Ruias make fresh move to stop Essar Steel takeover

Ruias, promoters of Essar Steel, want the ArcelorMittal takeover of the ailing company to be rejected.

The promoters came up with fresh allegations that Lakshmi Mittal was suppressing information about his shareholding in his brothers' companies, which had defaulted on its repayments banks.

Under the Insolvency and Bankruptcy Code 2016, a promoter or a shareholder of a defaulting company cannot take over another company unless all the dues are repaid.

ArcelorMittal in a statement said that these are frivolous attempts to deflect attention from the fact that the committee of creditors (CoC) has shortlisted ArcelorMittal as the most credible owner of Essar Steel.

In a petition filed on behalf of Prashant Ruia, director, Essar Steel in the National Company Law Appellate Tribunal (NCLAT), Ruias have pleaded for rejection of ArcelorMittal's bid to take over their steel plant at Hazira, in a last ditch effort to retain it. This is India's largest single-location flat steel plant. Built with a total investment of over Rs 30,000 crore, it has a steel-making capacity of 10 million tonne per annum.

In a long winded bankruptcy proceedings, which took over 600 days to decide the fate of the company, the bankers are losing out on the repayments on the loan of Rs 47,000 crore. The fresh set of allegations will further delay the resolution process.

Arcelor Mittal was selected as the highest bidder for Essar Steel after it submitted a resolution plan with a commitment of an upfront payment of Rs 42,000 crore. After this offer was approved by the committee of creditors (CoC) Essar Steel Asia Holdings Ltd (ESAHL), the largest shareholder of Essar Steel made an offer of Rs 54,389 crore on October 25, 2018 improving the offer of ArcelorMittal consortium. But the court subsequently asked ESAHL to clear all the stressed outstanding dues of all its group companies before being eligible to retain the company.

Prashant Ruia in the petition told the NCLAT that Lakshmi Mittal and ArcelorMittal India had conspired to suppress vital facts and misled the court and the CoC. They alleged that Lakshmi Mittal as late as September 2018 was a co-promoter in Navodaya Consultants along with his brothers Promod Mittal and Vinod Mittal. Navodaya was the promoter of GPI Textiles, Balasore Alloys and Gontermann Piepers, companies that had defaulted to banks. This is, they alleged, was in contradiction to a sworn affidavit file by Sanjay Sharma on behalf of Lakshmi Mittal on October 17, 2018, which said that there is no business association between Lakshmi Mittal and Arecelor and his brothers.

Following the Supreme Court judgement of October 2018, ArcelorMittal had paid Rs 7,500 crore to lenders of Uttam Galva and KSS Petron to become eligible to bid for Essar Steel. Lakshmi Mittal was a shareholder in both these companies. Under the IBC, it is mandatory that the promoter taking over a company should not have any non-performing assets in any of the companies he owns or has a shareholding.

'Allegations regarding ArcelorMittal's ineligibility on account of companies associated with Mr. Mittal's brothers have already been raised by the promoters of the Essar Steel before the Supreme Court, which refused to entertain such assertion," ArcelorMittal said in a statement. It added that the latest allegations of Essar Steel promoters are yet another attempt to subvert the directions of the Supreme Court and IBC, a critical government legislation.

The proposed deal

• Rs 42,000 crore – ArcelorMittal and Sumitomo Corporation of Japan consortium had offered to pay for Essar Steel
   
• Rs 8,000 crore – infusion it plans over eight-year period
   
• Rs 49,350 crore – admitted dues of Essar Steel

Operational creditors

• Rs 214 crore – Operational creditors are getting against their dues of Rs 4,976 crore
   
• Rs 1,000 crore – CoC decided to allocate to operational creditors on request of NCLT

The asset

• Rs 30,000 crore – investment for Essar’s Hazira plant
   
• 10million tonne per annum – its steel making capacity