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Tech Insider
2021-02-04

Harshad Mehta scam 1992: A scam that changed the direction of the stock market

Harshad Mehta scam 1992: A scam that changed the direction of the stock market 

credit: third party image reference

If you know about the stock market, you must have heard the name Harshad Mehta. Harshad Mehta is the man who hit the country's financial markets hard in the 1990s.

The years 1990 to 1992 saw major changes in the Indian economy. But in the meantime, a scandal unfolded that changed the course of the stock market. Harshad Mehta was responsible for this scam. The scam was worth around Rs 4,000 crore and only then was SEBI empowered to stop the turmoil in the stock market.

Harshad Mehta , the main accused in the scam , died in 2002. But the memories of the 1992. stock market scandal are now in the minds of very few people.

credit: third party image reference

Who is Harshad Mehta?

  • Harshad Mehta was born on July 29, 1994 in Rajkot Panel Moti, Gujarat.
  • His childhood was spent at Kandivali in Mumbai.
  • He attended Holy Cross Baron Market Secondary School.
  • He did his early studies at Janata Public School
  • Mehta studied B.Com from Lajpat Rai College.
  • For eight years he did small jobs.
  • His first job was as a sales person in New India Assurance Company Limited.
  • He then joined a brokerage firm called Harijivan Das Nemidas Securities.
  • In 1984, he started his own company called Grow More Research and Asset Management and subscribed to the BSE as a broker.
  • He went to work for a lower level clerk at brokerage firm Harjivandas Nemidas Securities, where he worked for Prasanna Pranjivandadas, a broker he considered his "guru".
  • Mehta learned every argument in the market from Prashant Parijivadas.
  • Mehta was dubbed the 'Big Bull' for launching a bull run in the stock market .

 How did the stock market breakup happen?

  • Broker Mehta was blamed for the rapid rise in the stock market in 1990 and was given the status of 'Big Bull'.
  • The money was disclosed in April 1992.
  • Mehta used to take advantage of banking rules and invest crores of rupees in the stock market without telling the banks .
  • Mehta used to borrow money from banks for 15 days as an intermediary between the two banks and then return the money to the banks at a profit.
  • When the issue came up, the stock market started falling sharply.
  • Mehta used to make fake BRs from one bank, after which he could easily get money from other banks as well.
  • Following the revelation, Mehta was charged with 72 criminal offenses and a civil case.
  • What was the punishment, and how did death occur?
  • Mehta had to face several charges, but was convicted in only one case.
  • He was convicted by the High Court and sentenced to five years and Rs 25,000.

credit: third party image reference

Harshad Mehta was lodged in Thane Jail.

  • He complained of pain late on 31st December 2001 and was later admitted to Thane Civil Hospital.
  • He died at the hospital.
  • Recovery from family
  • Even after 25 years of this scam, his recovery was still starting from his family. The custodian sold Mehta's assets and paid more than Rs 6,000 crore to the bank and income tax department. In 2017 alone, Mehta's family paid Rs 614 crore to the bank.
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