Russia's VTB Bank-promoted firm NuMetal, which was asked to establish its "subterfuge" charge against rival bidder ArcelorMittal, Wednesday told the Supreme Court that contrary to claims, a consortium of banks led by SBI had written to the L N Mittal group company to pay the dues of debt-ridden Uttam Galva.

A bench of Justices R F Nariman and Indu Malhotra took note of the submissions with a word of caution saying the charges and counter-charges by the two firms, seeking to bid for Essar Steel, against each other, would open a "pandora's box".

It had earlier asked NuMetal to establish that there was "subterfuge" on part of rival ArcelorMittal in divesting its shares in two debt-ridden firms before bidding for Essar Steel.

Senior advocate Mukul Rohatgi, appearing for NuMetal, assailed the submissions of steel and mining major ArcelorMittal that no bank has asked it to pay the dues of Uttam Galva and KSS Petron, claiming that a consortium of banks led by SBI had written to them to pay the dues in these two firms.

He then referred to the non-disposal undertaking agreement and said that ArcelorMittal should have taken permission of the lenders before disposing off its shares in Uttam Galva and moreover, this information was not disclosed to the public and the Bombay Stock Exchange.

Referring to the legal provisions, he said ArcelorMittal suffered "triple disqualifications" on three counts as it was the promoter in Uttam Galva and was managing and also exercising control over the company.

"ArcelorMittal was the promoter of Uttam Galva because of the co-promoter agreement and if you are the promoter, then you are the promoter and there is no concept of a sleeping promoter," Rohatgi said.

Sale of Rs 80 crore worth of shares at Rs 19.50 per share as on February 7, 2018 were disposed of at an aggregate value of Re 1, he said, adding that ArcelorMittal was not a philanthropist.

To save Rs 6,000 crore dues of Uttam Galva, the company (ArcelorMittal) walked out by just booking a loss of Rs 80 crore, he claimed.

Referring to records, Rohatgi said that till February 7, 2018, ArcelorMittal was listed as promoters in the annual report submitted to Registrar of Companies and alleged that the sale of Uttam Galva shares for Rs one per share was an act "shrouded in fraud".

"You are equally guilty by passive negligence. There are no sleeping or working promoter, promoter is a promoter as per the Companies Act", he said.

"The one rupee business is the fraud. Misleading the public, BSE, banks and the court is the fraud," Rohatgi said, adding that his submissions alleging the role of ArcelorMittal in Uttam Galva was equally applicable in the case of KSS Petron, in which it had stakes.

He said NuMetal had brought the facts about the non disposal agreement of Uttam Galva with the banks before NCLT and NCLAT, but they did not take this into account and gave ArcelorMittal time to pay off the dues for securing the eligibility.

The advancing of arguments remained inconclusive and would resume on September 25.

Earlier, the court had asked NuMetal to establish that there was "subterfuge" on part of its rival bidder ArcelorMittal in divesting its shares in two debt-ridden firms before bidding for Essar Steel.

ArcelorMittal had said that NuMetal was not eligible to bid for Essar Steel on several grounds, including that it was a "shell company" created by a firm in which Essar group promoters had majority shares.

NuMetal, a consortium of Russia's VTB-JSW, has also filed an appeal challenging the National Company Law Appellate Tribunal (NCLAT) order allowing ArcelorMittal to take part in the bid and alleged that the firm stood disqualified due non-deposition of the money.

It had ruled that NuMetal's second bid for Essar Steel was eligible but the same by ArcelorMittal will qualify only if it cleared the Rs 7,000 crore dues of the two firms it was previously associated with.

First Published:Sept 19, 2018 10:31 PM IST