Pramod Mittal Arrested: Got Away in India, Caught in Bosnia
Updated on 8 August 2019 at 3.30pm to include response from Charles Russell Speechlys LLP
 
When Pramod Mittal was arrested in Bosnia on 24th July, it hardly caused a ripple in India, except to note that he is the younger brother of global steel magnate Lakshmi N Mittal. Although he was expected to remain in jail for a month, Mr Mittal and two colleagues were released on Tuesday, 30th July after paying a hefty €12.5 million. The release order also mandates an ‘insurance’ of €11 million deposited into a special account until the end of the proceedings.
 
He was held for suspicious transfer of nearly €11 million from Lukavac (Bosnia)-based GIKIL (Global Ispat Koksna Industrija d.o.o.) which is a partnership between Global Steel Holdings (GSHL) and Coke and Chemical Conglomerate (KHK) owned by the Government of Bosnia-Herzegovina. GIKIL was set up in 2003 and has over 1,000 employees. 
 
In May this year, Pramod Mittal got out of another sticky situation in India when his older brother Lakshmi N Mittal bailed him out by paying over $200 million owed to the State Trading Corporation (STC). This helped quash civil and criminal proceedings that had slowly wound their way to the Supreme Court of India.  
 
At a time when the bad loans of Indian public sector banks (PSBs) have soared to Rs10 lakh crore, it is worth remembering that Pramod Mittal’s Indian steel businesses have done their bit to bleed Indian lenders over the decades, until they were literally forced to sell their flagship company, Ispat Industries Ltd (IIL) to Jindal Steel in 2010. In fact, STC is probably the only case that was pursued assiduously all the way to the apex court.
 
Pramod Mittal, say lenders who knew him, had it coming. He loved to boast about his political connections and used them to the hilt. In my first meeting with him, decades ago, he freely dropped names of leading politicians across the world, who he claimed were close friends. 
 
He told me how a taciturn Indian prime minister used to visit him at home, although he kept a distance publicly. Over the years, he got leaders from France, Canada and the UK to smoothen the many wrinkles of his money-guzzling coal and power projects. The Indian media too has openly reported how powerful politicians, cutting across party lines, lobbied for the government to go soft on the money that he owed STC and defended him in court. 
 
A story that I remember well dates back to March 1999. IIL’s flagship Dolvi plant owed over Rs80 crore to the Maharashtra State Electricity Board (MSEB) which finally cut off power supply. Within hours, two powerful Maharashtra politicians (both now deceased) burnt the phone lines between Mumbai and Delhi to have the supply restored. 
 
This drama between the Maharashtra chief minister and his brother-in-law in Delhi was repeated dozens of times over the years, until Ispat’s outstanding zoomed to Rs247 crore by September 2001. Finally, one strong MSEB chairman put his foot down and forced them into signing a deal to make staggered payments based on an escrow account.  
 
If this was the attitude towards paying utility bills, imagine his attitude to bank repayments! IIL’s debts soared past Rs8,500 crore in 2002 after repeated restructuring and generous write-offs. In 1998, I had published details from confidential reports of lending institutions, which documented the diversion of hundreds of crores of rupees to purchase real estate and other investments. There was no serious effort to recover the money. 
 
Thanks to this style of governance, Ispat’s Indian steel operations were rarely profitable, even when steel prices were very high. For instance, all steel companies reported a turnaround in 2007 (after multiple rounds of restructuring); but Ispat Industries struggled with its repayments. 
 
At the same time, Mr Mittal had no qualms about flaunting his lavish lifestyle. In 2010, I wrote: “A detailed investigation will reveal how banks turned a blind eye to the fact that hundreds of crores pumped into IIL have probably funded the Mittals’ luxurious lifestyle overseas and extravagances such as acquisitions in Bulgaria, including a football club (both have failed or been sold). Some bank chairmen have even been guests at the Mittals’ palatial home in Mayfair (London) staffed by a valet, chef, chauffeurs and other help.” 
 
At that time, the entire shareholding of the Mittals in IIL was pledged with the lenders; Pramod and his brother Vinod Mittal had also given personal guarantees and pledged a Peddar Road property, valued at around Rs75 crore which was pretty high those days. 
 
Pramod Mittal had already shifted base to his $17-million home in London and established a global empire well before IIL was sold. According to a European banker, who has helped several steel magnates raise funds abroad, he used “Ispat Industries like a piggy bank.”  
 
The overseas business began with STC procuring raw material on behalf of Global Steel for its Philippines operations between 2005 and 2010. STC funded this through borrowings; but when Mr Mittal’s firm defaulted, it was left with the outstanding and accrued interest.
 
After The Philippines, Mr Mittal quickly started operations in Nigeria, Bosnia and, finally, Bulgaria by buying political influence in each country. In July 2013, IndustriALL Global Union, representing 50 million workers in 140 countries, said this in an article that is still on its website: “The Ispat Group, owned by Pramod Mittal, has a record of social destruction in several countries. Its actions in Nigeria, Libya and Bulgaria over the last five years illustrate a total institutional disregard for the company’s employees and their communities, as well as for the law and the national economies in which they operate. The record includes lengthy pay arrears of up to seven months, leading to numerous worker suicides. The company is also known for cannibalising equipment and exporting it.”
 
It further said that the immediate provocation for “increasing the squeeze on workers at GIKIL is the €92 million company debt. This artificial debt, however, was created through highly dubious business dealings by GIKIL, purchasing coal at an inflated price for a prolonged period from another subsidiary of the same holding company, Stenkom, owned by Global Infrastructure Holdings.”
 
Well, six years later, Bosnia has certainly managed to get Pramod Mittal to cough up a hefty sum in exchange for his release. One of the allegations against him is his link with ‘organised crime’; we need to see if that sticks during the trial. 
 
The European banker points out that this is not the first time that Mr Mittal has been embroiled in controversy. His Bulgarian adventure included the purchase of the huge, Kremikovtzi steel mill near Sofia in 2005. He went on to raise €325 million through a bond issue for an expansion programme; but the company was already making losses and soon defaulted on the bond payment as well. For a while, the socialist government kept it afloat; but it soon floundered.
 
In 2006, he also purchased CSKA, a top Bulgarian football club from Vassil Bozhkov, one of the richest men in Bulgaria, also known as a ‘gambling boss’. He hired a top Bulgarian politician as president of the club. Two years later, Mr Mittal had sold the club at a loss after it had accumulated large debts and was already on the path of a long decline. All this caused a lot of anger and local papers say that he purchased the club only to buy influence in a football-crazy nation. My banker source insists that there is trouble waiting for Pramod Mittal if he decides to travel to Bulgaria. 
 
 
His Nigerian operations were also controversial. In 2008, the Nigerian government cancelled its contract to two steel companies amidst allegations of ‘asset stripping’. Soon after, employees, mostly Indians with families, were left high and dry without salaries. 
 
At a time when Nirav Modi is doing jail time, a visionary VG Siddhartha was driven to suicide after finding himself in a massive debt trap, and the flamboyant Vijay Mallya has lost his swagger as he faces deportation, it is important to remind ourselves how much some industrialists have got away with because of corruption in public sector companies and nexus with political leaders over the decades. 
 
Editor's Note:
On Friday evening one Alok Gupta, ostensibly of Imaginem Media, has forwarded us a "press release" on behalf of GSHL, which claims that the arrest was in connection with a hostile takeover. The essence of the two page release is that the arrest of Mr Mittal, Rajib Das, member of the supervisory board and Paramesh Bhattacharyya, managing director/general director of GIKIL, were "the objective of hostile takeover by dislodging the present management and causing loss of value for its stakeholders and their investments."
 
Updated on 8 August 2019 at 3.30pm:
In an email communication, Charles Russell Speechlys LLP, which claims to represent Mark Wilson, Adrian Allan and Craig Mitchell in their capacity as the joint liquidators of GSHL, says, "... the Liquidators of Global Steel Holdings Ltd, confirm that the press statement referred to above was not authorised by them, and was not made by or on behalf of Global Steel Holdings Ltd."
  • Like this story? Get our top stories by email.
    COMMENTS

    Bijay Tantia

    3 weeks ago

    This company is group company of Ispat industries ltd, Balasore alloys Ltd, Gontermann Pipers India Ltd.

    Bijay Tantia

    3 weeks ago

    I am holding thousands of shares of Ispat Profiles Limited. Since there Launching of company.Now i am paying maintenance charges for them in my D mat Account.There Pune factory is lying closed since long. Crores & Crores of Rupees are stucked there as non performing assets.Shares are now not even traded.
    Is the Government of India or State Govt. don't any responsibilities to interfere in the matter, where lots of employees became unemployed and lots of shares holders money , Banks money ,Public money etc.are involved.
    When the company started functioning, came out with an IPO, there Slogan was
    "PROFIT FROM DAY ONE" & "ROBOT CONTROL"
    What a game? Can it be played without.......................

    PRAVIN BANKER

    3 weeks ago

    Message for "Thomas Talbot" - You must either be a paid schill or PM himself writing under a nom de plume. The latter is probably correct because I know first hand that he never pays his bills ..He even stiffs lawyers. He is by now esconced in his Renaissance Court Mansion but will have to return to Bosnia for the trial or forego the 23mm or so in deposits. Neighbouring Bulgaria is following the proceedings carefully. They would love to have PM visit there. They have claims exceeding one billion.
    Unless big bro steps in, which is likely, he will not be able to find lawyers to defend him in any action that could begin in a UK Court. Such action could have the unintended consequence of forcing Justice Jacobs to backtrack on his unprecedented USD 1.5 billion dollar World Wide Freeze Order directed at the Ruias of Essar. Just recently - a timely VTB intervention - persuaded a Cayman Court to reject an enforcement order requested by Arcelor. Their first setback. .Cayman - though a British protectorate - was unimpressed by Jacobs sweeping order.
    The Ruias may yet have some life in them - albeit faint - in this fascinating battle of the tycoons..

    REPLY

    PRAVIN BANKER

    In Reply to PRAVIN BANKER 3 weeks ago

    The biggest risk is the USA DOJ. They love this sort of thing. Under Obama a few years ago they pursued the NY Times Sulzberger Ochs Ziff Fund and fined them USD 310mm for bribery in DRC and are now actively pursuing Mozambique officials and credit suisse. AM has a huge footprint in the USA and some AM "antagonists" are begging the DOJ to "step in". Unlike in India, Baksheesh does not sway the DOJ. SC please note.

    Chandra

    In Reply to PRAVIN BANKER 3 weeks ago

    Absolutely correct

    KAVIRAJ B PATIL

    3 weeks ago

    For over 30 years all the ISPAT group stocks hardly gave any returns to their shareholders. Good that his sins are catching up with him. The business dailies too are not highlighting this arrest. Perhaps he has taken good care of the media.

    Baskaran

    3 weeks ago

    I follow Sucheta Dalal from Harshad Mehta days. Keep writing. Good job.
    You should also name the characters involved more closer to real names as
    present young readers may not be able to get them correctly( subject to legal
    limitations)

    REPLY

    PRAVIN BANKER

    In Reply to Baskaran 3 weeks ago

    Interesting you should mention Harshad Mehta. The man was a genius, al be it crooked. We were advisors to the late Kothari (Chennai) whose shares he had manipulated to over Rs 150 from under 20 where it languished for years. I had brought Soros to India. Prakash Shah was the Soros man for India. I had begged Pradip Kothari to sell the shares to Soros at these Harshad Mehta inflated prices. Pradip was tone deaf. Like the promoters who inherited fortunes he preferred to maintain his Chairman's privileges such as cricket club membership, iirst class travel etc. KICL eventually went bankrupt, his mother died of a broken heart (I admired the Lady) and he went personaly bust. That was December 1994. A few years prior I had a meetig with Manmohan Singh - then FM under Narasimhan Rao. Rao was famous for having bundles of cash placed at his feet. Jayalalitha preferred Diamonds as a womans best friend. I was there with Citibank to convince Rao to settle the ten billion dollar equivalent ruble debt to Russia in rubles - Citi would finance. Under Yeltsin the Ruble had collapsed and the settlement could have been made at 10 cents on the dollar. MMS approved but Rao declined - corruption in the armed forces forced the Defense Minister to object. Congress Party of the Gandhis.

    Ratna Magotra

    3 weeks ago

    In depth reporting is educative in exposing the nexus among the corrupt who loot the public and live lavish lives. Pramod Mittal and his ilk must get no mercy and face the law.

    narendra khabya

    3 weeks ago

    here pramod mittal is discussed not the policies of the bosnian govt.I, as a chartered accountant & an investor in indian equity market since last 30 years can very well vouch he is crook & corrupt to the hilt.why England is a safe heaven for such crooks?

    Nurani Ramanathan

    3 weeks ago

    Superb article. A lot of articles that I am reading in money life are never / sparsely covered in the mainstream media. Has been an eye opener. Thanks and keep up the good work

    Srinivas Sreeram

    3 weeks ago

    Indian businessmen were never known to be ethical or honest. They used the "democratic means of corruption" with connections in political circles, i.e. politicians always had a price for every illegal or corrupt activity cover up, which these businessmen leveraged & kept afloat.
    I know this person when he put up the first plant in Kalmeshwar, Nagpur (Nippon Denro Ispat) know the actual costs & how much it was gold plated for the bonus that was promised to us for early delivery of the project never kept (1988 period).
    He & his brother both Mittals are corrupt to the core.
    It is time that whenever a businessmen buys or puts a new plant, he should reveal & place on record source of his money.

    Subbarao

    3 weeks ago

    Keep up the good work. Did not know the background and our bought out media has been keeping all this under the wraps.
    Any idea how they suppress such news items? Could be a great article in itself though it may lead to you being personally ostracised by the media crooks.

    kiran

    3 weeks ago

    The story of crony capitalism in India eating away the economy goes long back right from 1970. It is a fact from my personal friends that Miittals in Nigeria were used to pay salary only after six months. There will be a ever running six months of arrears any time so that you do not leave the job. Employees who want to leave have to forgo the arrears in toto.

    sundararaman gopalakrishnan

    3 weeks ago

    Excellent and eye opening article

    Liquidity constraints, high interest cost subdue July auto sales
    Liquidity constraints along with high GST rates and interest cost continued to subdue Indian automobile sales during July.
     
    Automobile major Maruti Suzuki India's overall sales including exports for July declined 33.5 per cent to 109,264 units from 164,369 units' off-take recorded during the corresponding period of the last financial year.
     
    The company's domestic sales (domestic and OEMs) decreased 35.1 per cent on an year-on-year basis to 100,006 units in July.
     
    Although, the total domestic passenger vehicle sales was lower by 36.7 per cent to 96,478 units on a YoY basis, the company's sales of light commercial vehicles in the country inched up 0.5 per cent to 1,732 units.
     
    The automobile major's exports declined by 9.4 per cent in July to 9,258 units from 10,219 units which were shipped out during the corresponding month of last fiscal. 
     
    Similarly, Hyundai Motor India's overall sales including exports slipped by 3.8 per cent during the month under review to 57,310 units from 59,590 units in July 2018.
     
    The company's domestic sales in July edged lower by 10 per cent to 39,010 units from 43,481 units sold during the same month in 2018.
     
    However, exports went up by 13.6 per cent to 18,300 units from 16,109 units in July 2018.
     
    On its part, Mahindra and Mahindra reported a decline of 15 per cent in its total vehicle sales which fell to 40,142 units last month, against 47,199 units sold during the corresponding period of 2018.
     
    The company's domestic sales plunged by 16 per cent to 37,474 units from an off-take of 44,605 units in the like period of last year.
     
    However, M&M's exports inched higher by 3 per cent to 2,668 vehicles in July.
     
    According to Sridhar V., Partner with Grant Thornton India: "Huge drop in sales for passenger vehicles shows no signs of improvement. One small solace is the marginal improvement on sequential basis over June 2019."
     
    "The factors which have been influencing the negative growth the previous months continue to make further dent. Industry hopeful of some positive changes creeping in with monsoon and festival season whose effects possibly can be only seen in the coming months of September and October."
     
    In the two-wheeler segment, Hero MotoCorp, however, reported sales of 535,810 units down from 679,862 units sold during a year-ago period.
     
    Honda Motorcycle & Scooter India's total sales fell to 489,631 units from 548,751 units sold in July 2018.
     
    On the other hand, Suzuki Motorcycle India reported a growth of 18 per cent in its overall sales to 69,236 units from 58,805 units sold in the corresponding period of last year.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
  • Like this story? Get our top stories by email.

    User

    COMMENTS

    suneel kumar gupta

    2 weeks ago

    Will any one clarify why we blame interest rate for drop in sales. Last year interest rate was higher than todays rate but sale was more.
    Is it way of just putting pressure on RBI or misguide investers.

    India's housing mess: 1.74 lakh homes stalled across major cities
    Supreme Court's recent landmark verdict on the Amrapali case has brought the limelight back to the the Indian realty sector and lakhs of home buyers as numbers of incomplete and stalled housing projects continue to be on the rise creating "ghost cities" by the day.
     
    The magnitude of the country's real estate sector's dark reality can be gauged from the fact that around 1.74 lakh homes in 220 projects across the top seven cities in the country are completely stalled, as per the data from Anarock Property Consultants.
     
    "Launched either in 2013 or before, these projects have absolutely no construction activity going on. The overall value of all stalled units is estimated to be more than Rs 1,774 billion (Rs 1.77 lakh crore). Most of these projects have been grounded due to either liquidity issues or litigations," the Anarock report said.
     
    Around 1.15 lakh homes, which accounts for nearly 66 per cent of the total stalled units have already been sold to buyers who have been left in the lurch, at the mercy of either the concerned developers or the law of the land. The net estimated value of these sold units is around Rs 1.11 lakh crore.
     
    As per the data, the National Capital Region (NCR) has the largest pile-up of stalled units with 1.18 lakh homes spread over 67 projects with an overall value of Rs 82.2 thousand crore. Of this, nearly 69 per cent or 83,470 units are already sold out. 
     
    Further, around 98 per cent of the stuck projects in NCR are located in Noida and Greater Noida alone, while other cities like Gurugram, Ghaziabad have minimal inventory.
     
    The other major market of Mumbai Metropolitan Region (MMR) ranked second in terms of stalled projects with 38,060 units stalled across the city. The stalled units are spread across 89 projects, compared to 67 in NCR, the data showed.
     
    Pune comes next with nearly 28 stalled projects comprising 9,650 units, followed by Hyderabad with nearly 4,150 units. Bengaluru has 26 projects comprising 3,870 stuck units.
     
    The housing distress, although spread across the country, is mostly felt and witnessed in the NCR, with Noida and Greater Noida in the lead. The cases such as Jaypee Infratech, Amrapali Group and Unitech have been under the glare, with all them being dragged to the Supreme Court.
     
    The Supreme Court has cancelled Amrapali's RERA licence, and ordered investigation on its key officials, and has asked the state-run construction major NBCC to take over its projects. NBCC has also submitted its proposal to work as consultant for the completion of Unitech's projects.
     
    Jaypee Infratech, on the other hand, is going through the corporate insolvency resolution process (CIRP) and has surpassed the 270 day deadline of achieving a resolution. The National Company Law Appellate Tribunal (NCLAT) this week extended its resolution process by another 90 days.
     
    These legal issues have also hit the already-distressed homebuyers. Sanjeev Sahani, who bought a 2-BHK flat at one of Jaypee's projects in Noida in 2011 still for the completion of his home and says that the total legal cost born by home buyers to get their rightful home has reached around Rs 2 crore by now.
     
    Sahani, who is also a member of a home buyer's association told IANS: "The tower in which I bought the flat is not even 50 per cent built. Even if a third party takes it up, it would take another three years to complete." 
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
  • Like this story? Get our top stories by email.

    User

    COMMENTS

    B. Yerram Raju

    3 weeks ago

    Asian crisis has seen such unfinished homes in South East Asian nations. 2008 recession was a result of artificial demand and engineered derivatives. Are we heading for a similar debacle? Governments - both Union and States are building homes for the poor. Banks and FIs are lending for homes. There seems to be a mismatch between supply and demand. Incentive for second homes could be perverse.

    We are listening!

    Solve the equation and enter in the Captcha field.
      Loading...
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email

    BUY NOW

    online financial advisory
    Pathbreakers
    Pathbreakers 1 & Pathbreakers 2 contain deep insights, unknown facts and captivating events in the life of 51 top achievers, in their own words.
    online financia advisory
    The Scam
    24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
    Moneylife Online Magazine
    Fiercely independent and pro-consumer information on personal finance
    financial magazines online
    Stockletters in 3 Flavours
    Outstanding research that beats mutual funds year after year
    financial magazines in india
    MAS: Complete Online Financial Advisory
    (Includes Moneylife Online Magazine)