For indulging in manipulative, fraudulent and unfair trade practices and thereby violating market norms, Sebi levied a total fine of Rs 10.25 crore on the firm, Rs 1 crore on its Chairman and Managing Director Kantilal Hiran, Rs 50 crore on Arun Panchariya and Rs 15 lakh on Mukesh Charuadiya.
During an investigation conducted between April 2010 and May 2010, Sebi noted that the firm had issued GDRs amounting to USD 10 million on May 20.
It was found that the issue was subscribed by just one entity, Vintage FZE, now known as Alta Vista International FZE.
The issue was subscribed by Vintage on obtaining a loan from European American Investment Bank AG (EURAM) Bank for which the security was provided by Hiran Orgochem by pledging the GDR proceeds against the loan.
In addition, 50 per cent of the underlying shares of the GDRs were issued without proper consideration.
The firm not only failed to make requisite disclosures to the stock exchanges but also failed to follow accounting standards.
Regarding Kantilal Hiran, Sebi said that "he had conceived and executed the deceptive and manipulative scheme".
The entire process of GDR issue, from subscription of GDRs to the sale of converted shares to the Indian investors, was devised and structured by Panchariya.
Panchariya arranged loans for the subscription of GDRs of Hiran by Vintage, wherein Panchariya was managing director, 100 per cent shareholder and authorised signatory, from EURAM Bank, which was connected to Panchariya.
Thereafter, using certain Foreign Institutional Investors (FIIs), he got the GDRs converted into underlying shares and sold them in the Indian securities market with the help of certain domestic entities connected to him.
"AP (Arun Panchariya) was the root cause in creating an artificial impression that the GDRs have been subscribed by foreign investors when in fact GDRs were purchased by AP through Vintage," Sebi said.
Such an act is clearly prohibited under the Prohibition of Fraudulent and Unfair Trade Practices norms, it added.
In the entire process, Panchariya was the sole beneficiary who made an ill-gotten gain of around Rs 18.20 crore.
New Delhi, June 17: Markets regulator Sebi on Wednesday slapped a fine totalling Rs 61.4 crore on Hiran Orgochem, its senior official and two others for manipulation in issuance of global depository receipts (GDR).
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