New Delhi: The Supreme Court on Friday upheld attachment of over Rs.

1,500-crore property of stock broker Harshad Mehta and his family members in Maharashtra. A Bench of Justices P. Sathasivam and B. S. Chauhan dismissed appeals filed by Harshad Mehta's wife Jyoti and two daughters against a Mumbai special court judgment upholding the order of attachment of the various properties involved in the stock market scam. Writing the judgment, Justice Sathasivam said: From the material placed, it is clear that the appellants are nothing but front benamidars of Harshad Mehta, and there is no acceptable material such as income-tax returns to show that the appellants were having sufficient funds in their hands due to the purchase and sale of shares. The important aspect is that the appellants have not explained the source of their income. The Bench said: The appellants are housewives having no independent source of income. It is impossible for such persons to have such huge amounts of money unless they were beneficiaries of monies diverted by the late Harshad Mehta and his other family members, who were notified, and firms belonging to the Harshad Mehta Group. The Bench said it could reasonably be suspected that the appellants were involved in the offence, considering the various reports of the Janakiraman Committee, the Joint Parliamentary Committee, and the Inter-Disciplinary Group (IDG), and also the fact that 28 members of the Harshad S. Mehta group including his family members/entities were notified under the Special Act Ordinance itself. The Bench said: The object of the Special Court (Trial of Offences Relating to Transactions in Securities) Act is not merely to bring the offender to book but also to recover what are ultimately public funds. Even if there is a nexus between a third party, an offender and/or property, the third party can also be notified. The purpose of the law is not to allow the offender to sneak out of the meshes of law. Reducing the legislation to futility shall be avoided and in a case where the intention of the legislature cannot be given effect to, the courts would accept the bolder construction for the purpose of bringing about an effective result. The Bench pointed out that the Act provided for stringent measures. It was enacted for dealing with an extraordinary situation in the sense that any person who was involved in any offence of transaction of any security could be notified, whereupon all his properties stood attached. There is nothing in the Act which suggests that only such properties which belong to the notified party and which have been acquired with the use of tainted funds alone can be attached for purposes of distribution under Section 11 of the Act.

OVERVIEW : OVERVIEW CAPITAL MARKET CAPITAL MARKET SCAM HARSHAD MEHTA KETAN PAREKH

CAPITAL MARKET ? :

CAPITAL MARKET ? The capital market is the market for securities, where companies and govt. can raise long term funds. It is a market in which money is lent for periods longer than a year. The capital market includes the stock market and the bond market

Slide 4: It is basically fraud done in the Capital market with the investors by manipulating the facts in order to attain enormous profits. What is Capital Market scam?

INTRODUCTION TO THE BIG BULL OF THE TRADING FLOOR. : INTRODUCTION TO THE BIG BULL OF THE TRADING FLOOR.

The Great Indian Scam-1992 : The Great Indian Scam-1992

Who is this man? : Who is this man? HARSHAD MEHTA- story Started his career with New India Assurance Co. Quit his job in 1981 to become a sub-broker. Went bankrupt in 1982 & recovered soon to become more stronger. Went on to become one the most successful broker The Rags to Riches Story, thereby earning the nick name of THE BIG BULL

What was the SCAM all about? : What was the SCAM all about? Diversion of funds Use of Ready Forward (RF) to maintain SLR (Statutory Liquidity Ratio) Creative Accounting Intra-day Trading

Slide 9: He triggered a rise in the Bombay Stock Exchange in the year 1992 by trading in shares at a premium across many segments. Taking advantages of the loopholes in the banking system, Harshad and his associates triggered a securities scam diverting funds to the tune of Rs 4000 crore (Rs 40 billion) from the banks to stockbrokers between April 1991 to May 1992. Exploiting the loophole in the banking system

Slide 10:

Mehta soon mastered the tricks of the trade by managing several brokers and set out on dangerous game plan. Mehta has siphoned off huge sums of money from several banks and millions of investors were conned in the process. His scam was exposed, the markets crashed and he was arrested and banned for life from trading in the stock markets. How it was done & role of the broker ?

Slide 11: He was later charged with 72 criminal offences. A Special Court also sentenced Sudhir Mehta, Harshad Mehta's brother, and six others, including four bank officials, to rigorous imprisonment (RI) ranging from 1 year to 10 years on the charge of duping State Bank of India to the tune of Rs 600 crore (Rs 6 billion) in connection with the securities scam that rocked the financial markets in 1992. He died in 2002 with many litigations still pending against him. Major culprits Brokers, Bankers, Financial institutions, Bureaucrats, etc.

His favorite stocks included : His favorite stocks included ACC Apollo Tyres Reliance Tata Iron and Steel Co. (TISCO) BPL Sterlite Videocon.

Market at Harshad Mehta scam : Market at Harshad Mehta scam

HARSHAD MEHTA : THE SCAMSTER. : HARSHAD MEHTA : THE SCAMSTER.

The End of the BULL Story : The End of the BULL Story Lifestyle (flashy cars & life like a celebrity) 31st December 2001 The Death Of The Bull Forever remembered as the Architect of the Rs.50 billion Scam

THE FOLLOWER OF THE BIG BULL : THE FOLLOWER OF THE BIG BULL

Introduction :

Introduction C.A by profession-comes from broking family background. Popularly known as the Pentafour Bull Known for his K10 series of stocks. KETAN PAREKH

THE K-10 STOCKS : THE K-10 STOCKS Amitabh Bachchan Corporation Limited (ABCL) Mukta Arts Tips Pritish Nandy Communications. HFCL Global Telesystems (Global) Zee Telefilms Crest Communications PentaMedia Graphics

Slide 19: Ketan Parekh followed Harshad Mehta's footsteps to swindle crores of rupees from banks. A chartered accountant he used to run a family business, NH Securities.Ketan however had bigger plans in mind. He targetted smaller exchanges like the Allahabad Stock Exchange and the Calcutta Stock Exchange, and bought shares in fictitious names.

WAYS HE FUNDED HIS SCAM : WAYS HE FUNDED HIS SCAM THE PAY ORDER ROUTE KP issued cheques drawn on BoI (Bank of India) to MMCB (Madhavapura Mercantile Cooperative Bank), against which MMCB issued pay orders. The pay orders were discounted at BoI. It was alleged that MMCB issued funds to KP without proper collateral security and even crossed its capital market exposure limits.

THE PAY ORDER ROUTE : THE PAY ORDER ROUTE KP reportedly used his BoI accounts to discount 248 pay orders worth about Rs 24 billion between January and March 2001. BoI's losses eventually amounted to well above Rs 1.2 billion.

WAYS HE FUNDED HIS SCAM : WAYS HE FUNDED HIS SCAM BORROWING FROM MMCB The second route was borrowing from a MMCB branch at Mandvi (Mumbai), where different companies owned by KP and his associates had accounts.KP used around 16 such accounts, either directly or through other broker firms, to obtain funds.

Slide 23:

Ketan borrowed Rs 250 crore from Global Trust Bank to fuel his ambitions. Ketan alongwith his associates also managed to get Rs 1,000 crore from the Madhavpura Mercantile Co-operative Bank. According to RBI regulations, a broker is allowed a loan of only Rs 15 crore (Rs 150 million). There was evidence of price rigging in the scrips of Global Trust Bank, Zee Telefilms, HFCL, Lupin Laboratories, Aftek Infosys and Padmini Polymer.

HOW THE SCAM BROKE OUT? : HOW THE SCAM BROKE OUT? His mode of raising funds by offerings shares as collateral securities worked well but..

Slide 25: Only till the prices of shares went up but it reversed when shares started falling from mar 2000. The crash was a result of fall at NASDAQ that saw a fall in K-10 stock as well In next 2 months, sensex declined by 23% and K-10 stock declined by 67%

WHAT NEXT? : WHAT NEXT? In May 2000, the market picked up back and the prices of K-10 rise again The prices of stock doubled like HFCL doubled from Rs 790 to Rs 1353 by July

THE FINAL TURN AROUND : THE FINAL TURN AROUND BY Dec.2000 the NASDAQ fell back again and the KP stocks went down as the prices of stock falling globally

Cont.. : Cont.. KP faced liquidity problems The CSE has payment crises and was a set back for KP because of three reasons which are-

THE DOWN FALL : THE DOWN FALL Stocks held by KP and his broker were reduced to 6-7 bn from 12bn Situation worsened when KPs badla payment was not honored and 70 CSE brokers along with top 3 brokers made default By mid March the value of shares went to 2.5-3 bn.

THE END : THE END KPs brokers started pressuring him for payment. SEBI tricked the regulatory norms and several other rules were framed Finally KP was arrested.

Market at Ketan Parekh scam : Market at Ketan Parekh scam