Essar Steel auction: Allegations mount ahead of second round bids deadline

Their main complaint is this. While taking a loan of Rs 1,400 crore from a consortium of banks led SBI in 2011, ArcelorMittal and Uttam Glava promoters had "confirmed to State Bank of India that it would not ‘sell, transfer or dispose of’ the shares held by it in the Company to any Person."

"Arcelor Mittal was permitted to sell its shares to the other sponsors only if no event of default had occurred," and that "the company agreed that it would not recognize or register any transfer of the shares held by Arcelor Mittal without the approval of State Bank of India."

The letter further asks lenders if permission was given to ArcelorMittal, and if yes, on what grounds.

The mail concludes, "The facts outlined clearly show that illegalities are being committed by Arcelor Mittal who are trying to wriggle out of their legal obligation to deal with the problems of the Company... We request you to please take note of the above and take immediate necessary action in this regard."

Sources close to the development added that the minority shareholders are exploring options to take legal action.

They have already moved the Securities Appellate Tribunal (SAT) in Mumbai against the declassification of ArcelorMittal as a promoter of Uttam Galva.

On March 24, the Lakshmi Mittal company had got clearance from market regulator SEBI and the two exchanges on its plea to remove the promoter tag.

ArcelorMittal replies

The world's largest steelmaker though sees the latest allegations as another "trivial attempt to muddy waters."

A spokesperson said: “We have spoken repeatedly about the Uttam Galva situation.  We never had any management involvement, we had no board position and we have no shareholding in the company.  The declassification was carried out in accordance with the processes of the stock exchanges.

"This is nothing more than another tiresome and trivial attempt to muddy the waters and distract from the central fact that ArcelorMittal, together with our partner Nippon Steel, is the most credible owner of Essar Steel given our superior track record and standing in the industry.”

A source close to the company added: “These guys will stop at nothing.  The endless circulating of misinformation and legal challenges designed to obfuscate and confuse.  And people are really expected to believe these minority shareholders are taking this action on their own volition?  It’s pretty clear where it’s coming from.  Let’s hope people are able to see through it for what it is – a refusal to compete on equal terms with the world’s leading steel company because they know that judged on merit they will never win.”

Bid for ArcelorMittal

The increasing belligerence from the two sides promises to make the second round of bidding for Essar Steel even more contentious.

The bids will be placed on Monday, April 2.

Apart from ArcelorMittal and Numetal - both of their bids were termed ineligible in the first round - the race has been opened up for other companies who had initially showed interest in Essar Steel. These include Tata Steel, Vedanta Resources and SAIL.

While ArcelorMittal has exited Uttam Galva and got itself declassified itself as a promoter of Uttam Galva, Numetal  - say reports - may have bought out minority shareholder Rewant Ruia.

In both counts, the two companies were seen as going against the Insolvency and Bankruptcy Code, which prevent promoters of defaulting company from bidding for stressed assets.

"The finer details will emerge when the bids are presented on Monday," said an executive from the industry.