The undertaking given by ArcelorMittal to Uttam Galva for raising funds has come as another obstacle for the former to bid for the stressed asset of Essar Steel.

In July 2011, Arcelor Mittal had given undertaking to consortium of banks led by State Bank of India not to sell their shares in Uttam Galva without prior approval from the lenders. This undertaking was given by Arcelor Mittal in its capacity as sponsor as security for loan taken by Uttam Galva.

Without seeking lenders permission, ArcelorMittal transferred its shares in Uttam Galva on February 7 back to the original promoters of Uttam Galva. The transfer of shares may be in violation of their undertaking to banks.

The development comes when the resolution professional has set April 2 as the deadline for submitting rebids for Essar Steel asset.

In response to the development, ArcelorMittal said "We have repeatedly said that we had no management control over Uttam Galva. Our declassification as non-promoter was carried out in accordance with the processes of the stock exchanges. This is nothing more than another tiresome and trivial attempt to distract from the central fact that ArcelorMittal, together with our partner Nippon Steel, is the most credible owner of Essar Steel given our past track record."

Lenders of Uttam Galva, despite being aware of such share transfer being done have neither collected their dues from Arcelor Mittal nor taken any action against the company, market sources said.

While ArcelorMittal has money to make bid for Essar Steel, why they are not paying bank dues of Uttam Galva – where they were a promoter, sources questioned.

Company’s application to the stock exchanges for declassification of Arcelor Mittal never disclosed that transfer was made illegally in violation of the undertaking given to the banks. The fact that the company registered the transfer despite its own undertaking to State Bank of India was also not disclosed, said a banker.

As a first level regulator, National Stock Exchange should have done proper due deligenceience or sought an undertaking from the company on these matters before giving final approval for declassifying Arcelor Mittal as non-promoter of Uttam Galva in record time on same day, said a lawyer who is aware of the development.

Minority shareholders of Uttam Galva, who had invested in the company on the strength of ArcelorMittal being the world's largest steel producing company have been left holding dud shares, said an investor.

Responding to the allegations source close to ArcelorMittal said "the misinformation and legal challenges are designed to obfuscate and confuse resolution professional. And people are really expected to believe these minority shareholders are taking this action on their own? It’s pretty clear where it’s coming from."

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