SAT Quashes SEBI Penalty For Disclosure Lapses In ArcelorMittal Nippon Steel Case

The Securities Appellate Tribunal has set aside a SEBI order that imposed a penalty of Rs 2 lakh on Essar Steel India Ltd., now known as ArcelorMittal Nippon Steel India Ltd., for disclosure lapses.

Bankruptcy proceedings were initiated against debt-laden Essar Steel in August 2017. It was taken over by the new management ArcelorMittal Nippon Steel India in December 2019 upon completion of the insolvency resolution process.

"The impugned order dated March 28, 2022 cannot be sustained and is quashed... However, it will be open to the respondent SEBI to initiate proceedings for the relevant period against the relevant entities," SAT said in an order passed on July 1.

The ruling comes after an appeal was filed against the SEBI order that had levied Rs 2 lakh fine on Essar Steel for not making the requisite disclosure under Listing Obligations and Disclosure Requirements rules in the case pertaining to issuance of non-convertible debt securities in 2011. It was alleged violation of LODR rules by Essar Steel for the December 2015 to March 2019 period.

In October 2019, the Securities and Exchange Board of India had issued a show-cause notice asking why an inquiry should not be initiated and penalty should not be imposed on the company.

The appellant contended that National Company Law Tribunal admitted a petition against Essar Steel India under the Insolvency and Bankruptcy Code in August 2017. A resolution professional was appointed in February 2019. The resolution plan filed by ArcelorMittal Nippon Steel India was upheld by NCLT in July 2019.

Further, the Supreme Court also approved the resolution plan by NCLT in November 2019 holding that ArcelorMittal Nippon Steel India must get a clean slate and cannot be faced with additional claims after the resolution plan was approved.

SEBI's counsel had contended that during the pendency of the resolution plan the resolution professional was required to comply with the LODR provisions and in case of non-compliance, the resolution professional would be responsible for non-compliance of the provisions.