07/05/2022
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Hedge fund files $70-m lawsuit in UK against Cals Refineries for GDR scam
SAT, too, had ordered Cals’ promoter to return $92 million with interest for 10 years
• The Hindu Business Line
• 22 Nov 2019
• PALAK SHAH
Cals Refineries, India’s largest traded penny stock at one point, is now part of a $70-million litigation in the UK. Hedge fund RP Explorer has claimed damages from Sanjay Malhotra, promoter of Cals Refineries — currently lodged in a Dubai prison for “conspiracy and deceit” — arising out of the hedge fund’s 2007 purchase of securities issued by the Indian company, a report by Bonnie Eslinger of news portal Law360 revealed.
The UK case also draws reference to a recent order by the Securities and Appellate Tribunal, which upheld a SEBI order against Cals Refineries for GDR scam and asked one of its promoters Gagan
Rastogi and Cals to pay $92 million with 6 per cent interest on the amount from 2009, for defrauding Indian investors.
SAT has observed that 25 million GDRs worth $92 million issued by Cals had come to rest in the Asia Texx account, which were further transferred free-of-cost to Rastogi. SAT further observed that Rastogi sold a part of these GDRs and received $8.96 million in November 2011. SEBI had concluded that GDR issuance to certain overseas investors was a sham transaction.
Between 2010 and 2014, Cals Refineries, which was at around ₹0.30-0.40, was an aggressively traded counter. The stock churned average daily volumes of over four crore shares, as Indian investors were swayed by the company’s plan to build a $1.1-billion refinery at Haldia, West Bengal, that was supposed to be operational by March 2011.
The story sold by the Cals management to the market was that they would ‘dismantle and import’ a refinery plant in 3,000 containers from Germany to Haldia, where it would be put back together again. The company had hired UK refinery engineers KBC to upgrade the plant, adding new units so that they could also refine lower-quality Arab crude oil. In 2007, Cals said BayernOil sold a 30-year-old refinery plant at Ingolstadt in Germany to Lohrmann International,
Scan & Share which in turn sold it to Cals. The plan was to pack this refinery and transport it to India.
RP Explorer’s case is that it purchased the securities that were issued to raise capital for the acquisition and installation of a second-hand oil refinery in Haldia. Malhotra was a “promoter” for a group of individuals behind the refinery project called ‘Spice Energy Group’.
RP Explorer told the court that Malhotra and others, working in conspiracy, made “false representations to induce RP to acquire the GDRs”. Malhotra is currently in prison in Dubai and did not participate in the trial, according to RP Explorer. The reason for his incarceration was not disclosed.
The Serious Fraud Office in India is investigating Cals’ GDR issue.
