Harshad Shantilal Mehta. One of the top names of crime lists in 1992. In the world of financial crime his name was very well known. During the government of P.V. Narsimha Rao. The 1992 security scam had made him the center of attraction. Mehta was considered as the Amitabh Bachchan of the stock market.
He was born on 29 July, 2954 at Gujarat, India. By profession he was a businessman and stockbroker. He was charged with 27 crimes. But he was only convicted of four, and that before his death at age 47 in 2001. The allegations was Mehta engaged in a massive stock manipulation scheme financed by worthless bank receipts, which his firm brokered for "ready forward" transactions between banks. Mehta was convicted by the Bombay High Court and the Supreme Court of India for his part in a financial scandal valued at ₹INR24,000 Crores which took place on the Bombay Stock Exchange (BSE). The scandal exposed the loopholes in the Indian banking system, Bombay Stock Exchange (BSE) transaction system and SEBI further introduced new rules to cover those loopholes. He was on trial for 9 years, until he died at the end of 2001.
According to the source, 'up to the early 90's banks in India were not allowed to invest in the equity markets. However, they were expected to post profits and to retain a certain ratio of their assets in government fixed interest bonds. Mehta cleverly squeezed capital out of the banking system to address this requirement of banks and pumped this money into the share market. He also promised the banks higher rates of interest, while asking them to transfer the money into his personal account, under the guise of buying securities for them from other banks. At that time, a bank had to go through a broker to buy securities and forward bonds from other banks. Mehta used this money temporarily in his account to buy shares, thus hiking up demand of certain shares (of good established companies like ACC, Sterlite Industries and Videocon) dramatically, selling them off, passing on a part of the proceeds to the bank and keeping the rest for himself. This resulted in stocks like ACC (which was trading in 1991 for ₹200/share) to nearly ₹9,000 in just 3 months.'
'Another instrument used in a big way was the bank receipt. In a ready forward deal, securities were not moved back and forth in actuality. Instead, the borrower, i.e. the seller of securities, gave the buyer of the securities a BR. The BR confirms the sale of securities. It acts as a receipt for the money received by the selling bank. Hence the name – bank receipt. It promises delivery of the securities to the buyer. It also states that in the meantime, the seller holds the securities in trust of the buyer sale.'
Having figured this out, Mehta needed banks, which could issue fake BRs, or BRs not backed by any government securities. Two small and little known banks – the Bank of Karad (BOK) and the Metropolitan Co-operative Bank (MCB) – came in handy for this purpose.'
'Once these fake BRs were issued, they were passed on to other banks and the banks in turn gave money to Mehta, plainly assuming that they were lending against government securities when this was not really the case. He took the price of ACC from ₹200 to ₹9,000. That was an increase of 4,400%.The stock markets were overheated and the bulls were on a mad run. Since he had to book profits in the end, the day he sold was the day when the markets crashed.'
On 23 October 2020 a Bollywood movie was released I.e. 'The Big Bull'. It was based on Mehta's life scenes and financial crimes. Abhishek Bachchan was leading the film.
The recent arrival of Scam 1992 based on Harshad Mehta has left everyone speechless. The cast depicting the fraud of 1992 has clearly marked its place in the industry. The launched Sony Liv Series not only talks about the scandal but shares the story of a middle class man who doesn’t want to live a mediocre life and believes in himself. Read - SCAM 1992 - Risk Hai to Ishq Hai
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