ArcelorMittal gets relief from Bombay HC against Essars

ArcelorMittal gets relief from Bombay HC against Essars

The Bombay High Court has directed both parties not to dispose of assets till pending of the case

The sinking ship of the Ruias-owned business has received a further jolt with the Bombay High Court directing Essar House Pvt Ltd (EHPL) and Essar Services India Ltd (ESIL) to deposit a cumulative sum amounting to nearly Rs. 83 crore with the court by 4 February 2021.

While EHPL has to deposit Rs. 35.5 crore, ESIL has been asked to deposit Rs. 47.41 crore.

The HC has stated in no uncertain terms that until the deposit is made or bank guarantees are furnished, both companies cannot dispose of their assets or create any third party rights.

World's largest steel manufacturer ArcelorMittal, owned by the Indian born steel baron Lakshmi Mittal and Aditya Mittal, had moved to HC when the two Essar companies failed to repay the due money to it. ArcelorMittal had taken over Essar Steel when it went into insolvency and fought a prolonged legal battle. The international steel major subsequently leased out office space in Essar House at Mumbai's Mahalaxmi area during the insolvency period of Essar Steel.

Following the insolvency process that started in September 2018, Essar Steel entered into an agreement with EHPL to use six floors of the Essar House. ArcelorMittal also availed services of ESIL after singing a separate agreement by paying a deposit of Rs. 47.41 crore. Essar Steel was supposed to pay a monthly fee of Rs. 1.78 crore and give a refundable deposit of Rs. 35.81 crore. Subsequently, Essar Steel now owned by Mittals vacated the leased premises and asked EHPL to refund the security deposit.

EHPL acknowledged receiving Rs. 25.80 crore as deposit and taken over Essar Steel payment of Rs. 26 crore to Marvel Mines and Minerals Pvt Ltd and the entire deposit was adjusted against it.

EHPL further said that the Marvel Mines had taken a loan of Rs. 26 crore from the HDFC Bank to service Essar Steel and the deposited amount was used to repay the bank loan, and it was liable to repay only Rs. 9.52 crore. EHPL informed that the Essar House is its only asset which itself is mortgaged to India Bulls Housing Finance, IDBI Trusteeship and India Bulls Financial Services for Rs. 138 crore and it was in no position to repay the deposited money.

The Bombay High Court judgement is an interim relief in nature to protect the rights of ArcelorMittal. The disputing companies have agreed to the sole arbitration of Soli Cooper, Senior Advocate of Bombay High Court. Essar group is at the same time is making preparations to knock on the doors of the Supreme Court if the HC rules against it.