The regulator after an investigation of a GDR issue during December 2007 found that the KTL issued 0.49 million GDRs worth $ 16.5 million on the Luxembourg Stock Exchange. It was observed that the entire 0.49 million GDRs were subscribed by only one entity, Clifford Capital Partners. The subscription amount for GDRs was paid by Clifford after securing a loan from Lisbon-based bank Banco Efisa. However, KTL had pledged the GDR proceeds to the bank against the loan given to Clifford for subscription of GDRs. It was observed by the regulator that KTL gave a false and misleading corporate announcement that its GDR issue was successfully allotted whereas the same was subscribed by only one entity. $ 10.39 million was transferred to Clifford by KTL for default in repayment of loan to the bank. The regulator found that the Clifford acquired the GDR, to the extent of $ 10.39 million for free and at the cost of investors of KTL.
SEBI has found that by indulging in such activities, all the entities violated the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices). SEBI has barred KTL, its five directors and Clifford Capital Partners, for at least five years from securities market in a matter related to manipulation of global depository receipts (GDRs). Besides, SEBI directed KTL to continue efforts to recover an outstanding sum of $ 10.39 million from Clifford Capital Partners, the only subscriber of the company’s GDRs.