Sebi issues Rs 26.25 crore demand notice to Arun Panchariya in GDR manipulation case

Sebi issues Rs 26.25 crore demand notice to Arun Panchariya in GDR manipulation case

Markets regulator Sebi has issued a demand notice to Arun Panchariya, asking him to pay about Rs 26.25 crore in a case on manipulation of global depository receipts (GDRs) issuance by Hiran Orgochem Ltd. In its notice issued on November 23, the regulator has also warned Panchariya of arrest and attachment of assets as well as his bank accounts if he fails to make the payment within 15 days.

The demand notice came after Panchariya failed to pay the fine imposed on him by the Securities and Exchange Board of India (Sebi) in July. In its notice, Sebi directed Panchariya to pay Rs 26.25 crore, including interest and recovery costs, within 15 days.

In the event of non-payment of dues, the market watchdog will recover the amount by attaching and selling the moveable and immovable property of Panchariya. Besides, he will also face attachment of his bank accounts and arrest.

In July, Sebi imposed a penalty of Rs 25 crore on Panchariya and Rs 20 lakh on Mukesh Chauradiya for manipulation of GDR issuance in the case of Hiran Orgochem. The direction came after the Sebi conducted an investigation to ascertain whether shares underlying GDRs of Hiran Orgochem were issued with proper consideration. The period under investigation was from April 2010 to May 2010.

Hiran, 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 a fraudulent manner by obtaining loans, defaulting on loan payment, converting GDRs into equity shares and subsequently selling converted shares.

Further, the regulator stated that Chauradiya acted as a party to the fraud perpetrated on the Indian investors by Panchariya. By indulging in such acts, they violated the provisions of the Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) rules.

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.