Harshad Mehta

Harshad Mehta was an Indian stockbroker and is alleged to have engineered the rise in the BSE stock exchange in the year 1992. Exploiting several loopholes in the banking system, Harshad and his associates siphoned off funds from inter-bank transactions and bought shares heavily at a premium across many segments, triggering a rise in the Sensex. When the scheme was exposed, the banks started demanding the money back, causing the collapse. He was later charged with 72 criminal offenses and more than 600 civil action suits were filed against him. He died in 2002 with many litigations still pending against him.

Early life

Harshad Shantilal Mehta was born to Shantilal Mehta, a small businessman, and Rasilaben Mehta. He spent his early childhood in Mumbai the capital of Maharashtra and the family moved to Raipur in Madhya Pradesh sometime in mid-1960s.

He studied at the Holy Cross High School, located at Byron Bazaar area of Raipur. After completing his secondary education Harshad left for Mumbai. Supporting himself with odd jobs he completed a Bachelor’s degree in Commerce in 1965 from Lala Lajpat Rai College and started his working life as an employee of the New India Assurance Company. During this period his family relocated to Bombay and his brother Ashwin Mehta started to pursue graduation course in law at Lala Lajpat Rai College. His youngest brother Hitesh is a practising surgeon at the B.Y.L.Nair Hospital in Mumbai. After his graduation Ashwin joined (ICICI) Industrial Credit and Investment Corporation of India.

As a stock brokerIn the late seventies every evening Harshad and Ashwin started to analyze tips generated from respective offices and to clearly understand the stock market operation they extended their study to regular financial statement as well.

In the early eighties he quit his job and sought a job with stock broker P. Ambalal (who is affiliated to Bombay Stock Exchange) (BSE) before becoming a jobber on BSE for stock broker P.D. Shukla.

In 1981 he became a sub-broker for stock brokers J.L. Shah and Nandalal Sheth. After a while he was unable to sustain his overbought positions and decided to pay his dues by selling his house with consent of his mother Rasilaben and brother Ashwin. The next day Harshad went to his brokers and offered the papers of the house as guarantee. The brokers Shah and Sheth were moved by his gesture and gave him sufficient time to overcome his position.

After he came out of this big struggle for survival he became stronger and his brother quit his job to team with Harshad to start their venture GrowMore Research and Asset Management Company Limited. While a brokers card at BSE was being auctioned, the company made a bid for the same with financial assistance from Shah and Sheth, who were Harshad's previous broker mentors.

He rose and survived the bear runs, this earned him the nickname of the "Big Bull" of the trading floor, and his actions, actual or perceived, decided the course of the movement of the Sensex as well as scrip-specific activities.By the end of eighties the media started projecting him as "Stock Market Success", "Story of Rags to Riches" and he too started to fuel his own publicity. He felt proud of this accomplishments and showed off his success to journalists through his mansion "Madhuli", which included a billiards room, mini theater and nine-hole golf course.

During his heyday, in the early 1990s, Harshad Mehta commanded a large resource of funds and finances as well as personal wealth.

The fall

In April 1992, the Indian stock market crashed, and Harshad Mehta, the person who was all along considered as the architect of the bull run was blamed for the crash. It transpired that he had manipulated the Indian banking systems to siphon off the funds from the banking system, and used the liquidity to build large positions in a select group of stocks. When the scam broke out, he was called upon by the banks and the financial institutions to return the funds, which in turn set into motion a chain reaction, necessitating liquidating and exiting from the positions which he had built in various stocks. The panic reaction ensued, and the stock market reacted and crashed within days.He was arrested on June 5, 1992 for his role in the scam.

The extent

"The Harshad Mehta induced security scam", as the media sometimes termed it, adversely affected at least 10 major commercial banks of India, a number of foreign banks operating in India, and the National Housing Bank, a subsidiary of the Reserve Bank of India, which is the central bank of India.

A number of people holding key positions in the India's financial sector were adversely affected, which included arrest and sacking of K. M. Margabandhu, then CMD of the UCO Bank; removal from office of V. Mahadevan, one of the Managing Directors of India’s largest bank, the State Bank of India.

The end

The Central Bureau of Investigation which is India’s premier investigative agency, was entrusted with the task of deciphering the modus operandi and the ramifications of the scam. Harshad Mehta was arrested and investigations continued for a decade. During his judicial custody, while he was in Thane Prison, Mumbai, he complained of chest pain, and was moved to a hospital, where he died on 31 December 2001.

His death remains a mystery. Some believe that he was murdered ruthlessly by an underworld nexus (spanning several South Asian countries including Pakistan). Rumor has it that they suspected that part of the huge wealth that Harshad Mehta commanded at the height of the 1992 scam was still in safe hiding and thought that the only way to extract their share of the 'loot' was to pressurize Harshad's family by threatening his very existence.fact|date=October 2007 In this context, it might be noteworthy that a certain criminal allegedly connected with this nexus had inexplicably surrendered just days after Harshad was moved to Thane Jail and landed up in imprisonment in the same jail, in the cell next to Harshad Mehta's.

ee also

*Ketan Parekh
*Virendra Rastogi

External links

* [http://tanay.uni.cc/harshad/ From Pied Piper of the markets to Indias best-known scamster]
* [http://www.thehindubusinessline.com/2003/07/31/stories/2003073101810900.htm Sale of Harshad Mehta's Stocks]
* [http://www.tribuneindia.com/2002/20020101/biz.htm#5 Harshad Mehta's Profile]

ource

* The Great Indian Scam by S.K.Barua and J.R. Verma (ISBN 81-7094-128-8)