Speciality Steel UK Limited, Re

MR JUSTICE MELLOR:

1. This is the hearing of a winding-up petition presented against Specialty Steel and UK Limited ("the Company"). The petitioning creditor is Greensill Capital UK Limited (‘GCUK’), which itself is in administration. Mr Ryan Perkins appears for GCUK, and I have heard submissions from Mr Marcus Haywood for the Company, and also from Mr Bradley from the Citibank that supports the position of the petitioning creditor. I have also heard very brief submissions in response to two questions I have posed to him from Mr Westwood, KC, who appears for the Official Receiver. This is the first of the two applications I am potentially hearing in relation to the Company, and as I said, this is concerned with whether I should make an order for the winding up of the Company today.

2. There is some considerable history to this matter. The petition was originally presented on 8 October last year by another creditor of the company, Harsco. The petitioning creditor suggests that the Company has deployed many tactics over the last two years to stave off a winding-up order. In November 2024 the company announced it would be proposing a restructuring plan under Part 26A of the Companies Act. I understand a series of hearings took place before Hildyard J, and counsel for the petitioning creditors suggests it became apparent that the restructuring plan was unfair to the company's creditors. Indeed in one of his judgments ([2024] EWHC 3355 at [80]), Hildyard J criticised the Company for failing to engage with its creditors, and that process led to the Company discontinuing its restructuring plan proceedings on 14 May 2025. Following the failure of that restructuring plan, the company paid the debt over to Harsco, but on 16 January 2025 the court made an order substituting GCUK as the petitioning creditor in place of Harsco, and the debt relied upon by GCUK in the winding up petition is over £5 million-odd. It is important to realise this debt is not disputed by the company. Furthermore, rather more substantial additional sums are said to be owing to GCUK by the Company, but those sums are, of course, irrelevant for present purposes.

3. The petition is supported by six other creditors, and the most significant of those is Citibank, London Branch, which is owed some £233 million, and again, these debts are not disputed by the company. Those debts owing to GCUK and Citibank are secured over the company's assets by various fixed and floating charges, but the Company asserts that the security is worthless and would realise no value in a liquidation such that GCUK and Citibank should be treated as unsecured creditors. Although in the evidence before me this assertion is strongly disputed, it is not necessary for me to resolve that dispute, because it is common ground that the company is unable to pay its debts within the meaning of section 123 of the Insolvency Act, with the consequence that the court plainly has jurisdiction to make a winding-up order under section 125. In addition, there is no dispute that the necessary procedural requirements have been complied with, so the sole issue for me today is whether I should exercise the general discretion I have to make a winding-up order.

4. The petition came before ICC Judge Barber yesterday in the general winding-up list. In some very late evidence filed the day before that hearing, it was argued that the court should not make a winding-up order, the argument being based on Mr Gupta's fifth witness statement and a witness statement from Mr Coley. That evidence was filed in support of an application for a four-week adjournment to allow the completion of a sales process, which of course could not be carried out if the winding-up order is granted.

5. I should also mention one other development that took place at the hearing before ICC Judge Barber: the Official Receiver informed GCUK that a special manager application would be made and funding would be provided to the appointees, who are from a well-respected firm of insolvency practitioners, Teneo. In the light of those developments, ICC Judge Barber adjourned this matter to be heard by a judge today.

6. The position today is that if a winding-up order is made, the Official Receiver will be appointed as the liquidator of the company. I am told that the Department for Business and Trade has been preparing for the Company’s entry into liquidation, and the Official Receiver has prepared an application to appoint special managers under Section 177 of the Insolvency Act 1986 to assist the Official Receiver in carrying out liquidation of the company. It is clear that the special manager application can only be made after the company has been wound up. Hence, Mr Westwood KC appears before me, and if I make the order for winding up today, he will then make the special manager application. As I say, the proposed special managers are insolvency practitioners at Teneo, and GCUK say the powers of these special managers are functionally equivalent to the powers vested in administrators under the Schedule B1 of the Insolvency Act.

7. So, what I am faced with is a choice, as Mr Haywood put it, between two insolvency procedures. An important difference between these two procedures is that the special managers are going to be funded by the Department for Business and Trade, and this is an approach that has developed in cases such as Re British Steel [2019] EWHC 1304 (Ch) and Re Thomas Cook [2019] EWHC 2626 (Ch) , where the underlying business is considered by the government to have an element of strategic importance to the UK economy. It is for that reason that the government is willing to fund the insolvency proceedings, but only, I am told, on the basis that the Official Receiver is appointed as a liquidator. In the alternative proposed by the Company, via a pre-pack administration, the government would have no role at all. If special managers are appointed, the day to day operations will be performed by the special managers but under the ultimate supervision and control of the Official Receiver.

8. An important part of the background is that the ultimate beneficial owner of the Company is Mr Sanjeev Gupta, who has a corporate empire which is known as the Gupta Family Group Alliance. This group is said to be in severe financial distress, and the evidence discloses that at least 15 entities in the group are subject to formal insolvency or restructuring proceedings in a total of nine jurisdictions. Counsel for GCUK stressed that the Company has failed to file its accounts with the Registrar of Companies since 2019, and Mr Gupta and four other directors are currently being prosecuted for failing to file accounts in respect of over 70 companies within the group. In response, Mr Haywood says that there was substantial information provided in the course of the restructuring applications to show what the accounts would reveal.

9. The present position is that GCUK say the company's financial position appears to be dire. In his evidence filed on 19 August, Mr Gupta gave some information about the current position of the company, and the immediate problem is that tomorrow, wages and salaries will fall due for payment in an aggregate amount of approximately £3.69 million, and over the next four weeks certain other critical costs will also require funding. So the total amount necessary to be paid by the company over the next four weeks is approximately £6.83 million. Mr Gupta also reveals in his latest witness statement that the company has approximately £650,000 in its accounts, and although he says further funds may accrue over the next four weeks, he accepts that the funds will be insufficient to meet the funding required. This, as GCUK submits, is the effect of a series of validation orders, including one by me, which has been effectively to run down the assets of the company so that there is no money left.

10. In addition, Mr Perkins referred me to some evidence from Mr Connolly of Begbies, which makes it clear that the business has already been mothballed, and due to the financial uncertainty, no orders have been received for the last three months. He made those points in response to Mr Haywood's suggestion that if a winding-up order is delayed, there will be significant disruption. However, Mr Perkins submitted that submission did not stand up to scrutiny, partly because of the evidence to which he took me in Mr Connolly's evidence, but also because the alternative which Mr Gupta seeks to promote has no government support at all.

11. In these circumstances, Mr Haywood on behalf of the Company has renewed his application for a four-week adjournment, and he suggests, based on the sales process that is being conducted by Mr Connolly at Begbies, that it is in the interests of the company's creditors to complete that sales process. However, it is quite clear that the limited interest to date in that sales process by potential buyers is, at best, tentative. There are two parties that are interested, plus a bid which Mr Gupta appears to wish to make supported by some equity financing.

12. Mr Haywood contrasts the two insolvency processes and says that a winding-up order plus the appointment of special managers will result in very considerable uncertainty, this, on the basis of his suggestion that there would have been no real planning by the special managers and they would not be in the same position as the existing team from Begbies in terms of their experience with the business. In light of that suggestion, I asked Mr Westwood KC a question about the extent to which investigations had taken place before the proposal for special managers was made. He assured me (and I accept) that extensive consideration had been given already, and that seems to me to be logical. The government would not give the assurance to fund the appointment of the special managers without giving the subject very careful consideration.

13. Overall, it is clear that there are significant uncertainties in both of these processes. Mr Perkins points to the lack of substance underlying the assurances given by Mr Gupta in his witness statement. He suggests that GCUK will continue to fund the operation of the Company, but those assurances are at best questionable in view of the evidence about Mr Gupta's previous operations in relation to this Company.

14. That in outline is the background to the current application. Mr Perkins addressed me fully on the legal principles which I have to apply. It is unnecessary to repeat those, but he makes the key point that the debtor has no voice. There is jurisdiction for the debtor to ask for time to pay the petition debt in full, but if there is no suggestion that the petition debt will be paid in full, then he says that the authorities establish that the petitioning creditor is entitled as of right to the winding-up order it has against the debtor. He has also addressed me very clearly on the views of the creditors, which are in particular that the court gives a little weight to the views of creditors who are connected to the company shareholders, and the views of independent creditors are of paramount importance.

15. On the basis of those principles, Mr Perkins then turned to address the position in the present case. He submitted that all of the creditors of the company support a winding-up order, with one exception - TFCL, which is supporting the position of the company. I will come to the position of TFCL in a moment, but, overall, in my view, the position is actually extremely clear: a. The debt the subject of this petition is due and payable. b. Mr Gupta cannot dispute the validity of the debts owing to any of the supporting creditors, including Citibank, which as I have said is owed more than £233 million. c. There is no prospect that any of these creditors will be paid in full or at all. d. It is quite plain the company is hopelessly insolvent.

16. The argument on behalf of the Company and Mr Gupta is that there is a sales process currently underway, and the idea is that the sales process will result in a binding agreement for the sale of the company's assets, which Mr Gupta intends to execute through a pre-pack administration.

17. Of course, the real difference between the two insolvency processes is that under Mr Gupta's plan, the pre-pack administration will appoint administrators which are basically connected with him, whereas the course proposed by GCUK and supported by the other creditors is that the insolvency process will be conducted by independent special managers who, as I have said, will have the support of the government. In that regard I was directed to an assurance given yesterday in which the Official Receiver confirmed that ‘ should the Court consider it appropriate to make a winding up order, he does have sufficient funding to conduct an orderly winding up, including (for the avoidance of doubt, only if it is deemed to be the most appropriate course of action in accordance with our client's duties to creditors) a marketing and sales process and the ongoing running costs, which in such circumstances would involve retaining employees and paying their wages as is common in compulsory liquidations with a national interest/strategic importance .’ I should add that although the Company, as Mr Connolly has said, is mothballed and no orders have been received for three months, there are still 1,500 employees at the Company.

18. In the current circumstances, I am satisfied that if I make an order for winding up, it will not result in a free fall or unplanned insolvency. It is quite clear that there are special managers lined up who have the support of the government. In all the circumstances, I consider by far the preferable approach is to make a winding-up order with a view to appointing special managers, and so I exercise the discretion of the court to make a winding-up order. Epiq Europe Ltd hereby certify that the above is an accurate and complete record of the proceedings or part thereof. Lower Ground, 46 Chancery Lane, London WC2A 1JE Email: [email protected]