Financial rogues are the talk of the town at the moment, and the most recent addition is Scam 1992. This SonyLIV show is about the infamous economic fraud controlled by Harshad Mehta, and it’s based on journalist Sucheta Dalal and Debashish Basu’s book The Scam: Who Won, who Lost, who Got Away. It’s 2020, and a lot of you may not remember what happened all the way back in 1992, so here’s a refresher.
In 1992, a man named Harshad Mehta committed the biggest stock market scam in India’s history, and it caused our stock market to crash.
While Harshad was almost like a celebrity stock broker at the time of his arrest, the man’s origins were actually quite tame. He was not a good student, and earlier worked a number of odd jobs like selling hosiery and cement.
Starting in 1980, he began a lower level clerical job at the brokerage firm Harjivandas Nemidas Securities. This involved gigs as a middle-man, and was not a position of much prominence. However, he rose through the ranks, and by the 1990, he was known as ‘The Amitabh Bachchan of the Stock market’. His flashy lifestyle included a sea facing 15,000 square feet penthouse in Worli with a mini golf course and swimming pool, along with a fleet of fancy cars.
However, the money actually came from a fraud of over 1000 crores from the banking system of India to buy stocks on the Bombay Stock Exchange.
Mehta obtained securities from SBI against forged cheques signed by corrupt officials and failed to deliver the securities. He made the prices of the stocks soar high through fictitious practices and then went on to sell the stocks that he owned in these companies. This resulted in the loss of money to lakhs of families, and also a sharp fall in the share prices. The index fell from 4500 to 2500 representing a loss of Rs. 100,000 crores in market capitalization.
The 1992 fraud involved the Equity Market scam where Mehta invested in bubble stocks that lost value by over 95%. It also involved the Ready forward deal scam (where Mehta) got cheques issued in his name instead of the bank and the Bank receipt scam (using fake bank receipts).
Mehta took the price of ACC from ₹200 to ₹9000 in an extremely short span of time, which led to a 4400% increase in several other stocks and as he sold the stocks, the market crashed.
On 23 April 1992, journalist Sucheta Dalal exposed Mehta’s illegal machinations via a newspaper article. The scam resulted in the biggest plunge in the index the market had ever seen.
Many banks and individuals were implicated, and the Supreme Court convicted Mehta for his part in this financial scandal valued at ₹49.99 billion. The scam resulted in the complete restructuring of the Indian Financial system to prevent further scams. Harshad Mehta himself died in 2001 of a heart attack while in custody, and he still had 28 cases pending against him.
And that’s the story of India’s biggest stock scam. Like a desi version of the Wolf of Wall Street!