Pramod Mittal, the insolvent brother of steel magnate Lakshmi Mittal, encounters difficulty in a UK court

• ByStartupStory     |    November 26, 2022

A UK court ruled steel mogul Pramod Mittal, who is also the brother of one of the richest people in the world, Lakshmi Mittal, would go bankrupt in June 2020. Since then, he has been battling to extricate himself from the legal quagmire, but on Friday (November 25, 2022), a judge rejected his plan to pay only 0.18 percent of his £2.5 billion debt to creditors, dealing him a setback. Pramod Mittal has said he will appeal the negative ruling and has refuted the accusations.

The trustee appointed to oversee the realization of his assets so that the creditors can be paid made an application for his bankruptcy to be extended due to allegations of willful non-cooperation, which resulted in a whole host of legal applications. According to the procedure, he would have been automatically discharged from bankruptcy 12 months after the date on which it was declared, but instead a number of legal applications were made.

In October 2020, Mittal drafted an individual voluntary arrangement (IVA) with the creditors; however, Judge Nicholas Briggs has now decided that it should be revoked because “there was a material irregularity.” The decision was made as Moorgate Industries Ltd. objected to the IVA on the grounds that it involved sham creditors, prejudiced its interests, and would have resulted in them receiving only £252,000. Moorgate Industries Ltd.’s petition got Mittal declared bankrupt for the outstanding debt of £140 million.

The creditors must authorize the IVA, but Moorgate claimed that other creditors with debts worth more than its own outnumbered it. The judge referred to the loan agreement of a firm named DIL, who was listed as a creditor, as “an altogether odd document” and the most contentious. During the bankruptcy filing, Mittal had mentioned DIL as a potential source of funding to prevent bankruptcy, but Moorgate had pointed out that the IVA had revealed it as a creditor with a £1 billion debt, making it the largest creditor.

Six additional creditors, whose obligations were previously estimated at $61,611,133 million, saw a startling increase in the IVA to a whopping $2,681,482,825 based on compound interest at a rate of 4 percent per month. The family of Pramod Mittal was shown to have £175 million worth of debts. This included his brother-in-law Amit Lohia (£1.1 million), wife Sangeeta (£1.11 million), son Divyesh (£2.4 million), and father Mohan Lal Mittal (£170 million). It was revealed that he only had a meager £150,000 in assets. The IVA called for his son Divyesh to pay £4.68 million. Moorgate, in contrast to the other creditors, had continually argued that the IVA did not accurately reflect Mittal’s assets and liabilities.

The chance was there for the challenged creditors to make their case, but they chose not to. In light of this, the court decided that Rupam Poddar, the assignee of Interworld Steel Industries, who was shown to be owed £13 million, Pankaj Agarwal, the assignee of Ispat, who was shown to be owed £533 million, and Smijithlal Satyanandan, the assignee of Global Coke and Energy FZE, who was shown to be owed £55 million, were not eligible to vote in the IVA. The information to prove that the loan documents and assignments were authentic was never delivered, despite Moorgate’s request, but the court was informed.

DIL was ruled to be a non-creditor as well.  At this hearing, the debts asserted by the disputed creditors have not been supported. The court concluded that the contested creditors had not met their burden of proof. Pramod Mittal’s financial situation was inconsistent between the bankruptcy and the IVA proposal, and the nominees’ inability to adequately address concerns hurt Mittal’s case. When it was Stemcor UK Limited, Moorgate began legal action against Pramod Mittal in 2013 to execute a guarantee provided in regard to the Bosnian company Global Ispat Koksna Indusrija Lukavac (GIKIC), which owed money to Stemcor. While this legal dispute was ongoing, Pramod Mittal lavished Rs 500 crore on his daughter’s wedding in Barcelona in December 2013. Arbitration was then conducted in the dispute, and Stemcor won. In June 2020, it all came to a head when Pramod Mittal was declared bankrupt.

Pramod Mittal was detained in Bosnia in July 2019 as part of a GIKIC investigation. After parting ways with his brother’s firm in 1994, he has been based in the UK since 1998. He was saved from legal action in March 2019 when his older brother, Lakhsmi Mittal, helped his younger brother pay Rs 2,000 crore to an Indian PSU. However, there has been no sign that Lakshmi Mittal, whose net worth is estimated to be £17 billion, will assist in the UK legal procedures.

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