Rabinder Buttar faces multi-million pound legal action over ClinTec performance

FORMER Scottish Entrepreneur of the Year Rabinder Buttar is facing a multi-million pound legal claim from a private equity firm that has written off more than 80 per cent of its investment in her company.

Aim-quoted Elephant Capital has issued the claim against Buttar and her brother, founders of clinical research company ClinTec, for alleged breach of a warranty provided under a share-purchase agreement.

Such warranties are commonplace to provide buyers with potential redress against vendors if investments do not perform as they expected.

The London-based investment fund pumped £8 million into ClinTec, which has its head office in Glasgow, in August 2010 in return for a 28.5 per cent stake.

But Elephant said ClinTec’s performance “rapidly fell short of budget” in the following months and the firm has written down the value of its investment three times.

In its latest half-yearly report to the stock market last week, Elephant said it has now written a total of £6.9m off the value of its stake.

Chairman Vikram Lall said the decision to issue the claim against the founders was due to “significant continued underperformance of the business as against targets and forecasts”. It is understood Elephant’s claim is for £8.35m plus costs and interest.

Lall added that Elephant’s investment manager remained “cautious regarding the near term prospects of the business, but is engaging with ClinTec management to position the company for improved performance in future”.

Both sides said they couldn’t comment on the legal proceedings. But, in a statement issued to Scotland on Sunday, Buttar said: “ClinTec has continued to grow revenues over the past years and, for the first quarter of this year, the company achieved its targets.

“Recently, ClinTec has signed several business contracts with clients including a new preferred partner agreement with a top-ten pharmaceutical company and the company expects continued growth ahead.”

Buttar, named Ernst & Young Scottish Entrepreneur of the Year in 2010, founded ClinTec in 1997 to carry out clinical research work for pharmaceutical firms, biotechnology companies and medical device makers. Elephant, which specialises in investments related to India, bought its stake in ClinTec through its Tusk Investments Fund.