 "SEBI")
Capital markets regulator Sebi on Tuesday imposed a penalty totalling Rs 25.2 crore on two individuals in a case related to the manipulation of global depository receipt (GDR) issuance of Hiran Orgochem Ltd.
Individually, the regulator levied a fine of Rs 25 crore on Arun Panchariya and Rs 20 lakh on Mukesh Chauradiya. They have been directed to pay the amount within 45 days, according to a Sebi order.
The direction came after the Securities and Exchange Board of India (Sebi) conducted an investigation to ascertain whether shares underlying GDRs of Hiran Orgochem Ltd were issued with proper consideration. The period under investigation was from April 2010 to May 2010.
Hiran, which is listed on the BSE, issued 15.38 lakh GDRs amounting to USD 10 million representing 4.61 crore underlying equity shares in May 2010.
In its order, Sebi found that Panchariya was the key person actively involved in the GDR process of Hiran at every stage and perpetrated fraud on the investors in the Indian securities market by way of subscribing to GDRs in fraudulent manner by obtaining loan, defaulting on loan payment, converting GDRs into equity shares and subsequently selling converted shares.
"Noticee 1 (Panchariya) indulged in employing fraudulent plan/arrangement, device, artifice and contrivance with regard to the subscription of GDRs, creation of underlying shares using the facade of GDR issue, monetising those GDRs through the sale of underlying shares of the GDRs and inducing and alluring Indian investors to deal in shares of Hiran," Sebi said in its 58-page order.
Further, it said that Chauradiya acted as party to the fraud perpetrated on the Indian investors by Panchariya.
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"To put it in nutshell, the issuance of these GDRs was for private gain at the cost of public good," Sebi said.
By indulging in such acts, they violated the provisions of Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) rules, it added.
Besides, Panchariya is responsible for the fraudulent scheme and arrangement for subscription of GDRs issued by several companies in which separate enforcement proceedings are going on.
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