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ON

MEHT
A

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PRESENTATI
ON

HISTORY OF HARSHAD MEHTA BEFORE SCAM


Harshad Shantilal Mehtawas born 29
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july 1954 in a Gujarati Jain family. His


early childhood was spent in Mumbai
where his father was a small-time
businessman. Later, the family moved
to Raipur in Madhya Pradesh after
doctors advised his father to move to a
drier place on account of his indifferent
health. But Raipur could not hold back
Mehta for long and he was back in the
city after completing his schooling,
much against his fathers wishes.
ASHWIN
MEHTA

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a stock broker on the Bombay


Stock Exchange, who did very
well for himself. At his peak, he
lived almost like a movie star in a
15,000 square feet house, which
had a swimming pool as well as a
golf patch. He also had a taste for
Harshad
Mehta
making
waves
in the stock market. He had
flashy cars,
whichwas
ultimately
led
to
been
buying shares heavily since the beginning of 1990. The shares
his downfall.
which attracted attention were those of Associated Cement
Company (ACC). The price of ACC was bid up to 10,000. from Rs
200 .For those who asked, Mehta had the replacement cost theory
as an explanation. The theory basically argues that old companies
should be valued on the basis of the amount of money which would be
required to create another such company. Mehta was the darling of
the business media and earned the sobriquet of the Big Bull, who
was said to have started the bull run. But, where was Mehta

getting his endless supply of money from? Nobody had a clue.

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Mehta gradually rose to become

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FAVOURITE STOCKS OF HARSHAD


MEHTA -

BANKING FAULTS RESULTING IN SCAM

A secured short-term (typically 15-day)


loan from one bank to another

Bank lends against government securities

A broker usually brings together two


banks for which he is paid a commission

The securities and payments were


delivered through the broker in the
settlement process

In a RF deal securities were not


moved back and forth in actuality

The borrower, i.e. the seller of


securities, gave the buyer of the
securities a Bank Receipt

Bank
receipts
serve
three
functions
1) Confirms the sale of securities
2) States that the securities are
held by the seller in trust for the
buyer
3) Acts as a receipt for the
received money by the selling
bank

Bank Receipts

In such settlement the banks may not


know with whom they are dealing.

In this scam Bank of Karad &


Metropolitan Co-operative Bank

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Ready Forward Deal

IN BANKING SYSTEM ASSETS DONT


MOVE, BUT ONLY THROUGH
RECEIPTS.

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READY FORWARD
LOOPHOLE

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TAKE FRAUD TO
NEXT LEVEL

MEHTA
BANK

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FAKE
BR

PROFIT
KEPT
BR
RETIRE
D
SOLD
FOR
PROFIT

MONEY
SHARE
S
BOUGH
T

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Issue fake BR

Borrower bank

Broker

Lender bank

Harshad Mehta

Funds
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MECHANISM OF MEHTAS TRADING

STAGE2

STAGE3

STAGE4

BANK OF KARAD (BOK) AND THE METROPOLITAN


COOPERATIVE BANK (MCB) AGREED TO ISSUE FAKE
BRs.

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STAGE1

BR PASSED TO ANOTHER BANK, MONEY ACQUIRED.

MONEY THUS USED TO ENHANCE PRICES IN THE STOCK


MARKET, INITIATING BULL RUN.
SHARES SOLD FOR SIGNIFICANT PROFITS. BR RETIRED.

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EXPOSURE , TRIAL AND CONVICTION

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Also accused of offering Rs. 1


cr. Bribe to former PM PV
Narsimha Rao, to cover up the
scandal.
A decade later, Mehta died in
a hospital on 31 december
2001, with 27 cases still
pending against him

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THROUGH OUT THE PAST YEARS MANY SCAMS HAS BROKE


OUT BUT THIS SCAM HAS MAINTAINED ITS POSITION IN TOP
TEN SCAMS IN INDIA BY THIS WE CAN ESTIMATE HOW MUCH
BIGGER THE SCAM WAS.

CURRENTLY
IT IS AT NO.6

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FACTS OF SCAM

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METROPOLITAN BANK AND BANK OF KARAD


GOT SEVERELY AFFECTED AND THEIR
MANAGERS COMMITED SUICIDE.
K.M. MARGABANDHU, THEN CMD OF THE UCO
BANK GOT ARRESTED IN THE CASE.
V. MAHADEVAN HAVE TO VACATE OFFICE AS
MANAGER OF SBI
CHAIRMAN OF VIJYA BANK COMMITTED
SUICIDE BEING GUILTY OF HAVING ISSUED
CHEQUES TO MEHTA.
MANY INDIAN AND FOREIGN BANK GOT
AFFECTED INCLUDING NATIONAL HOUSING
BANK.(City bank & Standard Chartered)

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IMPACT ON PARTICIPATORIES IN SCAM

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IMPACT ON ECONOMIC MARKETS

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CONCLUSION

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This is reality of our country many of the scams took


place only because government was involved . Legal
authorites and Regulateries were ignorant of the fact
that where harshad mehta was earning this huge
amount of money and even after discovering the scam
legal proceeding took 10 years to give decision on the
case.In last decade many scams have broken out and
in future also many will arise if we dont.
It shows that even without hard work, using illegal
means, you can quickly reach the top but it is not
sustainable. The fraudster not only spoils his future
but also that of innocent people who were never
involved in it.
N.R.Narayana Murthy worked hard, became popular for
good reasons and made millions of people richer by
creating jobs.
Harshad Mehta worked illegally, became popular for
bad reasons and made millions of people go bankrupt.

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