ArcelorMittal had sold its stake in Uttam Galva at Rs 1 a share. But Numetal contends that ArcelorMittal didn't take permission from bankers, as was required
The ongoing Supreme Court hearing on applications from ArcelorMittal and Numetal may have started over the eligibility of the Lakshmi Mittal-company to bid for Essar Steel.
While ArcelorMittal has questioned the need to pay dues of Rs 7,000 crore to become an eligible bidder, Numetal wants to know why the National Company Law Appellate Tribunal (NCLAT) is giving its arch rival the time to make the payment.
In its order, the NCLAT had given ArcelorMittal three days to clear the dues, even as it declared Numetal eligible.
The dues are that of Uttam Galva Steels and KSS Petron, in which ArcelorMittal was a shareholder, before it divested its stakes. According to clause 29A of Insolvency and Bankruptcy Code, a promoter of a defaulting company can’t bid for stressed assets.
But in the last two sessions of the SC hearing, focus has shifted to the legality of ArcelorMittal divesting its stake in Uttam Galva Steels. Numetal’s advocate Mukul Rohatgi called ArcelorMittal's sale of Uttam Galva stake at Rs 1 a share as a case of “fraud.” The stake sale is misleading the public, banks and the court, he said.
This may have put ArcelorMittal on the back foot.
The hearing will resume on September 25.
To push its case, Numetal earlier this week submitted a letter that State Bank of India had sent ArcelorMittal in April. This was after the Court asked Numetal to prove its 'subterfuge' charge on ArcelorMittal.
Pointing to the agreement signed between Uttam Galva, ArcelorMittal and the bank, SBI reminded that for any transfer of shares, each promoter needed to get a permission from the lender. And the permission was needed because Uttam Galva had defaulted on loan repayments.
But, contended Numetal, ArcelorMittal hadn’t taken SBI’s permission to sell its stake in Uttam Galva.
A spokesperson for ArcelorMittal denied the allegation. He said: “ArcelorMittal divested its passive shareholding in Uttam Galva following all due processes. ArcelorMittal firmly believes that there has been no violation of a non-disposal agreement”.
The moot question
Advantage Numetal? Maybe, maybe not.
Even if it is proven that ArcelorMittal didn’t inform, or take permission from SBI before selling its stake in Uttam Galva Steels, the moot question may come back to the payment of Rs 7,000 crore dues.
“SBI could say that ArcelorMittal has breached an agreement. So it can ask the company to accelerate the loan payment,” said a lawyer at a leading law firm in Mumbai.
“It’s a breach of contract, but not a fraud. This will add one more layer to Numetal’s case against its adversary, but eventually the matter will come back to the payment of dues,” he added.Both the sides will be eager to know the Supreme Court's stance on the issue, when the hearing resumes on September 25.