹54,389 crore to the lenders of the company. This was submitted to the committee of creditors of Essar Steel under Section 12A of the IBC and it offered full upfront recovery of loans to lenders and higher recovery ratios for all other classes of creditors. This proposal was rejected by the committee of creditors and by the National Company Law Tribunal, Ahmedabad.