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Richa Mishra
Nithya Subramanian

New Delhi , June 20

THE $15.5-million global depositary receipts raised by Morepen Laboratories Ltd in 2003 may yet again become an issue with the Government likely to seek details from the company on the end-use of the funds.

The company had raised the money to retire high-cost debt and fund its business operations and R&D initiatives. The company has since run into financial troubles, resulting in major litigation by investors.

Official sources said that in the interest of investors, the company should disclose the details of utilisation of the fund.

Meanwhile, the Company Law Board, which is hearing the case on non-payment of dues to fixed deposit holders, on Friday reserved its order on the Government's petition seeking appointment of six Government nominees on the company's board.

The Ministry of Company Affairs, in its petition under Section 408(1) of the Companies Act, has alleged mismanagement and oppression in the functioning of the company. The allegations of mismanagement were based on the scrutiny of Morepen's financial accounts till September 30, 2003.

The Government has further alleged that the company defaulted in the redemption of preference shares and also defaulted in redemption of 11 lakh non-convertible debentures. It had defaulted on repayment of its fixed deposits to the tune of Rs 156.2 crore.

It had also argued that Dr Morepen, which was converted into a 100 per cent subsidiary in March 2002, was `de-subsidiarised' the following year through a fresh issue of 67.57 lakh shares of Rs 10 each. These were issued to relatives of the Chairman and Managing Director. At the same time, Morepen Labs had spent Rs 65.75 crore on behalf of Dr Morepen between July 2001 and March 2003 and instead of receiving back the money, the company converted the same into preference shares.

The Government's argument had been that the money was spent without appropriate planning and this too contributed to default in fixed deposits.

Regarding investigations carried out by the Ministry and the action taken on the inspection report, sources said that the Government has already initiated prosecutions under various authorities.

The CLB had already approved a scheme under which deposits up to Rs 5,000 were to be repaid within a year and the rest over four years.

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