HARSHAD MEHTA SCAM

&
KUMARMANGALAM BIRLA COMMITTE REPORT
HARSHAD MEHTA SCAM
HARSHAD MEHTA
• Name : Harshad Shantilal Mehta
• Born : 29th July 1953
• Died on : 31st December 2001
• Profession : Stockbroker
• He earned degree in Bcom from Lalalajpatrai College
• Started his working life as an employee of the New India Assurance
Comapany
• In the early 80’s he quit his job with stock broker B.Ambalal affliated
to BSE
• In 1981 he became a sub-broker for stock brokers J.L Shah and
Nandalal Sheth
• In 1984, Mehta was able to become a member of the BSE as a broker
and established his own firm GrowMore Research and Asset
Management
• He took advantages of loopholes in banking system
• He triggered SENSEX in 1992 & made the scam by diverting funds of
Rs 4,000 crore
THE INSTRUMENTS USED IN SCAM
• Ready Forward Deal
• Bank Receipts
READY FORWARD DEAL
• A secured short term loan from one bank to another
• Bank lends against governemnt securities
• Broker brings together two banks for commission
• Securities and payments were delivered through the broker
BANK RECEIPTS

• Confirm the sale of securities

• States the securities are held by the seller
• Acts as a receipt for the received money by the selling bank
EXPOSURE OF THE SCAM

• On April 23, 1992, journalist Sucheta Dalal exposed Mehta’s scam

• She is a columnist in Times of India
• She got Padmashri Award for exposing the scam
• She also wrote a book on the scam named, The Scam: Who Won,
who Lost, who Got Away
IMPACT ON ECONOMY
• Government faced alot of criticizim
• Liberalization policies were criticized
• All the shares brought by the accused broker became “tainted
“ shares
• Staggering losses for the lakhs of innocent investors
IMPACT ON OTHERS
• Mehta’s scam cost the banks a loss of Rs 4,000 crore
• Holding banks of fake Bank Receipt had to face losses
• Government banned RF deals
• The Chairman of the Vijaya Bank committed suicide over it
• V.Mahadevan one of the M.D of SBI was removed from his office
ACTIONS TAKEN AGAINST HARSHAD MEHTA
• He was later charged with 72 criminal offenses, and more than 600
civil action suits were filed against him
• He was arrested and banished from the stock market
• Mehta and his brothers were arrested by the CBI on November 9,
1992 for allegedly misappropriating more than 27 Lakh shares of
about 90 companies
CONCLUSION
• Harshad Mehta was a brave and smart stock broker
• He knew the loopholes in banking system as well as how to exploit
those loopholes
• His whole intension was to give rise in SENSEX
 KUMAR
MANGALAM
BIRLA
COMMITTE REPORT
KUMAR MANGALAM BIRLA COMMITTEE

• In early 1999, Securities and Exchange Board of India(SEBI) had set

up a committee under Shri Kumar Mangalam Birla, member SEBI
Board, to promote and raise the standards of good corporate
governance.

 The report submitted by the committee is the first formal and

comprehensive attempt to evolve a ‘Code of Corporate governance’,
in the context of prevailing conditions of governance in Indian
companies, as well as the state of capital markets
Objective

 The Committee therefore agreed that the fundamental objective of

corporate governance is the “enhancement of shareholder value
keeping in view the interests of other stakeholders”.
RECOMMENDATION

• This Report is the first formal and comprehensive attempt to

evolve a Code of corporate Governance, in the context of
prevailing conditions of governance in Indian companies, as
well as the state of capital markets.
APPLICABILITY OF THE RECOMMENDATION

Mandatory and Non-mandatory recommendations

• The committee divided the recommendations into two categories,
namely, mandatory and non-mandatory.

 The recommendations which are absolutely essential for corporate

governance can be defined with precision and which can be enforced
through the amendment of the listing agreement could be classified
as mandatory.
 THANKYOU
• PRATIK TIWARI - 1605
• SARTHAK MATLAWALA - 1578
• UMESH KARAD - 1572
• AKSHAY JADHAV - 1569
• ANSHU AWASTHI - 1611
• PRINKLE PATEL - 1591