HARSAD MEHTA SCAM

PRESENTED BY : ARCHANA PRADHAN

ROLL NO: 1983031
BA.LLB (A)
CONTENTS

• Introduction
• Exposer of Scam
• About Scam
• Impact of Scam in the Stock Market
• Regulary action taken against Mehta
• Conclusion
INTRODUCTION
• Exposer of the Scam:-
• On 20th April 1992, a Journalist named Sucheta Dalal exposed Mehta's Scam.
• She is a columnist in Times of India
• The instrumental were used in this Scam
• Mehta has used 2 instruments in this Scam
• (i) Ready forward deal
• (ii)Bank receipt
• Ready forward deal:-
• (a)A secure short-term (typically -15days) loan from one bank to another.
• (b)Bank lends against Govt. Securities.
• (c) A broker usually brings together two banks for which he paid a commission.
• (d)The security and payments were delivered through the broker in the
process.
• (e) In such settlement the banks may not know with whom they are
.
dealing.
• Bank receipt:-
• (a)In a RF deal securities were not moved back and forth in actually.
• (b) The borrower, i.e the seller of the securities, gave the buyer of the
securities a bank receipt.
• (c)Bank receipt serve 3 functions
• Confirms the sell of securities
• States that the securities are held by the seller in trust for the buyer
• Acts as a receipt for the received money by the selling bank.
• (d) In this Scam, the Bank of Karad and Metropolitan co-operative bank
had issued fake BR.
 .

Sensex fell from 4500 to 2500 loosing 100,00crore in market capitalization.

The liberalization policies were put on hold by the Govt.
Inability of Indian companies to raise capital in world markets.
Holding banks of fake BR had to face losses.
BR has removed by RBI.

Regulatory action taken against Mehta

→Mehta was later charged with 72 criminal offences, and more than 600 civil action suits
were filed against him.
He was arrested and banished from the stock market.
➡ Mehta and his brother were arrested by CBI on 9th nov 1992 allegedly misappropriating
more than 27 lakh shares about 9 companies..
CONCLUSION
• Harshad Mehta was a brave stock broker.
• He knew the loopholes in system as well as how to exploit that
loopholes.
• His whole intension for 9 years and of the criminal charges brought
against him, he was only convicted of one, before his death at age of
47 in 2001