Harshad Mehta Scam

One thing common in all the scammers is that they have found the loophole in the Indian Legal System and exploited the same to earn an insane amount of wealth. Harshad Shantilal Mehta was an average student from Raipur, Chhattisgarh, who laundered 24000 Crores in a short span of 3 years.

He studied in Mumbai and did small jobs, doing the same he joined New India Assurance Company as a salesperson, which directed his interest in the Stock Market. He realized he was born for this, hence quit his job and joined a stock Market Brokerage Firm in 1981 and learned the market and within 3 years he was the Broker in BSE. Later he established his firm, Grow More Research and Asset Management but he was unsatisfied with his success and therefore with his lust for money he started exploitation of the Market.

RBI has mandated all the banks to keep a certain minimum level of funds into government bonds or else were penalized by the RBI. If any bank would fail, it would borrow the bonds from other banks in return of some interest via, brokers. One of them was Harshad Mehta, who would get the cheque in his name.

He would arrange some time from both the lending and borrowing banks in place of making some arrangements and would invest such funds in the Stock Market, aggressively buying the stocks and earning higher returns in the meantime and repay investors when they demanded. By the end of time, everyone were satisfied because lending banks got desired interest and borrowing got government bonds.

Since a massive injection of liquidity, the share price would always pump since other investors also bought more stock in anticipation of more movement. 

He became more greedy and conspired with the officials of two Banks, Bank of Charade and Metropolitan Cooperative Bank to issue fake bank receipts which were not backed by any government Bonds and similarly, the process continued until an investigative Journalist, Sucheta Dalal got vent of his modus operandi and published an expose in TOI, which was the beginning of the end of his sham.

Officials got alerted and demanded back their money, but since the scandal broke market got crashing and value of Mehta’s Shares crashed steeply. CBI stepped up and charged him with 70 counts of Fraud. He was in Criminal Custody in Thane prison and died of Heart failure.

Some of the stocks pumped by Harshad were ACC from Rs. 200/share to Rs. 9000/share, Reliance, Apollo, BPL, Tata Steel, Sterlite Cooper.