In the battle for Essar Steel, Monnet Ispat & Energy, bagged by the JSW-AION combine under the Insolvency and Bankruptcy Code (IBC), has been caught in the crossfire.
On Tuesday, the resolution plan put forward by JSW-AION for Monnet Ispat & Energy, which, like Essar Steel, is one of the 12 cases mandated by the Reserve Bank of India (RBI) for debt resolution under the IBC, was approved by the committee of creditors by a 98.97 per cent vote.
By Wednesday evening a tweet surfaced on ArcelorMittal India’s Twitter handle tagging JSW Group Chairman Sajjan Jindal:
@sajjanjindal Interesting what decision is being taken on Monnet today given it’s clear JSW runs afoul of 29A as they are related to the existing promoter….who is making the mockery here?
— ArcelorMittal India (@ArcelorMittalIn) 11 April 2018
An ArcelorMittal spokesperson said in the next few days JSW would be approved as the new owner of Monnet Ispat & Energy despite having clear, demonstrated related-party links to a promoter of the company. “Mr Jindal had previously intimidated ArcelorMittal is making a mockery of the system. It seems to us, in fact, that it is JSW’s acquisition of Monnet that is the real mockery.”
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JSW Steel responded: “JSW Steel has gone through the rigour of scrutiny. After a thorough examination of facts, JSW Steel is declared as a qualified resolution applicant as per the provisions of Section 29A of the IBC, 2016, not only in Monnet, but in other stressed accounts. The intention of unfounded allegations may be to defame JSW Steel or probably using an insufficient or incorrect interpretation of information to mislead the general public. JSW Steel adheres to the highest standards of corporate governance.”
The “related-party link” that ArcelorMittal is referring to is Seema Jajodia, Sajjan Jindal’s sister and an erstwhile promoter of Monnet Ispat & Energy, which owes banks around Rs 114 billion.
The comments of ArcelorMittal come just ahead of Monnet Ispat & Energy’s resolution plan being filed for approval at the National Company Law Tribunal (NCLT). The resolution plan is expected to be filed at the NCLT by April 13, when the stipulated 270-day period ends.
A source close to JSW said, “ArcelorMittal has been declared ineligible on scrutiny and JSW is declared as eligible on scrutiny by third parties. Who is right? Why this mala fide propaganda? Is it because tomorrow (Thursday) JSW Steel is getting a letter of intent for Monnet?"
Monnet Ispat & Energy had informed the stock exchanges on January 27 that Jajodia had transferred her holding of 8,801 shares of the company by way of gift on October 24, 2017. She had also conveyed that her name be excluded from the promoter group of the company.
The stock exchange notice also mentioned that she had conveyed she was not involved in the formation, management, and control of the company from inception and her classification as promoter was incidental to her minuscule holding in the company.
However, Bhushan Steel employees had filed an application with the NCLT, Delhi, raising objections on the eligibility of Tata Steel and JSW Steel. The objections raised against JSW Steel pertain to related-party links.
ArcelorMittal was waiting for a chance to get back at Sajjan Jindal for his earlier comments. Jindal had said some time ago, “In the spirit of the law, it is not fair to allow promoters of a defaulting firm to participate. I will be surprised if that kind of a thing is permitted. If the law itself is changed to allow a defaulter to bid, then it is fine. But when the IBC says that the promoter of a defaulter is not allowed to bid, and then that promoter cures himself by selling the shares, then that is a mockery of the system.”
A source close to the company asked: “How come they are eligible putting forward the same argument for which we were deemed ineligible?”
ArcelorMittal had sold its stake in Uttam Galva Steels in an inter-se transfer for Rs 1 a share ahead of the bid for Essar Steel to make itself eligible. Uttam Galva Steels has non-performing assets for more than a year and is facing insolvency proceedings. ArcelorMittal too has maintained that it neither had board representation nor management control of Uttam Galva.
Both ArcelorMittal and JSW are in a pitched battle for Essar Steel, for which JSW Steel has joined a rival bidder, NuMetal, in the second round of bidding.