Jaipuria Institute of Management,

Vineet Khand, Gomti Nagar

Lucknow – 226 010

Academic Year 2019 – 2020

Batch 2019 – 2021
Trimester 3rd Trimester
Programme
(PGDM / PGDM-FS / PGDM-RM) PGDM (Retail Management)
Name of Course Professtional Ethics
Section E
Name of Faculty Prof. Maneesh Yadav
Nature of submission
(Assignment / Project Report) Project Report
The topic of Assignment / Project
Harshad Mehta Scam
Deadline for submission 04th March 2020
Group/ Learning Team Number Learning Team E – 07
Maximum allotted marks 20
Contribution of group/LT members in the assignment/project
Sl.
Name &Enrolment Number of Student Contribution Signature
No.
1 Aman Srivastava & JL19RM007
2 Kritika Chauhan& JL19RM020
3 Manish Sinha& JL19RM021
Shivanand Chaudhary&
4
JL19RM050
5 Vignesh Gupta & JL19RM058
6 Yuvika Singh& JL19RM063

Date of receiving at PMC Signature of PMC staff

Penalty (marks to be deducted):

ACKNOWLEDGEMENT

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We wish to express our sincere gratitude to Prof. Maneesh Yadav, faculty of Professtional Ethics of
Jaipuria Institute of Management, Lucknow for providing us with an opportunity to do our project
work on “HARSHAD MEHTA SCAM”. This project bears an imprint of support of many peoples.
I sincerely thank our project guide Prof. Maneesh Yadav for his guidance and encouragement in
carrying out this project work.

I also wish to express my gratitude to the officials and other staff members of Jaipuria Institute of
Management, Lucknow who rendered their help during the period of our project work. Last but not
the least, we wish to avail ourselves of this opportunity, express a sense of gratitude and love to our
friends and our beloved parents for their manual support, strength, help and for everything.

1. Aman Srivastava [JL19RM007]

2. Kritika Chauhan [JL19RM020]

3. Manish Sinha [JL19RM021]

4. Shivanand Chaudhary [JL19RM050]

5. Vignesh Gupta [JL19RM058]

6. Yuvika Singh [JL19RM063]

TABLE OF CONTENTS

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CHAPTER TITLE PAGE NO.

Acknowledgement
Table of Contents

1 Facts, Observation and Judgement of (Aman Srivastava) 4

2 Facts, Observation and Judgement of (Kritika Chauhan) 5

3 Facts, Observation and Judgement of (Manish Sinha) 6

4 Facts, Observation and Judgement of (Shivanand Chaudhary) 7

5 Facts, Observation and Judgement of (Vignesh Gupta) 8

6 Facts, Observation and Judgement of (Yuvika Singh) 9

Facts, Observations and Judgement on Harshad Mehta Scam

( By:- Aman Srivastava [JL19RM007] [LT-07])

Facts & Observations:

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 1. The fraud done by Harshad Mehta was around Rs 3500 crores which was a huge and biggest amount
fraud in year 1992.
2. In early stage by the scam share market sensex indices increased by 4500 points. In which ACC share
prices increases from Rs 200 to Rs 9000
3. Case was performed or a tool used was “Ready Forward Deal”.
4. Ready forward deal is the deals that are signed between the banks in short term loans which are
given for 15 days.
5. Loans are given on the government securities
6. Harshad Mehta acts as Agent between the banks.
7. Harshad Mehta search for the bank who needs loan and bank who can provide the loans.
8. Harshad Mehta get the money from bank which needs to buy bank securities and invest that into
the stock market to manipulate the share price. And when as their money he arranges securities
from other banks.
9. Sucheta Dalal senior journlist, The Times of India expose the scam done by the Harshad Mehta.
10. 72 criminal cases and 600 civil suits are filled against Harshad Mehta and family.
11. Harshad Mehta had share worth Rs 453 crores of 131 companies in unknown account.
(Observation)
12. Harshad Mehta called as big bull of stock market. Harshad Mehta did not do the fraud instead he
exploited the loopholes of the system. (Observation)
13. Bank’s authority provide cheque on the name of Harshad Mehta but bank have to give the cheque
on the other bank’s name which means bank authority was also not careful and serious about their
work and Harshad took the advantage of this. (Observation)
14. Bank’s authority played unethically in their work by providing fake receipts without any mortage
(Bank involve are Bank of Karad and Metropolitan Co-operative Bank). (Observation)
15. The diverted money leads to pump in the share market by which share held by Harshad start
increasing. (Observation)
16. The scam was so big of his time that there is indulgence of PM P.V. Narshima Rao. (Observation)
17. In my view there is breaking of Right Based Ethics and Conduct Based Ethics (specifically egosim of
Telelogical Ethics). (Observation)
18. In my view Breaking of code of conducts is done.(Observation)

Judgement
1. According to me the judgement given by Bombay court is right i.e. life time imprisionment.
2. Harshad Mehta properties and companies should be sold out for the repayment.
3. Bank employees how are involved should be fined heavily and sentenced for the
imprisonment.
4. Mehta and his brothers were arrested by CBI on Nov 9 1992 for misappropriating more than 27
lakhs shares of about 90 companies
5. He was later charged for 72 criminal cases and more than 600 civil actions suits were filed against
him.
6.  On , September 1999, Bombay High Court convicted and sentenced him to 5
years imprisonment and a fine of Rs 25,000.
7.  On 14 January 2003, Supreme court of india confirmed High Court's judgement. It was a 2:1
majority judgement. 
8. In 2018 ,Mumbai court has accused 9 people ,including Ashwin Mehta, brother of Harshad Mehta, in
a case of duping the SBI for RS.105 Crores.

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 9. In 2019 , Jyoti Mehta wife of Harshad Mehta won a case against a local broker for a claim of Rs. 6
crores .
10. In 2019 , Family free of Rs.2000 crore of tax demand after 27 years .

( By:- Kritika Chauhan [JL19RM020] [LT-07])

CASE OVERVIEW
Harshad Mehta done his business well in stock market and having great knowledge he smartly swap the
money of banks. Banks trusted Harshad Mehta for finding banks to give their security to another banks and
other banks trusted him to find banks who could take money in exchange of security.

During the exchange of securities between two banks, he take time and for a short period of time with those
money he apply them in stock market to earn extra profit.

He swaps money between diffrent banks as banks sign the cheque in name of Harshad Mehta because banks
never know with whom they were making contracts with.

Harshad had done money exchange deals with many other banks and earn more profit. Harshad always used
ReadyForwardDeal process to earn profit.

He used these money to manipulate stock prices in market.

For making more profit, he took further steps and with help of bank he drafted fake receipts for himself and
stared using them. He gave those receipts to bank who want to purchase government securities and as
earlier mentioned banks trusted Harshad Mehta so they belive that they were actual receipts.

With help of those money, he manipulated many stocks in market and rose the price.

In few months, the stocks of ACC went from 200Rs to 9000Rs.

His scam was exposed when bear market came and Harshad faced a huge loss where he was unable to
retrun the money of bank.

Banks faced loss of 3000-4000 cr. As they lend money on basis of fake receipts.

The chairman of vijya bank took his life after he heard the scam as he himself provided cheques to
Harshadmehta.

On 9 Nov 1992, CBI arrested Harshad Mehta. There were 600 civil action suits and 70 criminal charges.

SEBI banned Harshad Mehta to invest further in stock markets.

MY POINT OF VIEW

 Banks should not trust any broker to provide securities or for lending money also
 There were time, when banks give fake receipts to Harshad Mehta, which was totally a part of crime.

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  On basis of those fake receipts, bank had lose of 3-4000 cr.
 And most important, because of this scam, the chairperson of vijya bank commited suicide who
provided cheques to Harshad Mehta on matter of trust.
 Although in the end, Harshad Mehta himself died with remaining 27 criminal charges in his list.

( By:- Manish Sinha [JL19RM021] [LT-07])

OBSERVATION

 Harshad Mehta was one of the greatest registered broker in India.

 Mr. Mehta used the ready forward (RF) deal to insert money into the market.
 With the help of Bank’s employee Mr. Mehta get fake bank receipts issued.
 Mr. Mehta utilized these BRs to get different banks to loan him cash under the bogus impression
that they were loaning against government protections.
 He was killed in light of the fact that numerous powerful individuals were included and they can be
discovered engaged with this trick.

JUDGEMENT
 Harshad Mehta and his brother were arrested by investigation agencies in November 1992.
 He was charged with over 70 criminal cases (mostly relating to bribery, cheating, forgery, criminal
conspiracy and falsification of accounts) and over 600 civil action suits.
 In 1993, Mehta worked up a tempest when he openly reported that he had paid Rs 1 crore to Prime
Minister PV Narasimha Rao.
 On 31- December 2001, at the age of 48, Mehta died with 27 cases still pending against him in Tihar
Jail.
 In 2008, Mumbai court has denounced 9 individuals, including Ashwin Mehta, brother of harshad
Mehta, if there should arise an occurrence of hoodwinking the SBI for Rs.105 crores
 In 2019, family liberated from Rs. 2000 crore of tax demand after 27 years.

( By:- Shivanand Chaudhary [JL19RM050] [LT-07])

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Harshad Mehta Scam worth Rs 3500 crore

 Harshad Mehta was born in 1954 into a very poor family. He completed his high school from Raipur
but he was a very average kind of student. Who didn’t show any kind of promiseAfter completing his
schooling he came to Mumbai where he did his b.com from Lala Lajpat Rai college.
 He struggled to sell garments and appliances etc, His luck turned around when he joined New India
Assurance Company as a salesperson and got interested in the stock market. After that, he quit the
job and joined a brokerage firm and learned the ins & out of the stock market also made connection
with the influential brokers and within 3 years he became a broker at BSE(Bombay stock exchange).
 In 1990 he also established his firm called GROW MORE RESEARCH AND ASSET MANAGEMENT, but
he had great ambition to more money. Where he started finding a loophole in the banking system,
as the RBI has made a mandate of keeping a certain amount of government bonds with the banks.
 He was dealing with almost every bank, whenever the stock price would rise he would liquidate his
position from the stock market and take care of any deficits as he was reading the money with the
bank and the stock market. He conspired with two banks(Bank of Karad and Metropolitan
cooperative bank) to issue fake bank receipts that had no legal holding, just a piece of paper.
 An Investigating journalist named Sucheta Dalal got went of modus operandi and published an
article in Times of India newspaper. As this shock, the stock market and the Indian banks became
aware of the money also it did not take much time for CBI to get into the matter they filed 70 cases
of fraud.

WARNING

Harshad Mehta's story and more recently Nirav Modi scandal are such fraud which makes us getting
the thought of our banking system and stock market are at risk the general public money being
exploited with some of the banking officials helping to lead such fraud. A general reminder as to
whenever a company starts to grow rapidly with greater valuation the investor must be very aware
of the working of the company is under the legal norms and abide by law considering the general
public investment.

( By:- Vignesh Gupta [JL19RM058] [LT-07])

FACTS

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  The scam was of diversion of bank funds worth Rs 3500 crore.
 Ready Forward deal was used for the scam.
 Journalist SuchetaDalal exposed Mehta’s scam
 He took advantages of loopholes in banking system
 He triggered SENSEX in 1992 .
 He accused Prime Minister P.V. Narsimha Rao for taking Rs.1crore for removing all the cases against
him.
 The chairman of Vijaya bank committed suicide.
 He died in Tihar prison, some believe that he was murdered .
 Special court was set up to facilitate speedy trial.
 His total liabilities was of around Rs.16,044 crore .
 His wife filed a case against a local broker and won the case in 2019 for Rs.6 crores.

OBSERVATIONS
 According to me his motive is to trigger SENSEX and he did it.
 He was murdered because many influential people were involved and they can be even found
involved in this scam.
 He was one of the greatest stockbroker in india .
 He has exploited several loopholes in the Indian banking system

JUDGEMENTS
 Mehta and his brothers were arrested by CBI on Nov 9 1992 for misappropriating more than 27
lakhs shares of about 90 companies
 He was later charged for 72 criminal cases and more than 600 civil actions suits were filed against
him
  On , September 1999, Bombay High Court convicted and sentenced him to 5
years imprisonment and a fine of ₹25,000.
  On 14 January 2003, Supreme court of india confirmed High Court's judgement. It was a 2:1
majority judgement. 
 In 2003 , when he died in Tihar jail he was convicted for only one case .
 In 2018 ,Mumbai court has accused 9 people ,including Ashwin Mehta, brother of Harshad Mehta, in
a case of duping the SBI for RS.105 Crores.
 In 2019 , Jyoti Mehta wife of Harshad Mehta won a case against a local broker for a claim of Rs. 6
crores
 In 2019 , Family free of Rs.2000 crore of tax demand after 27 years

( By:- Yuvika Singh [JL19RM063] [LT-07])

OBSERVATION

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Harshad Mehta was an Indian stock broker and he was known as a big bull of stock exchange. He completed
his graduation from Lala Lajpat Rai College, Mumbai. After this he worked in different companies for 2 years
after that he developed the interest in share market and joined the stock broker B.Ambalal in 1980s. In 1981
he joined J.L Shah and Nandalal Sheth as a sub broker. After gaining knowledge about stock market he and
his brother started his own firm named as Grow More Research and Asset Management. Later he became an
active member in Bombay Stock Exchange as a broker.

For scam Harshad Mehta used two instruments the first one was Ready Forward Deal and second one was
Bank Receipt.

Ready Forward deal was the short term loan instruments for bank. There was some loopholes in the RF deals
and Harshad Mehta know the loopholes and by using that he made biggest scam and earn ample of illegal
money. He also make fake bank receipt for earning money. When any bank wants to sell their government
securities then as a collateral bank use to give a receipt not the actual securities and that receipt was called
Bank receipt. He makes fake receipts and took money from bank against those fake receipts.

He used this money to invest in stock market due to which the share price of ACC increases to Rs 9000 from
Rs 200 in few months. Due to drastic change in price people started investing in it and prices of stock went
to peak and he started earning profit, by that profit he used to return the money to the bank and collect the
fake bank receipt. After sometime when the prices started decreasing Harshad suffered huge losses and was
unable to pay money to the bank.

On 23rdapril 1992, the scam was exposed by journalist Sucheta Dalal in TOI. Due to Harshad Mehta’s scam
banking sector suffered the loss of almost Rs 4000 crores.

JUDGEMENTS
 Harshad Mehta was arrested by investigation agencies in 1992.
 The investigation agencies charged with over 70 criminal cases and over 600 civil action suits.
 In 1993, he announced that he paid 1 crore to Prime Minister PV Narasimha Rao.
 In 2001, he died at the age of 48 with 27 cases still pending against him.
 In 2019, Jyoti Mehta wife of Harshad Mehta won a case against local broker for claim of Rs. 6 crores.
 In 2019, Mehta family free from Rs 2000 crores of tax after 27 years.

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