Minority shareholders of Uttam Galva allege violation of loan agreement

Ahead of the Essar Steel rebid on Monday, minority shareholders of Uttam Galva Steels have written to lenders, the Securities and Exchange Board of India (Sebi) and stock exchanges, alleging that ArcelorMittal did not follow the terms of a loan agreement with lenders, which required it to seek prior permission for the sale of shares in the company. ArcelorMittal hit back saying the latest challenge is nothing more than another “tiresome and trivial attempt to muddy the waters”.


The letter mentions that in July 2011, ArcelorMittal, together with other promoters of the company signed a non-disposal undertaking in favour of State Bank of India (SBI) while taking a loan from a SBI-led consortium.


Uttam Galva Steels, according to the letter, had agreed that it would not recognise or register any transfer of shares held by ArcelorMittal without the approval of State Bank of India. Uttam Galva Steels declined to comment on the matter. Shareholders were likely to legally challenge the matter, sources close to the development said. The same set of shareholders had last week moved the Securities Appellate Tribunal (SAT) against the stock exchanges’ approval for declassificaton of ArcelorMittal as a promoter of Uttam Galva Steels.


However, SAT refused any immediate stay on the matter. According to the order, the transfer of shares from ArcelorMittal to Sainath being an inter-se transfer between promoters, it appeared, prima facie, that an approval from the shareholders would not apply to the current case.  ArcelorMittal had transferred its shares in Uttam Galva Steels on February 7 in an inter-se transfer to a Miglani group company, Sainath Trading Company, ahead of the Essar Steel bidding on February 12.


However, the LN Mittal-led company retained its promoter status in the records of stock exchanges, and the company was declared ineligible in the first round on technical grounds. It has, however, been declassified by the stock exchanges since. “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,” ArcelorMittal said. Both ArcelorMittal and Numetal will participate in the rebids on Monday. Numetal, will, however, submit its bid in a revised corporate structure.


Aurora Enterprises is being dropped from the structure to make Numetal eligible. Aurora Enterprises is an offshore trust, with Rewant Ruia, part of the promoter family, as a beneficiary. The shareholding will be divided among existing shareholders. VTB in the earlier format was the major shareholders.


According to a new legal addendum to the new process, bidders are obliged to legally confirm that the promoter family would have no involvement in the consortium either directly or indirectly. A legal declaration has to be signed to this effect, said sources close to the development.


Numetal was ineligible in the first round because of the company’s connection with the promoter. However, Numetal has challenged its rejection of bid in the National Company Law Tribunal’s Ahmedabad Bench. ArcelorMittal, too, has challenged the decision to declare it ineligible.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel