Transgene alleges $38 million fraud by Nirmal Kotecha, aides

HYDERABAD: City-based Transgene Biotek has accused the known securities market offender Nirmal Kotecha of duping it to the tune of around $38.42 million (approximately Rs 230 crore) by fraudulently swindling the company’s GDR proceeds parked in overseas bank accounts. The shocking accusation comes nearly a month after the market regulator Sebi holding the Transgene promoters responsible for failure in discharging their fiduciary duties and restraining them from accessing the securities market. The regulator also sought a detailed investigation into the entire episode.

On December 14, Transgene managing director Dr K Koteswara Rao said the company fell into the trap designed by Kotecha, the principal offender in one of India’s biggest insider trading frauds involving Pyramid Saimira Theatres in 2008. Transgene’s managing director Koteswara Rao told ET that "A complaint is now being filed in the courts in Hyderabad and an FIR against Nirmal Kotecha, his aide Kishore Tapadia and associates who played the mischief. All the evidential documents are being prepared so that the case can be filed in a week or so."

Sebi, which probed into alleged fraud in GDR issue by Transgene and misutilisation of proceeds, found that of the $40.5 million (approximately Rs 243 crore) of GDR proceeds, some $29.92 million were transferred to certain entities for undisclosed purposes.

The market regulator in its order said Transgene’s managing director Rao’s explanation was initially ‘vague and cryptic’ though he subsequently alleged that certain entities that were supposed to transfer technology for $30 million did not adhere to obligations after transfer of funds, which took place "without approval or authorisation from him."

Sebi said Rao "had attempted to cover the probable plan, device and artifice of transferring the GDR proceeds for the purposes other than informed to the shareholders."

In a letter to BSE’s surveillance department on December 14, Rao accused Nirmal Kotecha and his aide Kishore Tapadia of enticing the company for raising overseas funds and acquiring novel technologies for clinical studies on molecules and fraudulently transferring funds parked in banks at Switzerland and Singapore. Accusing Kotecha and associates of siphoning away the funds in the names of entities that were to transfer technology, Rao said "bank statements were provided by Kishore Tapadia camouflaging to show normal balances." When contacted, Nirmal Kotecha denied allegations levelled against him by Rao and told ET, "It’s a totally baseless statement."

The Transgene promoter claimed that the fraud came into light only after he personally sought details directly from the banks and he immediately reported the matter "to the Enforcement Directorate with all valid proofs substantiating misappropriation, cheating and forgery."

However, he said the management did not inform the matter to the stock exchanges immediately after detecting the fraud "as a matter of prudence in the best interests of the company and its stakeholders" due to "sensitive nature of investigations at that time in order to assist ED and other agencies involved."

Accusing Nirmal Kotecha and associates of transferring funds fraudulently with the help of forged letters of the company issued to the banks, Koteswara Rao said, "a total amount of $38.42 million is found to be siphoned off to the accounts of Asia First Technologies Ltd, SyMetric and Sristek (the entities that were to transfer technology) using aforementioned forged letters of instructions, all promptly handed over to ED."

"Nirmal Kotecha, we understand admitted to ED on the said siphoning of funds," Rao told BSE, adding that he is going to appeal before the Securities Appellate Tribunal against the interim orders of Sebi against the Transgene promoters.