Harshad Mehta

Harshad Shantilaal Mehta
Harshad Mehta.jpg
Born(1954-07-29)29 July 1954
Died31 December 2001(2001-12-31) (aged 47)
OccupationBusinessman, stockbroker

Harshad Shantilal Mehta was an Indian stockbroker, well known for his wealth and for having been charged with numerous financial crimes that took place during prime ministership of P.V. Narsimha Rao - 1992 securities scam.[1]

Of the 27 criminal charges brought against him, he was only convicted of four, before his death (by sudden heart attack) at age 47 in 2001.[2] It was alleged that Mehta engaged in a massive stock manipulation scheme financed by worthless bank receipts, which his firm brokered for "ready forward" transactions between banks. Mehta was convicted by the Bombay High Court and the Supreme Court of India[3] for his part in a financial scandal valued at INR24,000 Crores which took place on the Bombay Stock Exchange (BSE). The scandal exposed the loopholes in the Indian banking system, Bombay Stock Exchange (BSE) transaction system and SEBI further introduced new rules to cover those loopholes. He was on trial for 9 years, until he died at the end of 2001.[4][5]

Early life

Harshad Shantilal Mehta[6] was born on 29 July 1954,[7] at Paneli Moti, Rajkot district, in a Gujarati Jain family. His early childhood was spent in Kandivali, where his father was a small-time textile businessman. Later, the family moved to Camp 2,Power House, Bhilai Madhya Pradesh (Now Chhattisgarh).He spent his early study in Janta Public School, Camp 2. A cricket enthusiast, Mehta did not show any special promise in school and came to Mumbai after his schooling for studies and to find work.[8] Mehta completed his B.Com in 1976 from Lala Lajpatrai College, Mumbai and worked a number of odd jobs for the next eight years.[6]

Jobs, often related to sales, including selling hosiery, cement, and sorting diamonds. Mehta started his career as a sales person in the Mumbai office of New India Assurance Company Limited (NIACL). During this time, he got interested in the stock market and after a few days, resigned and joined a brokerage firm. In the early 1980s, he moved to a lower level clerical job at the brokerage firm Harjivandas Nemidas Securities where he worked a jobber for the broker Prasann Pranjivandas Broker who he considered his "Guru". Over a period of ten years, beginning 1980, he served in positions of increasing responsibility at a series of brokerage firms. By 1990, he had risen to a position of prominence in the Indian securities industry, with the media (including popular magazines such as Business Today) touting him as "Amitabh Bachchan of the Stock market".[6]

Grow More Research and Asset Management, with the financial assistance of associates, when the BSE auctioned a broker's card.[6] He actively started to trade in 1986.[6] By early 1990, a number of eminent people began to invest in his firm, and utilize his services. It was at this time that he began trading heavily in the shares of Associated Cement Company (ACC). The price of shares in the cement company eventually rose from 200 to nearly 9,000 due to a massive spate of buying from a set of brokers including Mehta.[9] Mehta justified this excessive trading in ACC shares by stating that the stock had been undervalued, and that the market had simply corrected when it revalued the company at a price equivalent to the cost of building a similar enterprise; the so-called "replacement cost theory" that he had put forward.[10]

During this period, especially in 1990–1991, the media portrayed a heightened deified image of Mehta, calling him "The Big Bull". He was covered in a cover page article of a number of publications including the popular economic magazine Business Today, in an article titled "Raging Bull". His flashy lifestyle of a sea facing 15,000 square feet penthouse in the tony area of Worli complete with a mini golf course and swimming pool, and his fleet of cars including a Toyota Corolla, Lexus Starlet, and Toyota Sera were flashed in publications. These further exemplified his image at a time when these were rarities even for the rich people of India.[11]

In criminal indictments later brought by the authorities, it was alleged that Mehta and his associates then undertook a much broader scheme, which resulted in manipulating the rise in the Bombay Stock Exchange. The scheme was financed by supposedly collateralised bank receipts, which were in fact uncollateralised. The bank receipts were used in short-term bank-to-bank lending, known as "ready forward" transactions, which Mehta's firm brokered. By the second half of 1991 Mehta had earned the nickname of the "Big Bull", because he was said to have started the bull run in the stock market.[10] Some of the people who worked in his firm included Ketan Parekh, who later would be involved in his own replicate scam.[8]

Background of the 1992 securities scam

Stamp paper scam

Up to the early 90's banks in India were not allowed to invest in the equity markets. However, they were expected to post profits and to retain a certain ratio (threshold) of their assets in government fixed interest bonds. Mehta cleverly squeezed capital out of the banking system to address this requirement of banks and pumped this money into the share market. He also promised the banks higher rates of interest, while asking them to transfer the money into his personal account, under the guise of buying securities for them from other banks. At that time, a bank had to go through a broker to buy securities and forward bonds from other banks. Mehta used this money temporarily in his account to bought shares, thus hiking up demand of certain shares (of good established companies like ACC, Sterlite Industries and Videocon) dramatically, selling them off, passing on a part of the proceeds to the bank and keeping the rest for himself. This resulted in stocks like ACC (which was trading in 1991 for ₹200/share) to nearly ₹9,000 in just 3 months.[8]

Bank receipt scam

Another instrument used in a big way was the bank receipt. In a ready forward deal, securities were not moved back and forth in actuality. Instead, the borrower, i.e. the seller of securities, gave the buyer of the securities a BR. The BR confirms the sale of securities. It acts as a receipt for the money received by the selling bank. Hence the name – bank receipt. It promises delivery of the securities to the buyer. It also states that in the meantime, the seller holds the securities in trust of the buyer sale.

Having figured this out, Mehta needed banks, which could issue fake BRs, or BRs not backed by any government securities. Two small and little known banks – the Bank of Karad (BOK) and the Metropolitan Co-operative Bank (MCB) – came in handy for this purpose.

Once these fake BRs were issued, they were passed on to other banks and the banks in turn gave money to Mehta, plainly assuming that they were lending against government securities when this was not really the case.[12] He took the price of ACC from ₹200 to ₹9,000. That was an increase of 4,400%.The stock markets were overheated and the bulls were on a mad run. Since he had to book profits in the end, the day he sold was the day when the markets crashed.[13][14]

Outbreak of 1991 securities scam

Sucheta Dalal reveals Mehta's Scam
The crucial mechanism through which the scam was effected was the ready forward (RF) deal. The RF is in essence a secured short-term (typically 15-day) loan from one bank to another. Crudely put, the bank lends against government securities just as a pawnbroker lends against jewellery. The borrowing bank actually sells the securities to the lending bank and buys them back at the end of the period of the loan, typically at a slightly higher price. It was this ready forward deal that Mehta and his accomplices used with great success to channel money from the banking system.

Sucheta Dalal, The Times of India ,[15]

On 23 April 1992, journalist Sucheta Dalal exposed Mehta's illegal methods in a column in The Times of India. Mehta was dipping illegally into the banking system to finance his buying.

A typical ready forward deal involved two banks brought together by a broker in lieu of a commission. The broker handles neither the cash nor the securities, though that wasn't the case in the lead-up to the scam. In this settlement process, deliveries of securities and payments were made through the broker. That is, the seller handed over the securities to the broker, who passed them to the buyer, while the buyer gave the cheque to the broker, who then made the payment to the seller. In this settlement process, the buyer and the seller might not even know whom they had traded with, either being known only to the broker. This the brokers could manage primarily because by now they had become market makers and had started trading on their account. To keep up a semblance of legality, they pretended to be undertaking the transactions on behalf of a bank.

Having figured out his scheme, Mehta needed banks which issued fake BRs (Not backed by any government securities). "Two small and little known banks – the Bank of Karad (BOK) and the Metropolitan Co-operative Bank (MCB) – came in handy for this purpose. These banks were willing to issue BRs as and when required, for a fee", the authors point out. Once these fake BRs were issued, they were passed on to other banks and the banks in turn gave money to Mehta, assuming that they were lending against government securities when this was not really the case. This money was used to drive up the prices of stocks in the stock market. When time came to return the money, the shares were sold for a profit and the BR was retired. The money due to the bank was returned.

This went on as long as the stock prices kept going up, and no one had a clue about Mehta's operations. Once the scam was exposed, though, a lot of banks were left holding BRs which did not have any value – the banking system had been swindled of a whopping 4,000 crore (equivalent to 250 billion or US$3.5 billion in 2019). He knew that he would be accused if people came to know about his involvement in issuing cheques to Mehta. Subsequently, it transpired that Citibank, brokers like Pallav Sheth and Ajay Kayan, industrialists like Aditya Birla, Hemendra Kothari, a number of politicians, and the RBI Governor S.Venkitaramanan all had played a role in allowing or facilitating Mehta's rigging of the share market.[16]

Exposure, trial and conviction

Exploiting several loopholes in the banking system, Mehta and his associates siphoned off funds from inter-bank transactions and bought shares heavily at a premium across many segments, triggering a rise in the BSE SENSEX. When the scheme was exposed, banks started demanding their money back, causing the collapse. He was later charged with 72 criminal offences, and more than 600 civil action suits were filed against him.[10]

He was arrested and banished from the stock market with investors holding him responsible for causing a loss to various entities. Mehta and his brothers were arrested by the CBI on 9 November 1992 for allegedly misappropriating more than 28 lakh shares of about 90 companies, including ACC and Hindalco, through forged share transfer forms. The total value of the shares was placed at 250 crore (equivalent to 15 billion or US$220 million in 2019).[17]

Mehta made a brief comeback as a stock market guru, giving tips on his own website as well as a weekly newspaper column. However, in September 1999, Bombay High Court convicted and sentenced him to five years rigorous imprisonment and a fine of 25,000 (US$350).[18] On 14 January 2003, The Supreme Court of India confirmed High Court's judgement in a 2–1 decision. While Justice B.N. Agrawal and Justice Arijit Pasayat upheld his conviction, Justice M.B. Shah voted to acquit him.[3]

Allegations of payment of bribe to India's prime minister

Mehta raised a furore on announcement that he had paid ₹1 crore to the then Congress President and Prime Minister, Mr P.V. Narasimha Rao, as donation to the party, for getting him off the scandal case.[4][19]


Mehta was under criminal custody in the Thane prison. Mehta complained of chest pain late at night and was admitted to the Thane Civil Hospital. He died following a brief heart ailment, at the age of 47, on 31 December 2001. He is survived by his wife and one son.[20] He died with many litigations still pending against him. Altogether, he had 28 cases registered against him. The trial of all except one, are still continuing in various courts in the country. Market watchdog, Securities and Exchange Board of India, had banned him for life from stock market-related activities.[4][21]

In popular culture


  • Mehta's life and his 1992 scam are covered in great detail by Sucheta Dalal and Debashis Basu in their book The Scam: From Harshad Mehta To Ketan Parekh.[22]

Films and television


  • A SonyLIV's original series Scam 1992 produced by Applause Entertainment is a biopic on Harshad Mehta and journalist Sucheta Dalal based on the Harshad Mehta's 1992 stock market scam. The series is adapted from journalists Debashis Basu and Sucheta Dalal’s book The Scam. Actor Pratik Gandhi played the role of Harshad Mehta. The series was released on 09 October 2020 . [25]Upon its release it received a IMDb score of 9.6/10, thus making one the best series in the world.

See also


  1. ^ "The securities scam of 1992 – CBI Archives". www.cbi.gov.in. CBI (Central Bureau of Investigation), India. Retrieved 22 May 2018.
  2. ^ "Action against Harshad Mehta, Videocon, BPL and Sterlite (Press release 19 April 2001)". www.sebi.gov.in. SEBI (Securities and exchange board of India). Retrieved 30 January 2018.
  3. ^ a b "SC upholds Harshad Mehta's conviction". Times of India. 14 January 2003. Retrieved 14 October 2012.
  4. ^ a b c "Admires of Harshad Mehta". The Hindu Business Line.
  5. ^ "Harshad Mehta's scam unfold". Rediff.com.
  6. ^ a b c d e Parikh, Daksesh; Katiyar, Arun (8 January 2013). "Spreading Shockwaves". India Today. Retrieved 31 October 2010.
  7. ^ "Harshad Mehta & Ketan Parekh Scam". Flame. 23 April 1992. Retrieved 21 May 2013.
  8. ^ a b c Dalal, Sucheta; Basu, Debashis (29 July 2014). The Scam: from Harshad Mehta to Ketan Parekh Also includes JPC Fiasco & Global Trust Bank Scam (8th ed.). Mumbai: Kensource publications.
  9. ^ Dalal, Sucheta (24 April 1992). "The pied piper of Dalal Street". Times of India.
  10. ^ a b c "Harshad Mehta's Scam". Flame.org. Retrieved 20 April 2012.
  11. ^ "Raging Bull – Harshad Mehta". Business Today. April 1991.
  12. ^ Dalal, Sucheta. "Revisiting 1992: The chickens come home to roost". Official website of Sucheta Dalal. Sucheta Dalal. Retrieved 22 May 2018.
  13. ^ Pathak, Rahul (2 January 2013). "Securities scandal: Investigators haul in more people, discover ever-widening net". India Today. Retrieved 22 May 2018.
  14. ^ "Scam 1992: Was Harshad Mehta the mastermind or fall guy of securities scam? A bit of both". cnbctv18.com. Retrieved 27 October 2020.
  15. ^ "Harshad Mehta: From Pied Piper of the markets to India's best-known scamster". Sucheta Dalal. 31 December 2001. Retrieved 21 May 2013.
  16. ^ Chakravarti, Sudeep (15 April 1993). "Book review: Debashis Basu's 'The Scam: Who Won, Who Lost, Who Got Away'". India Today. Retrieved 30 January 2018.
  17. ^ Pandya, Haresh (15 January 2002). "Harshad Mehta". The Guardian.
  18. ^ "Harshad Mehta sentenced to five years' RI". Rediff.com. 28 September 1999. Retrieved 14 October 2012.
  19. ^ "Mehta's is alleged to bribed PM Rao". Outlook India. Archived from the original on 19 January 2011. Retrieved 20 April 2012.
  20. ^ "Harshad Mehta Cremated". Economic Times.
  21. ^ "Chairman of Bank commit suicide". BullRider.in. Archived from the original on 16 June 2012. Retrieved 20 April 2012.
  22. ^ ISBN 8188154024, 9788188154029
  23. ^ "Aankhen may become a box-office classic". indiatoday.intoday.in. Retrieved 31 December 2013.
  24. ^ "Movie based on Harshad Mehta released". NowRunning.com. Retrieved 20 April 2012.
  25. ^ "SonyLIV Releases The Trailer Of 'Scam 1992' Based On Harshad Mehta's 1992 Stock Market Scam". Retrieved 17 August 2020.

External links


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