Essar Steel insolvency case: Majority shareholders seek rejection of ArcelorMittal's Rs 42,000 crore bid

New Delhi: An Essar Steel’s majority shareholder Tuesday moved NCLAT seeking rejection of ArcelorMittal’s Rs 42,000 crore bid of the bankrupt company, alleging that its promoter Lakshmi Mittal hid his association with loan defaulting firms run by his brothers, that made his firm ineligible to participate in insolvency proceedings. The plea by Essar Steel Asia Holdings Ltd (ESAHL), which holds 72 percent shares of Essar Steel, cames weeks after an insolvency court cleared ArcelorMittal’s bid for Essar Steel, which was auctioned by lenders to recover unpaid loans. In its plea before the National Company Law Appellate Tribunal (NCLAT), ESAHL alleged that Mittal was a promoter of GPI Textiles, Balasore Alloys and Gontermann Piepers - firms run by his brothers Pramod and Vinod Mittal that had been classified as non-performing assets or bad loans by banks. [caption id=“attachment_5135321” align=“alignleft” width=“380”] Representational image. Reuters.[/caption] Insolvency and Bankruptcy Code (IBC) rules had previously compelled 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. In its petition, ESAHL said Arcelor Mittal India Ltd and its promoter Lakshmi Mittal had “misled” the Supreme Court, lenders and insolvency court into believing that they had ceased to have any business association with Pramod and Vinod Mittal and their companies. It challenged a sworn affidavit filed by Sanjay Sharma on behalf of Lakshmi Mittal and ArcelorMittal on 17 October, 2018 that stated that there was no business association between Mittal and/or Arcelor and his brothers and their companies for more than 20 years and that Lakshmi Mittal and/or Arcelor has no shareholding in any of the companies where his brothers are promoters, including GPI Textiles, Balasore Alloys and Gontermann Piepers. ESAHL enclosed with its application various documents to show that as late as 30 September, 2018 Mittal was a co-promoter of one Navoday Consultants Ltd (Navoday) along with his brothers Pramod and Vinod, and that Navoday was in turn a promoter of GPI Textiles, Balasore Alloys and Gontermann Piepers. ESAHL stated that these facts make it clear that ArcelorMittal had suppressed and concealed from the Committee of Essar Steel Creditors and all courts that its promoter Lakshmi Mittal continued to have business relations with his brothers Pramod and Vinod and accordingly ArcelorMittal was ineligible to submit a resolution plan under Section 29A of the IBC. ESAHL alleged that ArcelorMittal was fully aware of such ongoing business association and consequent ineligibility. And in order to hide this, Mittal sold his shareholding in Navoday between 1 October, 2018 and 31 December, 2018 and stopped showing himself as the promoter of the company. This, it said, was the same tactic that was previously used by ArcelorMittal 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. Both Gontermann Peipers and GPI Textiles are classified as NPA and due to an alleged association of Mittal with these companies, ArcelorMittal would be a related party of these companies, making it ineligible under the provisions of the IBC, the petition said.