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Two Uttam Galva units being probed by MCA

Probe said to have been launched after a complaint by the Resolution Professional on business practices detrimental to the interests of banks and secured creditors, including siphoning out of money illegally

July 30, 2020 / 01:33 PM IST

Mumbai-based steelmaker Uttam Value Steels Limited and com Limited (UGML) are being probed under Section 210 (1) (C) of the Companies Act, 2013, following a Ministry of Corporate Affairs order issued last month. The probe relates to alleged misgovernance and siphoning out of money in violation of the law.

A source told Moneycontrol: “The MCA has started investigation on the recommendation of the Insolvency & Bankruptcy Board of India (IBBI) after a complaint filed by the Resolution Professional of the company".

The complaint by the resolution professional states: “UGML and UVSL derive substantial business synergies from each other as their manufacturing factories are located adjacent to each other. UGML, which is the primary steel plant, supplies liquid hot metals to UVSL, which then converts the same to coils and sheets. Both the companies executed journal voucher transactions and offset them, which is reflected in the turnover and in doing so avoided the transaction flow through the trust and retention account in which all collections were to flow through.”

Such a practice is said to be highly detrimental to the interests of banks and secured creditors.

Section 210 (1) (C) of the Companies Act, 2013, empowers the MCA to investigate the affairs of a company.

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Uttam Value Steels CEO’s response

Speaking to Moneycontrol, Uttam Value Steels Limited Chief Executive Officer Rajiv Munjal said: “We would like to bring to your kind notice that both Uttam Value Steel Limited and Uttam Galva Metallics Limited were admitted by NCLT, Mumbai Bench, on June 26, 2018, and July, 11, 2018, respectively under IBC, 2016. Accordingly Mr Rajiv Chakraborty was appointed as Resolution Professional for both these companies. To the best of our knowledge Mr Chakraborty has not filed any complaint to IBBI or any other agency.”

“Since then the resolution plan for both the companies has been passed by the NCLT, Mumbai Bench, on May, 6, 2020, and currently operations are being managed by The Monitoring Committee constituted pursuant to the said order,” he added.

This is not the first time Uttam Galva group has come under the scanner of an investigation agency. The Income Tax Department and Securities and Exchange Board of India investigated the company’s promoters for alleged tax evasion via long-term capital gains.

In October 2018, Arcelor Mittal, the world's largest steelmaker, became the sole financial creditor of Uttam Galva after paying off outstanding dues of around Rs 7,469 crore to overcome a legal hurdle under the insolvency and bankruptcy code and become eligible to bid for Essar Steel. Prior to this, Arcelor Mittal had a stake of around 29 percent in the company.

The Committee of Creditors (CoC), led by SBI, had selected the proposal submitted by CarVal Investors & Asset Reconstruction Company India (ARCIL) for the resolution of the two companies’ insolvency.

The Ministry of Corporate Affairs has ordered the investigation into the two companies to be conducted by the office of its Regional Director for the western Region, in Mumbai.
Tarun Sharma
first published: Jul 30, 2020 01:33 pm

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