Professional Documents
Culture Documents
B.B.A (2020-23)
Submitted in the partial fulfilment for the degree of
Bachelors of Business Administration
S.C.V.B. DEGREE COLLEGE PALAMPUR
SPECIALISATION FINANCE
UNIVERSITY ROLL NO 5200710022
CERTIFICATE
____________________________
External Examiner
DECLARATION
I ISHAN RANA from Shaheed Captain VIKRAM
BATRA GOVT College PALAMPUR, student of
BACHELORS OF BUSINESS ADMINISTRATION,
semester VI, here by submit my project report on
VARIOUS FINANCIAL SCAMS IN INDIA.
Date: __________
ACKNOWLEDGEMENT
CONTENTS:
SR.NO PARTICULARS PG.NO
5. Corporate Governance
6. Conclusion
7. Bibliography
A scam is a dishonest attempt to trap you into parting with your money.
true. Someone may email you, phone, text-message or post an offer that
they press you to take up. Scams can reach their target audience in many
direct mail, text messaging, phone calls and e-mail are all widely used.
first giving you a very good offer about something but later on you would
be shocked to know that the person was simply bluffing and you have lost
your money. An example of this can be the lottery scam. For example a
person calls or emails you and tells you that you have won a lottery prize
but to get the money there is a small processing fee, you have to pay that
1) 2G Spectrum Scam
3) Satyam Scam
4) Telgi Scam
5) Bofors Scam
various sectors, and is listed on the New York Stock Exchange and Euro
had over billion dollar revenue. Sat yam’s network covers 67 countries
China, Japan, Egypt and Australia. It serves over 654 global companies,
acquire two group firms - Maytas properties and Maytas Infra. The BOD
of Satyam had approved the founder’s proposal to buy 51 per cent stake
US$ 0.3 bn for the 51% stake in Maytas Infra.This is the move that
deal is not profitable for investor’s .So after this announcement they
Maytas infrastructure:
The company is run by the sons of Ramalinga Raju .It was started in the
late 1980’s by Ramalinga Raju. The main reason for the debacle of
Maytas properties:
One of the reasons for the debacle of Maytas properties is the ongoing
economic slowdown. The company has huge land banks and the prices
ANALYSIS:
was very well known in Stock Exchange with an increasing price of the
When he opened his Sydney office a few years ago, he occupied premises
invite Satyam to set up operations in their areas. But once Mr. Raju sold
shares to the Indian public in 1992 and later, went for a New York listing
Ever competitive, he was also in rush to catch the market leaders, Tata
obsessed with getting past the billion-dollar sales mark. When he got
(S$3.1 billion) sales in the year to March 31; 2008.With the ever-rising
pressure to perform, Satyam began doctoring the books to show bigger
years back. For Satyam, the recent developments are a direct leftover of
the past. In fact, the story is about a decade old. In late 1999, India World
India World had a top line of just Rs 1 crore and a net profit of an
Sify, was paying this astronomical sum not just for India World but for a
khel.com and khoj.com. The argument dished out was based on the
potential of the internet business and the logic of eyeballs was driving this
valuation story. One was not sure about the source of funds and how
Satyam of withholding facts and claimed they were defrauded. This was
made a rights issue of 12 lakh shares at par just before this merger. A
third of this was bought by Satyam Computer while the remaining 8 lakh
shares went Srinivasa Raju’s way after they were renounced. Once
proportion, Mr. Raju got 8 lakh shares at just Rs 10 each, when the shares
was willing to stand up and face the music for his transgressions. If Raju
was dressing up the bottom-line, it was only to boost the company’s
higher valuation also enabled Raju to borrow more money against his
shareholding.
QUERIES:
Mr. Raju started doctoring the sheet simply to show superior performance
properties?
people as BOD.
If satyam was fudging funds, where were the funds for all cash
consultancy group 5.5 Mn (All cash deal)4) Jan-08 Chicago based Bridge
Who is guilty in this sordid state of events? MR. Raju is by far the father
of this fraud. But there were others who are also culpable.
1. The auditors:
What were the auditing company, Price waterhouse Coopers, doing?
PwC has written a letter to the BOD of Satyam that its audit may be
check whether the money has indeed come or not. They check
or were the bank statements forged? No one knows yet. The company
2. The promoters:
Since the promoters, in this case, held only about 8 percent shares, their
3. The Sebi:
The Sebi had in December given a clean chit to Satyam in the probe on
If the auditors were conned, it means that either the bank statement or
Despite the shareholders not being taken into confidence, the directors
6. The government:
The government too is equally guilty in not having managed to save the
losing heavily.
PART 1:
Harshad Mehta was born n 29thy July in a Guajarati Jain family. Moved
from small town Raipur to find his future in Mumbai. First job as
dispatch clerk in new India assurance. Worked with stock brokers and
soon managed to get a broker’s card. Soon started his own ventures grow
seller and celebrity of the financial world. People started to address him
as the” Big Bull of Market”. On April 23, 1992 journalist Suchita Dalal in
Mehta. He was later charged with 72 criminal offences and 600 civil
actions were filed against him. He died in 2002 due to a massive heart
attack in a jail in thane, with much litigation still pending against him.
heavily in certain shares at the start of the day which led to a sharp
increase in the price of the stock and then cashing in at the end of the
4000 Cr. from the banks to stockbrokers from April1991 to May 1992.
He caused the steep rise in the Stock market index in the year 1992 by
were:
Reliance
Sterlite
Videocon
TABLE: 1
The graph shows the rise in the Sensex during the period when Harshad
exchange increasing the liquidity and thus arbitrary increase in the prices
of some shares.:
READY FORWARD (RF )
Disappearance of money:
money swindled from the banks. At this stage we can only conjecture
about where the money has gone and what part of the misappropriated
amount would be recovered. Based on the result of investigations and
However, since the share prices have dropped steeply from the
question is what are the shares worth today? Till February 1992,
It is well known that while Harshad Mehta was the "big bull" in
in the market with money cheated out of the banks. Since the stock
prices rose steeply during the period of the scam, it is likely that a
It is rumored that a part of the money was sent out of India through
A part of the money must have been spent as bribes and kickbacks
A part of the money might have been used to finance the losses
sheets. In other words, part of the money that went out of the
Immediate impact :
After the Harshad Mehta scandal was exposed, April, 1992, the situation
in share market was that of utter chaos. The first impact of the scam was a
steep fall in the share prices. The index fell from 4500to 2500
However, the major damage to the stock market did not stop here. Since
the accused were active brokers in the stock markets, they had traded a
large number of shares during the previous year. All these shares became
tainted and worthless and could not be used in the market. This was a
great loss to the innocent investor who had bought these shares much
There was a lot of media coverage on the scam and the political parties
was under immense pressure and its liberalization policies were severely
criticized. It was also believed that Harshad Mehta and his accomplices
were behind framing of these policies. In the end the government had to
put the liberalization plans on hold. SEBI had to postpone the sanctioning
be delayed. The much talked about entry of foreign pension funds and
mutual funds became more remote than ever. The Euro-issues planned by
compromised.
Fake bank receipts (BR) which were an integral part of the execution of
the whole scam landed the banks involved in a tight spot. These BR were
declared void and public money was at stake. At least ten prominent
banks were involved in this; some of them being SBI, Standard Chartered
and a subsidiary of RBI. The scam could have been checked in time with
proper policies and verifications. The government, the RBI and the
commercial banks are as much accountable as the brokers for the scam.
The brokers were encouraged by the banks to divert funds from the
banking system to the stock market. The RBI too stood indicted because
despite knowledge about banks over-stepping the boundaries demarcating
UCO Bank (Arrested and sacked) and V. Mahadevan, one of the MD the
PART-2
from trading in the Indian stock exchanges till 2017. He was trainee of
Harshad Mehta. Ketan Parikh can be best described as the pied piper of
Dalal Street. Parekh came from a family of brokers which helped him to
create a trading ring of his own. A Mumbai based stock broker chartered
stakes in the K-10 companies the buoyant stock markets from January
other brokers and fund managers started investing heavily in these stocks.
Aftek Infosys
DSQ Software
Global Telesystems
Satyam computers
SSI
ZEE Telefilms
On March 1st, 2001 a fall about 176 points was seen in the sensex. Prior
day union budget tabled prompted 177 sensex points increase. SEBI
triggering the crash. RBI ordered some banks to furnish data of capital
almost 20$ million. Then there was another sensex fall of 147 points.
Factors that helped Ketan Parekh:
Though Ketan Parekh was a successful broker, he did not have money to
buy large stakes as he held the stakes of more than RS.750 million in
from various companies and banks for this purpose. His financing
method was fairly simple. He bought shares when they were trading at
low prices and saw the rise in the bull market while continuously trading.
When the prices were high enough he pledged the shares with banks as
collateral for funds, and also borrowed from the companies like HFCL.
Bank (MMCB) Was KP’s main ally in the scam. KP and his associates
started tapping the MMCB for funds in early 2000. In December 2000,
First was the pay order route, where Ketan Parikh issued cheques
illegal and volatile Badla business. Calcutta Stock Exchange had the third
largest volumes in the country after NSE & BSE. Calcutta stock exchange
helped Ketan Parikh to cover his operations from his rivals in Mumbai.
Brokers at CSE used to buy shares at Ketan Parikh behest. These brokers
had to keep shares in their name and they were paid 2.5% weekly interest.
By February 2001, CSE were reduced to estimated Rs. 6-7 billion from
their initial worth of Rs.12 billion. Ketan Parikh’s Badla payments were
not honored on time for the settlement and about 70 CSE brokers
SEBI & CBI reveal that sheer magnitude of money by Parikh was a
staggering 64 billion.
The stock exchange acts as an intermediary between you and the actual
lender. You will be changed on interest rate for borrowing, which will be
determined by the demand for that stock under badla trading. Thus,
higher the demand for Wipro under badla trading higher will be the
interest rate. You can keep your borrowing unpaid for a maximum of 70
days, after which you will have to repay the badla financer through the
exchange.
margins was lowered from 80% to 60%. To revive the markets SEBI
imposed restriction on short sales and ordered. It suspended all the broker
allowed banks for collateralized lending only through BSE & NSE.
Conclusion:
History of C.R.Bhansali:
Born in a jute trader's house in Calcutta, Bhansali was a studious person.
the years, Bhansali acquired other degrees as well including ACS, Ph.D.,
company was changed to CRB Capital Markets (CRB Caps) and it was
and forex operations. CRB Caps was also very active in stock-broking
having a card both on the BSE and the NSE. The company raised over Rs
176 crore from the public by January 1995. The A+ rating given by
CARE and upfront cash incentives of 7-10% attracted investors in hordes
to Bhansali's schemes.
Table: 2
rich.
maiden public issue with a few hundred investors, largely from Calcutta's
close knit Marwari Jain community. Having had a company listed on the
own money to rig share prices in order to raise more money from the
markets in two ways. Firstly, he bought his own stock through private
In May 1996, CRB Caps opened a current account in SBI's main Mumbai
payment warrants could be presented at any of the 4,000 SBI branches for
and did not enjoy any overdraft facility. He was expected to deposit cash
upfront into the current account, along with a list of payments that had to
and that it was not possible for every branch to check with the head office
these instruments just like a demand draft. For about nine months, the
setup worked very well. However, in March 1997, SBI realized that the
account had been overdrawn to the extent of a few crores. Bhansali was
called to the SBI office and asked to remit the difference immediately,
Frequent clashes occurred between RBI and SEBI in the media, with both
of them trying to prove how the other was responsible for not acting early
enough. The RBI claimed that it had no powers to examine the asset
quality of the CRB group and thereby was not in a position to pass any
raised by the group. The bank further claimed that the powers were
granted only in March 1997, when the RBI Act of 1934 was amended to
include specific provisions for the purpose. The bank also stated that it
had begun to examine the liabilities and not the assets. However, media
May 18, 1997 - hundreds of angry, frustrated and scared people stood
the scorching sun. They were waiting for Chain Roop Bhansali
Three days earlier the RBI had given Bhansali 72 hours to come up with a
were untraceable from the second week of May itself. The Central
Bureau of Investigation (CBI) locked and sealed the offices of the CRB
Group and arrested six persons, including four directors (two from
Bikaner and two from Mumbai) of the satellite companies of the group, a
seized incriminating files and other documents from the residence of the
Bhansali had fled India and was hiding in Hong Kong or Canada, the CBI
up petition claiming that the continuance of the CRB Group was not in
the interest of the public and depositors. The order prohibited CRB from
the RBI. Though it was not signed by him, the letter said that the RBI
added that the company was facing tremendous problems with payments
to fixed depositors. The letter further said that 'we have, also expressed
that in view of the precarious situation which is fast going out of our
would come out of hiding and work out a way to get out of the mess.
finance ministry held a meeting everyday to get to the bras stacks of the
CRB fiasco. In a meeting with SEBI, the finance minister criticized the
to the unit holders under the scheme; the investors were prematurely paid
Rs 4.95 per unit, which was its NAV as of 31 March 1998. When the
administrator had taken over, the assets of the scheme comprised the
fund's frozen bank accounts worth Rs 81 lakh, plus some dividends from
governance practices.
Corporate governance has also been defined as "a system of law and
corporate officers."
and transparent and that companies can be held accountable for their
need not only good internal governance, but also must operate in a sound
practice.
Principals of corporate governance:
meetings.
conduct for their directors and executives that promotes ethical and
Organizations should clarify and make publicly known the roles and
shareholders as the true owners of the corporation and of their own role
has been suggested that the Indian approach is drawn from the Gandhi
Unlike south –east and east Asia , the corporate governance initiative in
India and was not triggered by any serious nationwide financial, banking
1995, CII was set up a task force to design a voluntary code of corporate
governance. The final draft of this code was widely circulated in 1997.
In April 1998, the code was released. It was called Desirable Corporate
Bajaj Auto
Hindalco
Infosys
Nicholas Piramal
Bharat Forge
HDFC
BSES
employed
Consolidation of accounts.
Mandated Corporate Governance Guidelines:
composition:
1. Board must meet at least four times a year, with a maximum time
50%otherwise.
independence of judgment
supplied:
related questions.
professional advice.
Disclosures to shareholders in addition to balance
5. Remuneration of directors.
acts.
8. Details of grievances of shareholders, and how quickly these were
shareholders.
agents.
12. Details about the share transfer system. Stock price data over the
index.
as well as spirit.
The fact that white collar crime continues to occur, and seemingly at an
increasing rate, suggests that the expected costs do not outweigh the
So this concludes the list of Indian scams of all times. According to the
ethics, and care for the poor. To some it is an economic miracle and a
ethnic and rich-poor divisions and violence. Above all however, and not
far below the surface, India is a maze of unethical, unlawful and illegal
swindles that link most politicians, many bureaucrats, and a large number
1. www.caseplace.org
2. www.icmrindia.org
3. Articles.timesofindia.indiatimes.com
5. Dagar, S.S. (2009). How Satyam was sold the untold story.