Haad Mehta Scam Analysis

HARSHAD MEHTA SCAM, 1992
Harshad Mehta’s scam is one of the biggest scam of the early 90’s which shakes the whole corporate sector. Harshad Mehta was a famous notable stock broker of the era of 90’s who handle the stock market so cleverly in 1992 that he succeeded to earn a lot by simply manipulating the funds of bank .
List of Events
In the early years of 1990’s, Harshad Mehta comes into limelight of stock market
• Harshad Mehta is a Stock Broker by Profession
• Founder of Grow more Research and Asset Management company limited
• Promoter of Replacement cost Theory
• He dealing particularly in shares of Associated Cement Co. (ACC), Apollo Tyres, Reliance, Tata Iron and Steel Co. (TISCO), Bpl, Sterlite and Videocon
• Famous broker of

He had got that much position in stock market within a few couple of years which was not acquired by others in their lifetime . In 1990’s Indian banks were tussled for valuable gains. This was happens because of taking away of banking business by other rivals who were providing better services and results to the investors. This increasing contention and impulsion of banks to attain more benefits then the other rivals put the banks into the game plan of the brokers like Harshad Mehta . Mehta was worked as a broker with many of the banks at that time and he by taking advantages of his trustworthy position started playing a smart game. He asked bank for signing a cheque on his own name because he was not sure about with whom he was going to end the deal and on the Bank receipts he taking money from other banks

This shows the lack of ethical behaviour in the banking system, they took zero effort to cross check the brokers. One of the biggest examples is Vijaya bank who issued cheque without verification. It was an example of absolute failure of Corporate Governance and Mismanagement .The scam impacted the whole stock exchange, the market faced loss of 100,000 Cr. by sudden fall of index from 4500 to 2500 .
SEBI was setup in 1988 but SEBI has no authority to deal with the matter where involvement of Investors and Brokers. But after Harshad Mehta’s Scam Government decided to confer SEBI with powers of protecting the status of Investors . In pursuance of this government approved the SEBI Act, 1992 . This new act confers three functions to SEBI .
 Protection function: - To protect the stock markets from unethical behaviour of fraudulent investors and investors from unfair trade practices.
 Development Function: Lawful development of Stock markets
 Regulation Function: For ensuring fair trade practices regulate the transactions of the stock markets.

This scam raised the standard of SEBI from as a Regulatory Authority to the Statutory Authority as a separate legal