Sebi slaps Rs 1.5 cr fine on ABL Biotechnologies, CMD in GDR case

Markets regulator Sebi today imposed a total fine of Rs 1.5 crore on ABL Biotechnologies Ltd and its CMD Kollenmareth Oomman Isaac for indulging in fraudulent plan with regard to subscription of GDRs.

Individually, the regulator has levied a fine of Rs 1 crore on Isaac and Rs 50 lakh on ABL Biotechnologies Ltd (ABL), the Securities and Exchange Board of India (Sebi) said in an order.

A probe by Sebi found that the entities had pre-arranged subscription of global depositary receipts (GDRs) through several agreements.

According to Sebi, ABL had issued GDRs worth USD 6.68 million on June 20, 2008, which were listed on Luxembourg Stock Exchange. Clifford Capital Partners was the only entity which had subscribed to the entire issue of GDRs and the subscription amount was paid by Clifford by obtaining a loan from Banco Efisa.

Simultaneously, an account charge agreement was executed between ABL and Banco, by pledging the proceeds of the GDR issue to Banco, it added.

"These agreements enabled Clifford to avail a loan from Banco for subscribing to the GDRs of ABL. Subscription of GDRs of ABL by Clifford was possible through credit agreement entered into by Clifford with Banco and account charge agreement entered into by ABL with Banco," Sebi noted.

Later on June 23, 2008, the company had informed BSE that at its meeting held on June 20 of the same year, it approved the allotment of GDRs amounting to USD 6.68 million, which made investors believe that the said GDR issue was genuinely subscribed by the foreign investors.

Further, Sebi noted that the company failed to disclose immediately to the BSE about the outcomes of the board meetings held on March 1, 2008 and June 20, 2008 regarding approval of a proposal to raise up to USD 7 million by way of issuance of GDRs and allotment of GDRs respectively, which was price sensitive information.

Further, the company did not inform the BSE about delisting of GDRs on Luxembourg Stock Exchange.

"ABL and Isaac had indulged in employing fraudulent plan/arrangement, device, artifice and contrivance with regard to the subscription of GDRs and creation of underlying shares using the facade of GDR issue, monetising those GDRs through the sale of underlying shares of the GDRs and inducing and alluring Indian investors to deal in shares of ABL," Sebi said.

"The manner in which entire scheme of fraudulent and deceptive scheme planned and executed by the CMD of ABL demonstrates beyond reasonable doubt the manipulative intent to deliberately withhold the critical information to the board of ABL and also to the investors which ultimately enabled to carry out the fraud," it added.