NEW DELHI: Chances of
ArcelorMittal being allowed to bid for debt-ridden Essar Steel brightened on Wednesday with the Supreme Court disapproving the National Company Law Appellate Tribunal’s (NCLAT’s) view that a “stigma” was attached to the Lakshmi Mittal-controlled company because of Rs 7,000-crore loan default by
Uttam Galva (UG) and KSS Petron (KSSP), even after it had exited from these two.
A bench of justices R F Nariman and Indu Malhotra wondered how the NCLAT could have come to this decision. “How does the stigma attach after sale of shares? This is not correct,” justice Nariman said.
Appearing for ArcelorMittal, senior advocate
Harish Salve and A M Singhvi argued that the company had not set up UG or KSSP but had made commercial investments in them and had divested its shares much before bidding for Essar Steel, which allegedly defaulted on huge bank loans, part of which were obtained on personal guarantees of Essar promoters
Ravi Ruia and Prashant Ruia to SBI. On a petition by SBI, the SC had recently ruled that banks could proceed
against the personal guarantor for corporate loan defaults.
Salve said, “ArcelorMittal did not set up UG or KSSP like Numetal, which was set up by the Ruias. Essar Steel was led to sickness by the Ruias and now they want to regain management control through a front company Numetal, aiming in the process to substantially lessen their liabilities by obtaining a haircut from banks through insolvency and bankruptcy proceedings,” Salve said.
“Ravi Ruia’s son Rewant had majority shareholding in Numetal and divested his shares to shell companies just before Numetal’s bid for Essar Steel to show that Essar promoters had no links with Numetal. VTB Bank of Russia, a Numetal shareholder, has been restrained from dealing with shares or entering the securities markets because of a regulation by EU Council. These are serious allegations and the NCLAT refused to look at these,” Salve added.
The bench asked Salve, “You mean to say the shareholders who made the company (Essar Steel) insolvent are now bidding for it through a front company?” He replied, “Precisely so.”
