Moorgate Industries UK Ltd v Pramod Mittal (in bankruptcy)
| Jurisdiction | England & Wales |
| Judge | Briggs |
| Judgment Date | 25 November 2022 |
| Neutral Citation | [2022] EWHC 3009 (Ch) |
| Docket Number | Case No: BR-2019-001363 |
| Court | Chancery Division |
[2022] EWHC 3009 (Ch)
CHIEF INSOLVENCY AND COMPANIES COURT JUDGE Briggs
Case No: BR-2019-001363
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Joseph Curl KC and Giselle McGowan (instructed by CLYDE & CO LLP) for the Applicant
Ian Mayes KC and Stephen Ryan (instructed by COLLYER BRISTOW LLP) for the First Respondent
Hearing dates: 7, 8 November 2022
Approved Judgment
This judgment was handed down remotely with circulation to the parties' representatives by email. It will also be released to the National Archives for publication. The date and time for hand-down is deemed to be 12:30 hrs on 25 November 2022.
CHIEF INSOLVENCY AND COMPANIES COURT JUDGE Briggs
Chief ICCJ
This case before the court concerns a challenge to an individual voluntary arrangement entered after the making of a bankruptcy order.
Global Steel Holdings Limited (“GSH”) was a company incorporated in the Isle of Man and concerned in the business of steel. It was wound up on 10 May 2018. Pramod Mittal (“PM”) was the chairman and one of four directors of GSH. He was also a director of a Global Steel Philippines Inc (“GSP”) which owned and operated a steel works in the Philippines. In a written statement to creditors PM stated that the local authority in the Philippines had foreclosed on the assets of GSP in about 2013. In any event GSH and GSP incurred liabilities (the provision of raw materials by way of a purchase agreement) to the State Trading Corporation of India Limited (“STC”). GSH and GSP failed to pay those liabilities.
A settlement agreement was reached in respect of the STC liability in November 2011. The agreement was breached. A new agreement was reached in May 2012. By the second agreement PM agreed to provide STC with “additional security” (clause 12 (iv)) in the form of a personal guarantee “guaranteeing STC for payment of entire outstanding” sum.
Moorgate Industries UK Limited (“Moorgate”) had provided finance to another company within the group of companies associated with PM, Global Ispat Koksna Industrika d.o.o (“GIKI”), a company incorporated in Bosnia-Herzegovina. Ispat Steel Holdings Limited (“Ispat”) is a Mauritan company that claimed to be a creditor of PM and is the purported assignor of the debt to a Mr Agarwal. Moorgate required a personal guarantee to be provided for it “to continue to do business with (Ispat)”.
GSH was wholly owned by Direct Investments Limited (“DIL”). DIL is a company incorporated in the British Virgin Islands (“BVI”) and wholly owned by Prasan PTC Limited (“Prasan”) which is a private trust company also incorporated in the BVI.
Ispat failed in its obligations. As a result, Moorgate took action against GSH pursuing payment under the guarantee in the commercial court in August 2013. Ispat commenced arbitration proceedings under a request for Arbitration dated 4 November 2013. Ispat contended that it was not liable to Moorgate for any debt and issued a crossclaim for approximately US$300m.
Following the activity in the commercial court and the request for Arbitration GSH provided a guarantee to secure the debts of GIKI. The guarantee was given on 13 July 2016.
Subsequently PM provided an undertaking agreeing to be bound by and not challenge any finding of law or fact by the Tribunal under the Arbitration. He agreed, by the undertaking, that he would be liable to pay any award (the “Award”) made within 21 days of it becoming enforceable. Once the undertaking was given, a stay of proceedings in the commercial court was granted, pending the outcome of the Arbitration.
The Arbitration tribunal rejected the crossclaim and made an award against GIKI on 31 July 2017 to pay Moorgate the sum of £124,875,724.91, plus costs of £2,160,147.20 and interest from 14 August 2017 at a rate of 5.19%
PM became liable to pay the Award by reason of the undertaking.
On 19 January 2018 judgment was entered against GSH and PM. On 10 May 2018 the Manx Court appointed provisional liquidators in respect of GSH. PM and DIL jointly made an application to the Manx Court in June of that year to rescind the order appointing the provisional liquidators. The application was made on the basis that GSH was solvent. The application was unsuccessful. PM and DIL had failed to disclose to the Manx Court any debt due to STC. His Honour Deemster Corlett said that this failure was an “extraordinary omission” which presented “a false picture” to the court.
The provisional liquidation was terminated upon the appointment of liquidators in October 2018 when Mr Wilson, Mr Adrian Allen and Mr Mitchell of RSM Restructuring Advisory LLP were appointed. The statement of affairs of GSH was signed by Mr Das, who was one of the four appointed directors and a director of DIL.
In or around December 2018, applications were made to the Manx Court for a Committee of Inspection to be formed for GSH. DIL applied to be a member of the Committee. The Court found that PM controlled DIL and refused the application on the basis of a potential conflict of interest. Criticisms were levelled at PM and Mr Das for failure to disclose information and deliver up books and records. The Deemster commented “it seems on the evidence before me that [DIL] is beneficially owned by Mr Mittal. He is the driving force behind that company.” It is said that this comment needs to be read in context of the overall proceeding and in particular the issue of a conflict.
Moorgate served a statutory demand on 30 October 2019 seeking payment of the sum due under the Award. The demand was not paid and there was no application to set it aside. After 21 days from service of the demand Moorgate issued a petition for the bankruptcy of PM on the basis that the sum of £139,786,656.43 plus interest was due and owing.
The petition was opposed on many grounds set out in a document titled “Debtors Notice of Opposition to Petition”. The document was produced and signed by solicitors acting on behalf of PM. Several weak arguments were advanced but relevant to this matter, under a heading “Mr Mittal's Claim in GSHL's Liquidation” it was said:
“GSHL's liability to STC under the STC Settlement Agreements of circa US$347.74 million was discharged by paying circa US$ 372.51 million (US$ 347.74 plus interest)… In the premises, the discharge of GSHL's liability to STC has discharged the STC Claim in GSHL's liquidation, with the result that Mr Mittal is entitled to be subrogated to the rights of STC in respect of the STC Claim to the extent of circa US$315.41 million… On 14 May 2019, MannBenham Advocates Limited (“MannBenham”), acting on behalf of Mr Mittal in respect of the liquidation of GSHL in the Isle of Man, wrote a letter (pages 88 to 89) to the Joint Liquidators of GSHL in which the discharge of GSHL's liability to STC is set out and Mr Mittal's right to be subrogated to the rights of STC in respect of the STC Claim is asserted (the letter mistakenly referred to the figure of US$ 311.58 million as having been discharged by Mr Mittal instead of the correct figure, US$ 315.41 million)… On 23 December 2019, MannBenham lodged Mr Mittal's proof of debt for US$ 315.41 million and his witness statement in support with the Joint Liquidators… Pursuant to the STC Claim, Mr Mittal expects to receive a substantial sum from the liquidation of GSHL…Mr Mittal expects that the debt can be discharged within a reasonable period of time.”
PM maintained his subrogation claim with the liquidators of GSH through his solicitors MannBenham.
The proof of debt submitted stated GSH is: “indebted to for (sic) the sum of US$372,514,602 out of which USD315,404,602 paid by me and my behalf (sic)” The proof of debt submitted by PM was questioned by the liquidators. On 19 February 2020 MannBenham wrote in response that they had been instructed that the debt owed to STC had been settled and that: “out of the amount US$372,514,601.71 the amount paid by Mr Pramod Mittal and/or on his behalf was US$315,404,602”. The letter ended: “we trust that this clarifies matters and will now enable the Joint Liquidators to accept the proof of debt filed on behalf of Mr Pramod Mittal”.
In a witness statement signed with a statement of truth in the bankruptcy proceedings PM explained [11–15] that MannBenham had provided further evidence to the joint liquidators in support of his claim for subrogation. He states [13] that he made clear to the joint liquidators that he would apply to court if he had to “to ensure recognition of my claim.”
An application was subsequently made and listed. PM provided a witness statement signed with a statement of truth in support:
“ my application by which I claim is an declaratory and consequential relief to give effect to my having been subrogated by operation of law to the position of [STC].” (sic) (emphasis supplied)
In his statement (dated 23 October 2019) he explained [13]:
“GSHL is an investment holding company incorporated in Isle of Man. The sole shareholder of GSHL is Direct Investments Ltd which is incorporated in the British Virgin Islands and which is beneficially owned via a Trust and controlled by the Mittal Family” (emphasis supplied)
He asserts his subrogation claim in the following way:
“[42] By reason of my having discharged personally the entirety of the liabilities of GSHL to STCI, as a guarantor for those liabilities under the Personal Guarantee, as specifically recorded in the order of the Supreme Court of India dated 12 March 2019 and the subsequent order...
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