Uttam Galva minority shareholders accuse ArcelorMittal of indulging in 'illegalities' in connivance with banks
The development comes before the second round of bidding for debt-laden Essar Steel, which ArcelorMittal had bid for in the first round on 12 February
New Delhi: ArcelorMittal has been accused by the minority shareholders of Uttam Galva of indulging in "illegalities" in connivance with banks that caused losses of Rs 6,000 crore to the banking system of the country, a charge denied by the world's largest steel maker. The minority shareholders of Uttam Galva have flagged concerns over declassification of ArcelorMittal as promoters of Uttam Galva.
The development comes just a day before the second round of bidding for debt-laden Essar Steel, which ArcelorMittal had bid for in the first round on 12 February. The second company to submit resolution plan was Numetal.
Earlier, the SBI-led consortium of creditors had rejected both the bids submitted finding them ineligible under the IBC (Insolvency Bankruptcy Code) laws that debar related parties from bidding. ArcelorMittal rejected the allegations as "trivial attempts" designed to distract it from bidding process for Essar Steel, claiming it is the most credible entity to takeover control of the debt-laden firm.
The shareholders said, "We would like to bring to your attention to illegalities which are being committed by ArcelorMittal possibly together with Banks and Stock Exchanges which has led to a loss of Rs 6,000 crore of public money belonging to the Indian banking system and also caused grievous harm to the interests of thousands of small shareholders of Uttam Galva Steels Ltd, a listed company."
The shareholders of Uttam Galva have complained to the SEBI and other regulatory authorities that ArcelorMittal Netherlands BV (ArcelorMittal), a part of the ArcelorMittal Group led by L N Mittal, became a promoter of Uttam Galva Steels Ltd (the Company) in or around 2009 by way of acquiring shares of the company through an open offer.
They said that the offer document clearly disclosed that ArcelorMittal had signed a co-promotion agreement with the existing promoters viz. Miglani family and obtained substantial management rights in the company.
"ArcelorMittal continued to be a promoter of the company thereafter and was disclosed as promoter in all filings made by the Company to SEBI, Stock Exchanges, both NSE and BSE, and the Ministry of Corporate Affairs," they said.
The shareholders said in July 2011, ArcelorMittal, together with other promoters of the company, while taking a loan from a consortium of banks led by State Bank of India signed a Non-Disposal Undertaking in favour of the SBI, acting as facility agent in respect of a loan facility of Rs 1,400 crore.
They said that on 1 March, the "National Stock Exchange responded to our letter, enclosing a letter from the Company which showed that the Company had sought informal guidance from SEBI in regard to whether shareholder approval is required for declassification."
"In a curiously hasty decision, National Stock Exchange approved the declassification on 21st March 2018 and issued a letter in this regard to the Company. It is noteworthy that in a number of other cases, such applications are lying pending with the stock exchange for months altogether. "
On 23 March, they said, the Bombay Stock Exchange (BSE) also approved the declassification on the ground that since the NSE had already approved, such decision was being taken by the BSE.
"We are surprised at the speed at which Stock Exchanges have acted and the passive role being played by SEBI in the whole matter. These authorities are custodian and champions of interest of minority shareholders and it is very curious to note that these authorities have either acted with unusual sense of urgency (Stock Exchanges) or have not acted with sense of urgency (SEBI and PSU Banks) resulting in ArcelorMittal getting scot free from taking any responsibility from its Promoter Status and the undertaking given to Banks with respect loans of Uttam Galva Steel Ltd (UG).
"The declassification without any financial consequences to make good the loans in default of UG is leaving the minority shareholders of UG high and dry," they said.
However, ArcelorMittal said, "We have spoken repeatedly about the Uttam Galva situation. We never had any management involvement, we had no board position and we have no shareholding in the company. The declassification was carried out in accordance with the processes of the stock exchanges.
"This is nothing more than another tiresome and trivial attempt to muddy the waters and distract from the central fact that ArcelorMittal, together with our partner Nippon Steel, is the most credible owner of Essar Steel given our superior track record and standing in the industry.
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