Steel baron Lakshmi Mittal's bankrupt brother Pramod Mittal suffers setback in UK court

Pramod Mittal has indicated he would be appealing the adverse judgment and has denied the charges.

In June 2020, Pramod Mittal, brother of one of the richest men in the world, Lakshmi Mittal, and himself a steel magnate, was declared bankrupt by a UK court. Since then, he has been fighting to get himself out of the legal mess, but on Friday (November 25, 2022), he received a setback after a judge revoked his proposal to pay just 0.18 percent of his £2.5 billion debt to creditors. Pramod Mittal has indicated he would be appealing the adverse judgment and has denied the charges.

As per the procedure he would have been automatically discharged from bankruptcy 12 months after the date of being declared one, but allegations of willful non-cooperation meant that the trustee appointed to oversee the realisation of his assets, so that the creditors can be paid, applied for his bankruptcy to be extended leading to a whole series of legal applications.

Mittal had drawn up an individual voluntary arrangement (IVA) with the creditors in October 2020, but Judge Nicholas Briggs has now ruled that because “there was a material irregularity” it should be revoked. The judgment came as Moorgate Industries Ltd, whose petition got Mittal declared bankrupt for the outstanding debt of £140 million, objected to the IVA on the ground that it involved sham creditors, which prejudiced its interest, and would have meant that they would have received just £252,000.

The IVA has to be approved by the creditors, but Moorgate alleged that it was outnumbered by other creditors whose debt value was higher than theirs. The most contentious was the claim of a company named DIL, shown as a creditor, whose loan agreement was described as an “altogether unusual document” by the judge. Moorgate had pointed out that during the bankruptcy petition, Mittal had cited DIL as a possible source of funds to fend off the bankruptcy, but for the IVA had shown it as a creditor which was owed £1 billion, making it the largest creditor.

Six other creditors whose debts were initially shown to be $61,611,133, shot up to a staggering $2,681,482,825 in the IVA on the basis of compound interest at 4 percent per month. Members of the Pramod Mittal family were shown to be creditors to the tune of £175 million. This included his father Mohan Lal Mittal (£170 million), son Divyesh (£2.4 million), wife Sangeeta (£1.11 million), brother-in-law Amit Lohia (£1.1 million). His own assets were disclosed to be a paltry £150,000. The IVA provided for a payment of £4.68 million by his son Divyesh. Unlike the other creditors, Moorgate had consistently maintained that the IVA was not giving a fair representation of Mittal’s assets and liabilities.

During the two-day hearing earlier this month, the challenged creditors had the opportunity to present their case but they failed to do so. The court accordingly ruled that Rupam Poddar as assignee of Interworld Steel Industries, shown to be owed £13 million, Pankaj Agarwal as assignee of Ispat, shown to be owed £533 million, and Smijithlal Satyanandan as assignee of Global Coke and Energy FZE showed to be owed £55 million were not entitled to vote in the IVA. The court was informed that despite Moorgate’s request, the metadata to show that the loan documents and the assignments were genuine was never provided.

DIL too was adjudged to be not a creditor. “The debts claimed by the challenged creditors have not been substantiated at this hearing. The challenged creditors have failed to discharge the burden of proof,” ruled the court. The inconsistency of Pramod Mittal’s financial position in the bankruptcy and the IVA proposal and the failure of the nominees to sufficiently respond to questions had a detrimental effect on Mittal's case.

Moorgate had started proceedings against Pramod Mittal in 2013 when it was known as Stemcor UK Limited to enforce guarantee given in respect of the Bosnia-based Global Ispat Koksna Indusrija Lukavac (GIKIC) which owed money to Stemcor. While this legal battle was on, Pramod Mittal celebrated his daughter’s wedding in Barcelona splurging Rs 500 crore in December 2013. The case then went for an arbitration which went in Stemcor’s favour. It finally culminated in Pramod Mittal being declared bankrupt in June 2020.

In July 2019, Pramod Mittal was arrested in Bosnia in relation to a probe relating to GIKIC. He has been based in the UK since 1998 after splitting business with his brother in 1994. Elder brother Lakhsmi Mittal had come to his aid in March 2019 helping his younger brother to pay Rs 2,000 crore to a PSU in India, thus saving him from criminal proceedings. But there has been no indication of any help from Lakshmi Mittal, whose fortune is pegged at £17 billion, in the UK proceedings.