Harshad Mehta

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Harshad Shantilal Mehta
Harshad Mehta

(1954-07-29)29 July 1954
Died31 December 2001(2001-12-31) (aged 47)
Criminal penalty5 years rigorous imprisonment

Harshad Shantilal Mehta (29 July 1954 – 31 December 2001) was an Indian stockbroker and a convicted fraudster. Mehta's involvement in the 1992 Indian securities scam (about ₹30,000 Crores) made him infamous as a market manipulator.[1]

Of the 27 criminal charges brought against Mehta, he was only convicted of four, before his death (by sudden heart attack) at age 47 in 2001.[2] It was alleged that 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[3] for his part in a financial scandal valued at 100 billion (US$1.3 billion) which took place on the Bombay Stock Exchange (BSE). The scandal exposed the loopholes in the Indian banking system and the Bombay Stock Exchange (BSE) transaction system, and consequently the SEBI introduced new rules to cover those loopholes. He was on trial for 9 years, until he died at the end of 2001 from a heart attack.[4][5]

Early life

Harshad Shantilal Mehta[6] was born on 29 July 1954,[7] at Paneli Moti, Rajkot district, in a Gujarati Jain family.[8] His early childhood was spent in Borivali, where his father was a small-time textile businessman.[9][10]


He did his early study in Janta Public School, Camp 2 Bhilai. A cricket enthusiast, Mehta did not show any special promise in school and came to Mumbai after his schooling for studies and to find work.[11] Mehta completed his B.Com in 1976 from Lala Lajpatrai College, Bombay and worked a number of odd jobs for the next eight years.[6]

Work and life

In his early life, Mehta did jobs, often related to sales, including selling hosiery, cement, and sorting diamonds. Mehta started his career as a salesperson in the Mumbai office of New India Assurance Company Limited (NIACL). During this time, he got interested in the stock market and after a few days, resigned and joined a brokerage firm. In the early 1980s, he moved to a lower-level clerical job at the brokerage firm Harjivandas Nemidas Securities where he worked a jobber for the broker Prasann Pranjivandas Broker who he considered his "Guru".

Over a period of ten years, beginning 1980, he served in positions of increasing responsibility at a series of brokerage firms. By 1990, he had risen to a position of prominence in the Indian securities industry, with the media (including popular magazines such as Business Today) touting him as "Amitabh Bachchan of the Stock market".[6]

Mehta founded Grow More Research and Asset Management, with the financial assistance of associates, when the BSE auctioned a broker's card [6] and actively started to trade in 1986.[6] By early 1990, a number of eminent people began to invest in his firm and utilize his services. It was at this time that he began trading heavily in the shares of Associated Cement Company (ACC). The price of shares in the cement company eventually rose from 200 to nearly 9,000 due to a massive spate of buying from a set of brokers including Mehta.[12] Mehta justified this excessive trading in ACC shares by stating that the stock had been undervalued, and that the market had simply corrected when it revalued the company at a price equivalent to the cost of building a similar enterprise; the so-called "replacement cost theory" that he had put forward.[13]

During this period, especially in 1990–1991, the media portrayed a heightened deified image of Mehta, calling him "The Big Bull". He was covered in a cover page article of a number of publications including the popular economic magazine Business Today, in an article titled "Raging Bull". His flashy lifestyle of a sea facing 15,000 square feet penthouse in the tony area of Worli complete with a mini golf course and swimming pool, and his fleet of cars including a Toyota Corolla, Lexus LS400, and Toyota Sera were flashed in publications. These further exemplified his image at a time when these were rarities even for the rich people of India.[14]

In criminal indictments later brought by the authorities, it was alleged that Mehta and his associates then undertook a much broader scheme, which resulted in manipulating the rise in the Bombay Stock Exchange. The scheme was financed by supposedly collateralised bank receipts, which were in fact uncollateralised. The bank receipts were used in short-term bank-to-bank lending, known as "ready forward" transactions, which Mehta's firm brokered. By the second half of 1991 Mehta had earned the nickname of the "Big Bull", because he was said to have started the bull run in the stock market.[13] Some of the people who worked in his firm included Ketan Parekh, who later would be involved in his own replicate scam.[11]

Background of the 1992 security fraud

Bank funds scam

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 (threshold) 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 kept the rest for himself. This resulted in stocks like ACC (which was trading in 1991 for ₹200/share) skyrocketing to nearly ₹9,000 in just 3 months.[11]

Bank receipt fraud

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 serves as a receipt from the selling bank, and also promises that the buyer will receive the securities they have paid for at the end of the terms.

Having figured this out, Mehta needed banks, which could issue fake BRs, or BRs not backed by any government securities.

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.[15] He took the price of ACC from ₹200 to ₹9,000 (an increase of 4,400%). Since he had to book profits in the end, the day he sold was the day when the markets crashed.[16][17]

Outbreak of 1992 securities fraud

On 23 April 1992, journalist Sucheta Dalal exposed illegal methods in a column in The Times of India. Mehta was dipping illegally into the banking system to finance his buying.

A typical ready forward deal involved two banks brought together by a broker in lieu of a commission. The broker handles neither the cash nor the securities, though that was not the case in the lead-up to the fraud. In this settlement process, deliveries of securities and payments were made through the broker. That is, the seller handed over the securities to the broker, who passed them to the buyer, while the buyer gave the cheque to the broker, who then made the payment to the seller. In this settlement process, the buyer and the seller might not even know with whom they had traded, either being known only to the broker. This the brokers could manage primarily because by now they had become market makers and had started trading on their account. To keep up a semblance of legality, they pretended to be undertaking the transactions on behalf of a bank.

Mehta used forged BRs to gain unsecured loans, and used several small banks to issue BRs on demand. Once these fake BRs were issued, they were passed on to other banks and the banks in turn gave money to Mehta, mistakenly believing that they were lending against government securities. This money was used to drive up the prices of stocks in the stock market. When time came to return the money, the shares were sold for a profit and the BR was retired. The money due to the bank was returned.

This went on as long as the stock prices rose, and no one knew about Mehta's operations. Once the fraud was exposed, though, many banks were left holding worthless BRs – the banking system had been swindled out of a whopping 40 billion (equivalent to 310 billion or US$3.9 billion in 2023). They knew that they would be accused if people discovered his involvement in issuing cheques to Mehta. Subsequently, it transpired that Citibank, brokers like Pallav Sheth and Ajay Kayan, industrialists like Aditya Birla, Hemendra Kothari, a number of politicians, and the RBI Governor S.Venkitaramanan all had allowed or facilitated Mehta's market manipulation.[18]

In popular culture


  • Mehta's life and his 1992 scam are covered in great detail by Sucheta Dalal and Debashis Basu in their book The Scam: from Harshad Mehta To Ketan Parekh.[19][20]

Films and television

See also


  1. ^ "The securities scam of 1992 – CBI Archives". cbi.gov.in. CBI (Central Bureau of Investigation), India. Retrieved 22 May 2018.
  2. ^ "Action against Harshad Mehta, Videocon, BPL and Sterlite (Press release 19 April 2001)". sebi.gov.in. SEBI (Securities and exchange board of India). Retrieved 30 January 2018.
  3. ^ "SC upholds Harshad Mehta's conviction". The Times of India. 14 January 2003. Archived from the original on 23 October 2013. Retrieved 14 October 2012.
  4. ^ "Admires of Harshad Mehta". Business Line.
  5. ^ "Harshad Mehta's scam unfold". Rediff.com.
  6. ^ a b c d e Parikh, Daksesh; Katiyar, Arun (8 January 2013). "Spreading Shockwaves". India Today. Retrieved 31 October 2010.
  7. ^ "Harshad Mehta & Ketan Parekh Scam". Flame. 23 April 1992. Retrieved 21 May 2013.
  8. ^ Aiyar, V. Shankar (10 September 2002) [14 January 2002]. "Scam-tainted stockbroker Harshad Mehta passes away". India Today. Retrieved 15 November 2020.
  9. ^ Mehta, Jyoti. "Life Journey of Harshad Mehta Before and After". www.harshadmehta.in. Archived from the original on 10 July 2022. Retrieved 1 May 2024.
  10. ^ Batra, Shubham (29 July 2022). "'Scapegoat' or mastermind of 1992 scam? Harshad Mehta's fall from gracestill haunts family". ThePrint. Archived from the original on 29 July 2022. Retrieved 1 May 2024.
  11. ^ a b c Dalal, Sucheta; Basu, Debashis (29 July 2014). The Scam: from Harshad Mehta to Ketan Parekh Also includes JPC Fiasco & Global Trust Bank Scam (8th ed.). Mumbai: Kensource publications.
  12. ^ Dalal, Sucheta (24 April 1992). "The pied piper of Dalal Street". The Times of India.
  13. ^ a b "Harshad Mehta's Scam". Flame.org. Retrieved 20 April 2012.
  14. ^ "Raging Bull – Harshad Mehta". Business Today. April 1991.
  15. ^ Dalal, Sucheta. "Revisiting 1992: The chickens come home to roost". Official website of Sucheta Dalal. Sucheta Dalal. Retrieved 22 May 2018.
  16. ^ Pathak, Rahul (2 January 2013). "Securities scandal: Investigators haul in more people, discover ever-widening net". India Today. Retrieved 22 May 2018.
  17. ^ "Scam 1992: Was Harshad Mehta the mastermind or fall guy of securities fraud? A bit of both". cnbctv18.com. 25 October 2020. Retrieved 27 October 2020.
  18. ^ Chakravarti, Sudeep (15 April 1993). "Book review: Debashis Basu's 'The fraud: Who Won, Who Lost, Who Got Away'". India Today. Retrieved 30 January 2018.
  19. ^ ISBN 8188154024, 9788188154029
  20. ^ Basu, Debashis, 1960- (2007). The scam : from Harshad Mehta to Ketan Parekh. Dalal, Sucheta (Updated 3rd ed.). Mumbai: KenSource Information Services. ISBN 978-81-88154-02-9. OCLC 496105068.{{cite book}}: CS1 maint: multiple names: authors list (link) CS1 maint: numeric names: authors list (link)
  21. ^ "SonyLIV Releases The Trailer Of 'Scam 1992' Based On Harshad Mehta's 1992 Stock Market Scam". Retrieved 17 August 2020.
  22. ^ "Aankhen may become a box-office classic". India Today. Retrieved 31 December 2013.
  23. ^ "Movie based on Harshad Mehta released". NowRunning.com. Retrieved 20 April 2012.
  24. ^ "Harshad Mehta Biography - Scam, Case, Net Worth, Family, Death - Beyond Bollywood". 14 May 2022. Retrieved 14 May 2022.

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