Georg Hegel, a German philosopher once said:

“We learn from history what we do not learn from history.”

This quote is very apt, especially in the light of the Rs 13,000-crore Nirav Modi-Punjab
National Bank scam.
Why
?
Because back when India had just opened up its markets to the world in 1991, a stock
broker named Harshad Mehta had pulled off an even more audacious scam by
exploiting the loopholes in the Indian banking system.
• Who was harshad mehta??
 Harshad Mehta was an Indian stockbroker, well known for his
wealth and for having been charged with numerous financial
crimes that took place in the Securities Scam of 1992

Born as Harshad Shantilal Mehta in 1954 to a whilst his father ran a

lower middle-class Gujarati family, small business
spent his early childhood in Kandivali, completed his
Mumbai, schooling in Raipur. ,

took up odd jobs –

completed his [Link] from selling hosiery
from Lajpat Rai to sorting diamonds – he died in late 2001
College and for the next eight
years.
 Of the 27 criminal charges
brought against him, he was only
convicted of four, before his death
at age 47 in 2001.

It was alleged that Mehta engaged

in a massive stock
manipulationscheme

for his part in a financial scandal The scandal exposed the

Mehta was convicted by
valued at ₹ 4999 Crores which loopholes in the Indian banking
the Bombay High
took place on the Bombay Stock system, Bombay Stock Exchange
Court and Supreme Court of India
Exchange (BSE) (BSE) transaction system
His journey to becoming the ‘Big Bull’ Mehta began when he landed a job as a sales
person at The New India Assurance Company. It is here that he got interested in the stock
market, following which he quit and joined a brokerage firm in 1981. By the year 1990,
Mehta had risen from rags to riches and had become a prominent name in the Indian stock
market.

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 feet penthouse in the
tony area of Worli complete with a mini golf course and swimming pool, his fleet of a fleet
of cars including a Toyota Lexus, Corolla Starlet, 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.[11
2. What Was the Securities Scam?
The securities scam of 1991-92 refers to a diversion of bank
funds worth Rs 3,500 crore to a group of stockbrokers, led by
Harshad Mehta. These funds were then put into the stock
market selectively, causing it to surge to over 4,500 points. It
was first exposed by veteran journalist Sucheta Dalal in April
1992.

1992 :: Stock Broker Harshad Mehta Under Arrest after

Journalist Sucheta Dalal ( @suchetadalal ) Exposed Securities
Scam [Link]/W3TCXJH2Yw — indianhistorypics
(@IndiaHistorypic) September 12, 2017
Mehta’s favourite stocks included Associated Cement Company (ACC), Apollo
Tyres, Reliance, Hero Honda, Tata Iron and Steel Co (TISCO), BPL, Sterlite,
and Videocon, to name a few. The ACC, India’s foremost cement firm, was
Mehta’s favourite. He pumped money into its shares so aggressively that its
stocks rose from Rs 200 a share to Rs 9,000 a share in three years... a 4,400
percent rise!
He had the touch of Midas: everything he touched became gold and thousands
of gullible investors followed his lead. He was called ‘the Amitabh Bachchan
of the stock market’ and ‘the Big Bull.’ His 12,000 sq ft sea-facing Worli
penthouse, complete with a mini golf course and swimming pool and his fleet
of two dozen luxury cars, marked his steep and sudden rise to riches and
celebrity-status. Not a subtle or modest man, he even paid the Income Tax
Department an advance tax of Rs 26 crore just weeks before the scandal broke.
Mehta's illicit methods were exposed on 23 April 1992, when Sucheta Dalal
wrote an article in The Times of India detailing the loopholes in the banking
system that had been exploited by the stock bocker. She got the tip-off after she
saw him pull up at the State Bank of India offices in a brand new Toyota Lexus,
which had just been released internationally and costed more than Rs 40 lakh at
the time.
3. What Happened to Harshad Mehta?

• Harshad Mehta was arrested by the Central Bureau of Investigation (CBI) in November 1992,
along with his brothers Ashwin and Sudhir, who masterminded and executed this scam
together.
• Alongside, the Reserve Bank of India appointed a joint parliamentary committee (JPC), also
known as the Janakiraman Committee, to provide a comprehensive picture of the extent and
mechanics of the fraud.
• The government, through an ordinance, set up a Special Court for the trial of
offences in the case and also created an Office of the Custodian, occupied by a
bureaucrat and appointed by the court, to manage the assets of the scam-accused
during the trial and for the disbursement of dues to banks and the Income Tax
Department.

• Mehta and his brothers were released on bail after three months in custody, weeks
after which he publicly claimed, along with his lawyer Ram Jethmalani, that he had
paid Rs 1 crore to then Prime Minister PV Narasimha Rao as donation to the
Congress to get him “off the hook.”

• He even displayed the suitcase in which he allegedly carried the cash. Rao denied it,
and later, a CBI probe also found no concrete evidence of this bribery claim.
• Once out on bail, several stock market investors gave Mehta a hero’s welcome. He
made several comebacks after that as a “new age” stock market guru, and by 1997,
he had his own website and newspaper column where he would advise people about
what stock to buy and sell.

• Rigging was alleged here as well in return for favour and money from the top brass
of Sterlite, Videocon and some other firms. Despite the promptness shown by the
CBI and the JPC in uncovering this fraud, it took a while to put together criminal
evidence against Mehta.

• It was only in October 1997 that the Special Court set up to hear the bevy of cases
related to the securities scam approved 34 of the 72 charges brought forward by the
CBI against him.
• In September 1999, the Bombay High Court awarded five years rigorous
imprisonment to Mehta and three others in the Rs 380.97 million Maruti Udyog Ltd
fraud case (MUL), one of the many individual cases within the larger securities
scam.

• By the time he died, he had been convicted in only one (the MUL fraud) case, his
appeal against which was dismissed by the Supreme Court in 2003. The rest of the
criminal cases were abated due to his passing away, but the civil suits for the
recovery of crores of money remained
4. What Was the Extent of the Scam and What Is its Status Today?

Following the scam, the Reserve Bank of India had appointed the Janakiraman Committee to
probe it. In its first report, the committee quantified the scam amount at Rs 4,300 crore involving
units of the Unit Trust of India (UTI). Adjusted for inflation, this amount stands at over Rs 24,000
crore today.

Of these liabilities, Mehta’s family has to pay Rs 4,662 crore to various banks (mainly interest
charged over the years) and Rs 11,174 crore to the I-T Department.
The assets worth Rs 1,723 crore belong to 27 associates and family members of Mehta, who were
finally clubbed as an entity and held liable along with Mehta by the special court. It was
challenged by Mehta’s family but the Supreme Court upheld the decision of the custodian in May
2017.
The Mehta family – led by Ashwin Mehta, who has been representing the family in court for
decades now – is fighting this recovery amount at various levels, right from reducing their net
liabilities to safeguarding family assets from recovery and liquidation.

In the Supreme Court, Ashwin Mehta had argued that the claims made by the I-T Department
in its assessment reports were way too high and that the custodian had undervalued the
Mehtas’ assets purely taking into account the revenues of Harshad Mehta (and his affiliate
companies) and not his many incomes, such as TDS refunds. He also claimed that the
custodian was yet to recover the family’s shares in companies like the ACC and Apollo Tyres
worth Rs 300 crore and Rs 233 crore, respectively. He insisted that the family had more assets
than liabilities and not the other way around