The National Company Law Tribunal has dismissed a money recovery suit filed by Australian lender Macquarie Bank Ltd against a unit of loss-making Uttam Galva Steels Ltd, part-owned by global steel giant ArcelorMittal.
Macquarie Bank’s Singapore arm had approached the tribunal’s Chandigarh bench against Uttam Galva Metallics Ltd under the Insolvency and Bankruptcy Code to recover around $6.3 million, or Rs 43 crore, including interest.
The bench, however, ruled that the foreign bank does not fall within the purview of a ‘financial institution’ as defined in the bankruptcy code and must take recourse to a civil suit to recover the money.
The genesis of the dispute lies in a contract between Uttam Galva Metallics and Singapore-based Hamera International Pte Ltd. Under the contract, Hamera had agreed to supply hot-rolled steel sheet coil to the Indian company. Hamera Subsequently signed a pact with Macquarie Bank to transfer its receivables from Uttam Galva Metallics.
Later, Macquarie Bank sent a notice to Uttam Galva Metallics to recover the dues. Lawyers for the Indian company argued that after receiving the demand notice they had filed a case against Hamera and Macquarie Bank in the Bombay High Court arguing that the receivable purchase agreement between the two parties was not binding on the company.
The lawyers representing Uttam Galva Metallics also argued that Macquarie Bank doesn't have a certificate of valuation issued by a financial institution as required under the bankruptcy code.
After hearing arguments from both the sides, Justice RP Nagrath, judicial member of the tribunal, dismissed the petition filed by the bank on the ground of non-compliance to the bankruptcy code. The bank can challenge the ruling in the appellate tribunal or go to the civil court.
Ashish K Singh, founder and managing partner of law firm Capstone Legal, said the tribunal’s decision makes it difficult for operational creditors to take recourse to the Insolvency and Bankruptcy Code.
Uttam Galva Metallics’ parent, Uttam Galva Steels, is also struggling to repay creditors and is on the block, media reports have previously said. The steelmaker posted a consolidated net loss of Rs 437 crore for 2016-17, less than half the previous year, as revenue slumped 36% to Rs 5,599 crore.
ArcelorMittal, the world’s largest steelmaker, owns more than a fourth of the Indian company.