Suddenly Essar Steel “Shareholders” Find Rs54,389 crore to Pay Creditors to Retain Control
The Ruia owned Essar Steel India Ltd (Essar Steel) which was on the brink of changing hands, has claimed that it has submitted a proposal to its Committee of Creditors (CoC) for full settlement of the entire admitted claims of the financial creditors, operational creditors, and workmen and employees of the company, aggregating Rs54,389 crore. 
 
"The plan includes an upfront cash payment of Rs47,507 crore to all creditors, including Rs45,559 crore to the senior secured financial creditors, i.e. 100% recovery," the company said in a release on Thursday without revealing how the promoters and shareholders have suddenly got access to such huge funding.
 
When asked, Essar Steel has refused to reply on the source of its sudden riches. The question is if the money was so easily available, why was the company a defaulter?
 
Prashant Ruia, Director, Essar, said, "Essar Steel got into difficulty because of external factors. In fact, even after the onset of the insolvency resolution process, the shareholders of Essar Steel had made offers to settle the debt of the company, but the lenders did not accept those offers. We believe our current proposal will provide 100% recovery to secured creditors and lenders, and maximum recovery for unsecured creditors."
 
While the resolution plan currently under the CoC's consideration takes care of only the secured creditors (i.e. the banks), by offering this settlement, Essar Steel says its shareholders are ready to pay up the entire dues that will lead to not only maximum recovery for the lenders, but also for all other classes of creditors, thus taking the Company out of the corporate insolvency resolution process under Section 12A of the IBC, which was introduced in June 2018 by way of an amendment. 
 
"If the CoC were to accept the resolution plan currently under consideration, it will have to settle for a sizeable haircut. Moreover, the offer does not provide for meaningful payment to operational and other unsecured creditors," it added.
   
Earlier in September, the National Company Law Appellate Tribunal (NCLAT) had ruled that ArcelorMittal must pay its dues to enable consideration of its bid for Essar Steel along with resolution plans of other contenders, Numetal and Vedanta Resources.
 
The revised bid by the world's largest steelmaker is believed to be Rs42,000 crore compared with Rs37,000-crore bid submitted in the second round of bidding by Numetal, a consortium led by Russia's VTB Bank.
 
The commitment by ArcelorMittal to pay the outstanding dues of Rs7,000 crore on Uttam Galva and KSS Petron is learnt to be separate from its bid of Rs42,000 crore. ArcelorMittal was asked to clear its dues of about Rs7,000 crore related to Uttam Galva and KSS Petron, of which it was a promoter when these turned non-performing assets (NPA).
 
While ArcelorMittal got conditional approval from the NCLAT, Numetal's bid filed in the second round in March this year was found eligible as by then it had restructured its shareholding composition by removing the stake of Essar Steel promoter's son.
 
The first bid of both Numetal and ArcelorMittal were rejected by the CoC, the lenders of Essar Steel, as they violated Section 29A of the IBC, which disqualifies a promoter of NPA from submitting a resolution plan.
 
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COMMENTS

Ramesh Bajaj

4 days ago

There's definitely something fishy...
But what needs to considered is the FACT that all creditors will be paid in full.

rajee

2 weeks ago

Indian promoters style we worship them calling them entreprenuers

pravin sarwade

2 weeks ago

If the Bankers who have lent to Ruias by now know more about them, should accept a time bound plan of payment by them and none of the banks in India should lend them a paisa of of ₹54389 crore. Let Ruias raise money from Foregin banks and pay to Lenders. Else it will be bankers are sold to Essars and depositers should stay away from such Banks

Shivram Ramakrishnan

3 weeks ago

No doubt they had given daily allowances to their Mother who had saved it inside kitchen utensils. Given their current difficult circumstances this was their last resort. How callous of the lenders..

Chandragupta Acharya

3 weeks ago

Height of shamelessness.

SC seeks report on role of Amrapali Group's statutory auditors
The Supreme Court on Wednesday asked the forensic auditors to submit by Thursday an interim report on the role of statutory auditors in the beleaguered real estate company Amrapali Group.
 
The SC has asked forensic auditors to conduct an audit of 46 companies of the Amrapali Group, and also submit a report on whether the group's statutory auditors were cooperating in the exercise.
 
"Whatever you have observed till now, you can mention in the report," the bench of Justices Arun Mishra and Uday Umesh Lalit said.
 
Noting that the statutory auditors of the Amrapali Group were "hand in glove" with the group's top echelon, Justice Mishra said that "they (Amrapali group) have pocketed everything. They have not spent single penny from their pocket."
 
The court asked the forensic auditors to taperecord the questions they put to the Amrapali directors and their answers.
 
"We permit the forensic auditors to taperecord the questions which they put to the Directors etc and record their answers also and to submit that in this Court along with their report", the court said in its order.
 
The court also wanted to know how the money that was deposited by the flat buyers was used and whether the funds had been diverted to some other entities. "We want to see the trail of the money."
 
The court asked the forensic auditors - Ravi Bhatia and Pawan Kumar Aggarwal - to submit an interim report.
 
The auditors told the court that Amrapali's CFO Chander Wadhwa apparently suffers from memory loss. Though he remembers all personal details, he cannot recall as to when he joined the group.
 
The court directed the presence of Chander Wadhwa in the court on the next date of hearing on October 26.
 
The forensic auditors told the apex court that an amount of more than Rs one hundred crore had been diverted to a firm known as GauriSuta Infrastructures Pvt Ltd in which Ashish Jain and Vivek Mittal were Directors.
 
The court also noted the forensic auditors telling that both Ashish Jain and Vivek Mittal are relatives of the statutory auditors and there were "various malfunctioning of the statutory auditors and they have totally failed in their duties which statutory auditors are supposed to perform."
 
The forensic auditor told the court that in the case of one company, out of Rs 1,040 crore that was with it, Rs 400 crore was transferred to another company and the trail of that money is to be tracked.
 
Describing the transactions as "loot", the auditors told the court that the money Amrapali got from the home buyers and others was sufficient and they did not need to approach any third party for finances.
 
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.
 

 

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Hong Kong Court Wants to Know, How & Why SSG Capital, Value Team Corp Received About $ 23.3 million from Prithvi Infosolutions
A court in Hong Kong has ordered Shyam Maheshwari, Andreas Vourloumis, and Edwin Wong, principals of the hedge fund SSG Capital, a Hong Kong-based asset management firm, to answer under oath questions about missing funds relating to a multi-million dollar fraud scheme involving Prithvi Information Solutions Ltd and its units. 
 
The Hong Kong court wants to know how and why SSG Capital and Value Team Corp owe Prithvi Solutions Inc (PSI), a sum of US$ 4,000,000 and US$ 18,900,000, respectively? The court had asked Shyam Maheshwari, Andreas Vourloumis, and Edwin Wong, principals of the hedge fund SSG Capital, to answer under oath questions on missing funds. 
 
The court also wants to know whether funds owing to PSI were a result of receiving funds from another person or entity, whether such funds received were transferred by Value Team Corp or SSG Capital to another person or entity and why Value Team Corp or SSG Capital has not paid to Prithvi Solutions or Kyko Global Inc, the report says. 
 
The case related to a suit filed by Kyko Global seeking to recover damages of over $18 million from Prithvi Info Solutions, which was once a high-flying part of India's software story and had been purchased by many top foreign funds.
 
As reported by Moneylife in November 2011, Prithvi Info Solutions entered into an agreement with Kyko Global Inc, a Canadian company, for certain factoring (a type of commercial lending) services. 
 
Prithvi was to sell to Kyko some of its customer account receivables for IT services and authorise direct payment on those customer accounts receivable to be made to Kyko.
 
A factoring relationship started, whereby when the customers would confirm invoices from Prithvi, the Canadian company would advance funds to Prithvi for each invoice, and the customer would pay Kyko directly when the invoice was due.
 
In February 2013, the payments to Kyko suddenly stopped, with more than $ 17 million owing. Kyko then investigated and found that Prithvi's relationship with these five customers was fictitious.
 
When Kyko tried to contact the alleged customer companies directly for payments, it discovered that some of them were associates of Prithvi, who had posed as clients and created and executed the verifications. In order to get the money back, Kyko filed a lawsuit on 16 June 2013 against Prithvi Information Solutions at the US District Court in Seattle.
 
In September 2013, Kyko filed a Writ of Garnishment against Prithvi Information Solutions. Kyko claimed damages of $18,431,765.90 ($18.43 million) inclusive of balance of judgement, prejudgement interest and interest of judgement from 9 June 2013 to 23 September 2013.
 
Prithvi Infosolutions and Madhavi Vuppalapati, its chairwoman, have been found liable by the federal court in Washington for creating fake companies and bank accounts to fraudulently acquire and move millions of dollars.  

In 2013, the Washington federal court ordered Prithvi Infosolutions and various other entities and individuals to pay $134 million (about Rs950 crore) in damages in relation to fraud and Racketeer Influenced and Corrupt Organization Act (RICO) charges.
 
A three-year investigation conducted by the US Federabl bureau of Investigation (FBI) and Internal Revenue Service (IRS) resulted in Satish Vuppalapati, the managing director (MD) of Prithvi, and Madhavi Vuppalapati being indicted on criminal charges of, among others, wire fraud and money laundering conspiracy in December 2017. The duo has reportedly fled the US to evade prosecution and are believed to be hiding in Hyderabad in India.
 
Kyko Golobal approached the Hong Kong court to follow money trail of Prithvi Solutions. Following the court directions, Hang Seng Bank, a wholly owned subsidiary of HSBC Bank, submitted the records which shows foreign currency convertible bonds (FCCB) worth $35 million held in escrow at UCO Bank branch in Hong Kong transferred and dispersed into numerous entities and offshore companies.
 
Kyko discovered that Prithvi transferred about $24 million to SSG Capital in Cayman Islands and Value Team Corporation (VTC), a British Virgin Islands entity controlled by SSG Capital's principals. Pursuant to Kyko's request, the federal court in Washington requested the Hong Kong court's assistance to compel Maheshwari, Andreas, and Wong to answer questions regarding the $24 million. The Hong Kong court granted Kyko's request.
 
Acording to Kiran Kulkarni, chief executive of Kyko Global there are numerous other entities and individuals that allege to be harmed by the activities of Prithvi and its directors. "These include Sojitz, a Japanese finance company, Deutsche Bank of India and HSBC Bank of India. A California resident also came forward in 2014 alleging the Vuppalapatis stole his identity in relation to fraud and racketeering activities.  The complaint was filed with numerous regulatory bodies including the SEBI, ED, SFIO and others, but it appears that the Indian authorities have not taken any action as of yet."
 
"In high fraud profile cases such as those of Mehul Choski, Vijay Mallya, and Nirav Modi, the Indian government made extradition requests and pleas for help from various foreign governments in bringing these alleged fraudsters to justice. We are disappointed that reciprocal treatment by the Indian government is not being shown to bring the Indian nationals who have committed fraud in the US to justice," he added.
 
Earlier in April 2014, following directions from a US District Court to recover money, the Sheriff from King County had auctioned personal assets of Madhavi Vuppalapati, founder of Prithvi Info, to recover $17 million.
 
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COMMENTS

Krishnan Hariharan

2 weeks ago

If we expect foreign countries help us nab the culprits hiding there after looting the PSBs then it is but natural that our own governments should reciprocate. Unfortunately our law enforcement authorities are not that serious about providing the kind of support service they are expected to do. Unless the situation improves at home it will be difficult to nab our fraudsters hiding all over the world.

BV SUDHANVA

3 weeks ago

ANDHRAPRENEURS.

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