Pramod Mittal, the former Chairman of Global Steel Holdings Limited (GHSL) and younger brother of steel tycoon Lakshmi Mittal, is facing charges brought by India's Central Bureau of Intelligence (CBI) for allegedly defaulting on credit re-payments to the State Trading Corporation (STC).

According to the allegations, officials of GHSL and one of its subsidiaries, Global Steel Philippines (GSP), conspired with employees of STC to open fresh letters of credit (L/Cs) despite outstanding amounts remaining payable against earlier credits.

Conspiracy

The CBI alleges that 80 L/Cs were opened for GHSL or GSP to buy steel from STC between 2005 and 2010.

But, "STC officials in conspiracy with GSP and GSHL representatives opened fresh L/Cs despite the fact that outstanding amounts were increasing every year due to payment defaults by GSP and GSHL," according to the allegations.

Mounting debts

Due to unfavourable market conditions and the financial crisis, GSP plant operations in the Philippines were shut down in 2008 and by 31 March 2009 had racked up amounts outstanding of US$110 million to STC.

Ignoring the outstanding amounts, market volatility and not being paid by GSP, STC officials in conspiracy with GSP representatives even proceeded to open new L/Cs in May 2009 and continued to do so until May 2010 according to the CBI.

It reckons that by November 2012, payments outstanding from GSP and GSHL due to STC amounted to US$371 million.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.