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PROJECT ON
STOCK EXCHANGE SCAM IN INDIA WITH REFERENCE TO
HARSHAD MEHTA
BACHELOR OF COMMERCE
FINANCIAL MARKETS
SEMISTER V
2010 – 2011
PROJECT GUIDE AND COURSE CO-ORDINATOR:
Prof. Mahek. Mansuri
Prof. Shruti. Chavarkar
SUBMITTED BY
ASHISH. MANSUKHBHAI. THAKKAR
ROLL NO. 51
S.K.SOMAIYA COLLEGE OF
ARTS, SCIENCE & COMMERCE
MUMBAI UNIVERSITY
ACKNOWLEDGEMENT
The success of any project is never limited to individual undertaking
project; it is a collective effort at people around, that spell success. This
acknowledgement is humble attempt of earnestly thanking all those who
were directly or indirectly involved in this project.
We would like to extend our sincere, heartfelt gratitude to our head of
department, Prof. Shruti Charvarkar and our internal guide Prof. Mahek.
Mansuri under whose guidance we had the privilege of working and
learning and whose constant inspiration at all faces of the project lead to
the successful completion of our work.
Last but not the last we express our deepest regards to our principal Dr.
Sangitha Kohli . I also want to thank to all the staff members who had
helped me to make this project worthfull.
INDEX
SR.
No
TOPIC PAGE
1 EXECUTIVE SUMMARY
2 PURPOSE, SCOPE & OBJECTIVE
3 INTRODUCTION TO BOMBAY STOCK EXCHANGE
4 INTORDUCTION TO NATIONAL STOCK EXCHANGE
5 ORIGIN OF INDIAN STOCK MARKET
6 Securities and Exchange Board of India (SEBI)
7 THE 1992 SECURITIES SCAM
8 Conclusion
Executive Summary:-
The project deals with the biggest scam in the history of Indian Securities Market.
HARSHAD MEHTA SCAM.
The first chapter deals with the introduction to the STOCK EXCHANGE,
in which shows the exact meaning of stock. It also deals in the working of the
stock market and how the stock are traded in the stock exchanges.
The second chapter deals with the National Stock Exchange and its existience ,
how it functions and what types of regulations are imposed on companies inorder
to trade in the stock exchange is concerned.
The third chapter deals with the Origin Of Indian Stock Exchange, as and when
our stock market started and history of the stock exchange.
The fourth chapter deals with the regulations of the securities market , deals with
SEBI functions & powers .
Last but not the least , the fifth chapter confronts the actual scam of HARSHAD
MEHTA , the making , the exposure , the history of the concerned person and the
end of the culprit .
This project throws the light on the scam of Mr. HARSHAD MEHTA, what
exactly was he trying to do and at what point he ended .
Purpose and Scope of study:-
To analyze the way that how did the scam came into existience and what
things have instigate this man to end up with a huge scam in the history
of Indian Stock Market.
Objective :-
To throw a light on the scam .
To know how the legal procedures goes on .
To know about the ultimate outcome of the scam.
STOCK EXCHANGE SCAM IN INDIA
WITH REFERENCE TO
HARSHAD MEHTA
1. INTRODUCTION TO BOMBAY STOCK
EXCHANGE:-
1.1 BOMBAY STOCK EXCHANGE:-
The Bombay Stock Exchange (BSE) (Marathi मुं��बई शे�अर बजार Bombay Śhare
Bāzaār) (formerly, The Stock Exchange, Bombay) is a stock exchange located
on Dalal Street,Mumbai and is the oldest stock exchange in Asia. The
equity market capitalization of the companies listed on the BSE
was US$1.63 trillion as of December 2010, making it the 4th largest stock
exchange in Asia and the 8th largest in the world The BSE has the largest number
of listed companies in the world.
As of June 2011, there are over 5,085 listed Indian companies and over
8,196 scrips on the stock exchange, the Bombay Stock Exchange has a significant
trading volume. The BSE SENSEX, also called "BSE 30", is a widely used market
index in India and Asia. Though many other exchanges exist, BSE and
the National Stock Exchange of India account for the majority of the equity
trading in India. While both have similar total market capitalization (about USD
1.6 trillion), share volume in NSE is typically two times that of BSE.
1.2 Share Market:-
A Share market or Stock market, is a private or public market for the trading
of company stock and derivatives of company stock at an agreed price; these are
securities listed on a stock exchange as well as those only traded privately.The
stocks are listed and traded on stock exchanges which are entities a corporation or
mutual organization specialized in the business of bringing buyers and sellers of
the organizations to a listing of stocks and securities together.
Stock market is known as the cradle of capitalism. It is a place where
companies come to raise their share capital and investors go to invest their surplus
funds. Stock market essentially discharges the functions of "the invisible hand" that
channels investment into the most productive ventures so as to optimize the overall
productivity of the economy.
Stock Market is a place where financial instruments like shares, debentures,
commercial papers, bonds etc are bought and sold. Stock markets are popularly
known as stock exchanges. There are many popular stock markets in the world.
NASDQ, Tokyo Stock Exchange, London Stock Exchange are the most popular of
the lot. There are many participants in a stock market. Investors, Speculators,
Arbitrators, Traders are different type of participants of a Stock
Market. Brokers are intermediaries who bring together various participants
in a Stock Market.
Most important function of the stock market is to facilitate trading of
financial instruments. Brokers submit a quote at the stock market on behalf of
their clients. Quotes are specific to the scrip. The quote of the buyer is matched to
the quote of the seller and the transaction takes place. All transactions entered in a
stock market are guaranteed by the Stock Exchange. That means if the buyer or
seller fails to meet his obligation, the stock exchange steps in and meets the
commitment of the participant. This instills a lot of confidence and credibility
about the sanctity of the transaction amongst the investing public. That is the
reason why a stock exchange is preferred by investing public to a gray market in
shares even though the latter has much lower transaction cost.
All the participants in the stock market have the same objective i.e. to make
a profit. Investors invest in the stock market with the hope that market value of
their investment will go up and they will be able to make higher returns than in
bank deposits. Arbitrages buy in one market and sell in another market with an
objective of making a profit. For example if the shares of Caltex are quoting at a
lesser price at Amsterdam Stock Exchange in comparison to London Stock
Exchange, arbitrages will buy at Amsterdam and sell at London. This will result in
a rise in share price at Amsterdam and fall in share price at London, thus bringing
in price equilibrium among various stock markets in the world.
Speculators operate in the stock market with an objective to make quick
money by guessing the direction of the stock market. If they expect the market to
rise, they buy shares with a very small investment horizon. Similarly if they expect
a correction in stock market, they sell shares, thus imparting an essential element
of liquidity in the market. Those who expect a rise in the stock market and buy
relentlessly are known as bulls. Bulls keep the buying pressure and attempt to
take the stock market to dizzy heights. Bull market is a market scenario where
bulls have complete control over the stock markets. When bull market reaches its
peak, investors will make huge profit. Many investors start booking their profit by
selling the investments. Slowly the bulls find that there are more shares than
they could perhaps buy in the stock market. When supply of shares exceeds the
demand in the stock market prices start coming down. This is called correction.
Correction is a normal phenomenon in any bull market. Some times if the sellers
are huge in numbers, a negative sentiment takes over the stock market. Every
one attempts to sell their investments with an objective to salvage profit or
reduce losses. When this phase set in, bulls loose control. Sellers will control
stock market. This phase is popularly known are bear run. Bull and Bear runs
follow a cyclical pattern in a stock market.
Normally in a booming economy, companies make huge profits, so markets tend to
be bullish. When the trend of the economy reverses Stock Market experience a
bear hug. Thus the Stock markets reflect the health if the economy and are often
called as "barometers" of the economy.
1.3 Stock
Plain and simple, a “stock” is a share in the ownership of a company. A
stock represents a claim on the company's assets and earnings. As you acquire
more stocks, your ownership stake in the company becomes greater.
(Note: Some times different words like shares, equity, stocks etc. are used.
All these words mean the same thing.)
1.4 Shares in the Share Market are either traded through
(a) Stock Exchange
(b) Over-the -Counter (OTC)
(a) Stock Exchange
These are organized market places where stocks, bonds are other equivalents
are traded between the buyers and sellers where exchange acts as a counter-party to
both the participants in case of any default. The contracts are standardized and not
customized ones. For example, NYSE, NASDAQ, NSE, NIKKEI, etc.
(b) Over-the -Counter (OTC)
These are not centralized exchanges. Here, the trade takes place
through a network of dealers. Generally, the OTC contracts are bilateral
customized contracts and not standardized ones.
Important Participants of Share Market Trading are :-
Buyer An investor who buys a script in the belief that the market will
rise. If his hinge becomes right then he makes profit otherwise he suffers
loss.
Seller Seller of a stock sells in the hope that the stock price will go
down.
Stock Broker Brokers are persons or firms who execute buy/sell
order on behalf of the investors and charge a commission for rendering
the service.
1.5 Share Trading are done in three ways
(a)Offline Share Trading
(b)Online Share Trading
(c) Open Outcry Trading
(a) Offline Share Trading
In this form of trading the customer either goes to the share broker's place
and sits before the share trading terminal and asks the dealer to place orders in his
account. or rings the share broker, asks the share quotes and other relevant
informations, and accordingly places orders over the phone.
(b) Online Share Trading
The client could avail the share market and could place his order on his own
from any place he wants, provided he has a computer with an Internet connection.
(c) Open Outcry Trading
Here, the investors put their orders through the brokers and these share
brokers in turn place and execute orders on behalf of them on the floor of the
exchange. These brokers gather in a particular place on the trading floor known as
Trading Post. There is a person called as the Specialist present in the trading post
who does the matching of the buy and sell orders. This type of auction method is
called Open Outcry Method.
1.6 Online Share Trading
Online Share Trading is becoming the order of the day in share trading.
Now-a-days one could hardly see a person going to the stock exchange floor and
placing his order. Electronic media has played an important role in flourishing the
share market. In case of online share trading an investor could place his order from
his own house if he has internet connection.
There are two types of trading that can be done through online
share trading
1. Intra-day Trading
2. Delivery Trading
(1) Intra-day Trading
They enter and exit out of the market like the thief in the night. Traders
continuously have a watch on the market during the trading hours and the moment
they see any opportunity arising they pounce on it for scalping the profit out. These
type of trading generally are risky in nature. They buy and sell stocks during the
same day.
Intra day Traders are of two types :-
a. Scalp Traders
b. Momentum Traders
a. Scalp Traders
Investors who perform many trades per day for scalping out small profits out of the
bid-ask spread from each trade are known as scalp traders.
b. Momentum Traders
Investors who pounce on those stocks which move significantly in one
direction and book desired profit are called momentum traders. They do this within
a day.
1.7 Delivery trading
The investor buys the share for holding purposes. The brokerage charges are
a bit more than the intraday ones. Delivery Traders are :
a. Technical Traders
b. Fundamental Traders
c. Swing Traders
a. Technical Traders
They believe that buying/selling signals are present within the graphs and
charts of the stock.
b. Fundamental Traders
They perform trade on the basis of study of fact-sheets of the company like
historical profit graph, balance sheet, anticipated earning reports, stock splits,
mergers and acquisitions, etc.
c. Swing Traders
They are basically fundamental traders who take delivery of trades
for a span of short period generally more than one day.
In this electronic form of trading, the shares are not in the physical
form for their inconvenience to handle. So, they are now converted to
dematerialized form . So, one investor does not have to worry about the
safety of the physical shares because the bought shares get transferred to
the respective D-mat account . Thus, online share trading has helped the
investors a lot as it is hassle-free and time efficient.
For the intraday traders the brokerage costing is minuscule in
comparison to the delivery trades.
1.8 Number of companies traded in Stock Market:-
The equity market capitalization of the companies listed on the BSE
was US$1.63 trillion as of December 2010, making it the 4th largest stock
exchange in Asia and the 8th largest in the world The BSE has the largest number
of listed companies in the world.
As of June 2011, there are over 5,085 listed Indian companies and over
8,196 scrips on the stock exchange, the Bombay Stock Exchange has a significant
trading volume.
1.9 Hours of operation:-
Session Timing
Beginning of the Day Session 8:00 - 9:00
pre-open trading session 9:00 - 9:15
Trading Session 9:15 - 15:30
Position Transfer Session 15:30 - 15:50
Closing Session 15:50 - 16:05
Option Exercise Session 16:05 - 16:35
Margin Session 16:35 - 16:50
Query Session 16:50 - 17:35
End of Day Session 17:30
The hours of operation for the BSE quoted above are stated in terms the local time
(i.e. GMT +5:30) in Mumbai , India. BSE's normal trading sessions are on all days
of the week except Saturday, Sundays and holidays declared by the Exchange in
advance.
2. INTORDUCTION TO NATIONAL STOCK
EXCHANGE:-
NATIONAL STOCK EXCHANGE:-
The National Stock Exchange (NSE) (Hindi रष्ट्री य शे�अर बज़ार Rashtriya Śhare
Bāzaār) is astock exchange located at Mumbai, Maharashtra, India. It is the 9th
largest stock exchange in the world by market capitalization and largest in India by
daily turnover and number of trades, for both equities and derivative trading. NSE
has a market capitalization of aroundUS$1.59 trillion and over 1,552 listings as of
December 2010. Though a number of other exchanges exist, NSE and the Bombay
Stock Exchange are the two most significant stock exchanges in India, and
between them are responsible for the vast majority of share transactions. The
NSE's key index is the S&P CNX Nifty, known as the NSE NIFTY (National
Stock Exchange Fifty), an index of fifty major stocks weighted by market
capitalisation.
NSE is mutually-owned by a set of leading financial institutions, banks, insurance
companies and other financial intermediaries in India but its ownership and
management operate as separate entities. There are at least 2 foreign investors
NYSE Euronext and Goldman Sachs who have taken a stake in the NSE. As of
2006, the NSE VSAT terminals, 2799 in total, cover more than 1500 cities across
India. NSE is the third largest Stock Exchange in the world in terms of the number
of trades in equities. It is the second fastest growing stock exchange in the world
with a recorded growth of 16.6%.
2.1 ORIGINS:-
The National Stock Exchange of India was promoted by leading Financial
institutions at the behest of the Government of India, and was incorporated in
November 1992 as a tax-paying company. In April 1993, it was recognized as
a stock exchange under the Securities Contracts (Regulation) Act, 1956. NSE
commenced operations in the Wholesale Debt Market(WDM) segment in June
1994. The Capital market (Equities) segment of the NSE commenced operations in
November 1994, while operations in the Derivatives segment commenced in June
2000.
2.2 INNOVATIONS:-
NSE pioneering efforts include:
Being the first national, anonymous, electronic limit order book (LOB)
exchange to trade securities in India. Since the success of the NSE, existent
market and new market structures have followed the "NSE" model.
Setting up the first clearing corporation "National Securities Clearing
Corporation Ltd." in India. NSCCL was a landmark in providing innovation on
all spot equity market (and later,derivatives markets) trades in India.
Co-promoting and setting up of National Securities Depository Limited, first
depository in India
Setting up of S&P CNX NIFTY.
NSE pioneered commencement of Internet Trading in February 2000, which led
to the wide popularization of the NSE in the broker community.
Being the first exchange that, in 1996, proposed exchange traded derivatives,
particularly on an equity index, in India. After four years of policy and
regulatory debate and formulation, the NSE was permitted to start trading
equity derivatives
Being the first and the only exchange to trade GOLD ETFs (exchange traded
funds) in India.
NSE has also launched the NSE-CNBC-TV18 media centre in association with
CNBC-TV 18
NSE.IT Limited, setup in 1999 , is a 100% subsidiary of the National Stock
Exchange of India. A Vertical Specialist Enterprise, NSE.IT offers end-to-end
Information Technology (IT) products, solutions and services.
NSE (National Stock Exchange) was the first exchange in the world to use
satellite communication technology for trading, using a client server based
system called National Exchange for Automated Trading (NEAT). For all
trades entered into NEAT system, there is uniform response time of less than
one second.
2.3MARKETS:-
Currently, NSE has the following major segments of the capital market:
EQUITY
Futures & Options
Retail Debt Market
Who;esale Debt Market
Currency Futures
Mutual Funds
Stock lending &borrowings
August 2008 Currency derivatives were introduced in India with the launch of
Currency Futures in USD INR by NSE. Currently it has also launched currency
futures in EURO, POUND & YEN. Interest Rate Futures was introduced for the
first time in India by NSE on 31 August 2009, exactly after one year of the launch
of Currency Futures.
NSE became the first stock exchange to get approval for Interest rate futures as
recommended by SEBI-RBI committee, on 31 August 2009, a futures contract
based on 7% 10 Year GOI bond (NOTIONAL) was launched with quarterly
maturities.
2.4 HOURS:-
NSE's normal trading sessions are conducted from 9:15 am India Time to 3:30 pm
India Time on all days of the week except Saturdays, Sundays and Official
Holidays declared by the Exchange (or by the Government of India) in
advance. The exchange, in association with BSE (Bombay Stock Exchange Ltd.),
is thinking of revising its timings from 9.00 am India Time to 5.00 pm India Time.
There were System Testing going on and opinions, suggestions or feedback on the
New Proposed Timings are being invited from the brokers across India. And
finally on 18 November 2009 regulator decided to drop their ambitious goal of
longest Asia Trading Hours due to strong opposition from its members.
On 16 December 2009, NSE announced that it would advance the market opening
to 9:00 am from 18 December 2009. So NSE trading hours will be from 9.00 am
till 3:30 pm India Time.
However, on 17 December 2009, after strong protests from brokers, the Exchange
decided to postpone the change in trading hours till 4 Jan 2010.
NSE new market timing from 4 Jan 2010 is 9:00 am till 3:30 pm India Time.
3. ORIGIN OF INDIAN STOCK MARKET:-
3.1 HISTORY:-
The Bombay Stock Exchange is the oldest exchange in Asia. It traces its history to
the 1850s, when four Gujarati and one Parsi stockbroker would gather under
banyan trees in front of Mumbai's Town Hall. The location of these meetings
changed many times, as the number of brokers constantly increased. The group
eventually moved to Dalal Street in 1874 and in 1875 became an official
organization known as 'The Native Share & Stock Brokers Association'. In 1956,
the BSE became the first stock exchange to be recognized by theIndian
Government under the Securities Contracts Regulation Act. The Bombay Stock
Exchange developed the BSE SENSEX in 1986, giving the BSE a means to
measure overall performance of the exchange. In 2000 the BSE used this index to
open its derivatives market, trading SENSEX futures contracts. The development
of SENSEX options along with equity derivatives followed in 2001 and 2002,
expanding the BSE's trading platform. Historically an open outcry floor trading
exchange, the Bombay Stock Exchange switched to an electronic trading system in
1995. It took the exchange only fifty days to make this transition. This automated,
screen-based trading platform called BSE On-line trading (BOLT) currently has a
capacity of 8 million orders per day. The BSE has also introduced the world's first
centralized exchange-based internet trading system, BSEWEBx.co.in to enable
investors anywhere in the world to trade on the BSE platform. The BSE is
currently housed in Phiroze Jeejeebhoy Towers at Dalal Street, Fort area.
3.2 INDICES:-
The launch of SENSEX in 1986 was later followed up in January 1989 by
introduction of BSE National Index (Base: 1983-84 = 100). It comprised 100
stocks listed at five major stock exchanges in India
- Mumbai, Calcutta, Delhi, Ahmedabad and Madras. The BSE National Index was
renamed BSE-100 Index from October 14, 1996 and since then, it is being
calculated taking into consideration only the prices of stocks listed at BSE. BSE
launched the dollar-linked version of BSE-100 index on May 22, 2006. BSE
launched two new index series on 27 May 1994: The 'BSE-200' and the 'DOLLEX-
200'. BSE-500 Index and 5 sectoral indices were launched in 1999. In 2001, BSE
launched BSE-PSU Index, DOLLEX-30 and the country's first free-float based
index - the BSE TECk Index. Over the years, BSE shifted all its indices to the free-
float methodology (except BSE-PSU index). BSE disseminates information on the
Price-Earnings Ratio, the Price to Book Value Ratio and the Dividend Yield
Percentage on day-to-day basis of all its major indices. The values of all BSE
indices are updated on real time basis during market hours and displayed through
the BOLT system, BSE website and news wire agencies. All BSE Indices are
reviewed periodically by the BSE Index Committee. This Committee which
comprises eminent independent finance professionals frames the broad policy
guidelines for the development and maintenance of all BSE indices. The BSE
Index Cell carries out the day-to-day maintenance of all indices and conducts
research on development of new indices.
SENSEX is significantly correlated with the stock indices of other emerging
markets
The graph of SENSEX from July 1997 to March 2011
3.3 AWARDS:-
The World Council of Corporate Governance has awarded the Golden Peacock
Global CSR Award for BSE's initiatives in Corporate Social Responsibility
(CSR).
The Annual Reports and Accounts of BSE for the year ended March 31, 2006
and March 31, 2007 have been awarded the ICAI awards for excellence in
financial reporting.
The Human Resource Management at BSE has won the Asia - Pacific HRM
awards for its efforts in employer branding through talent management at work,
health management at work and excellence in HR through technology.
3.4 Rise & Rise of Indian Stock Market
Following is the timeline on the rise and rise of the Sensex through Indian
stock market history.
1978-79
Base year of Sensex, defined to be 100.
1986
Sensex first compiled using a market Capitalization-Weighted methodology
for 30 component stocks representing well-established companies across key
sectors.
Since 1990
1900s
July 25, 1990.
The Sensex touched the magical four-digit figure for the first time and
closed at 1,001 in the wake of a good monsoon season and excellent corporate
results.
July 1991 Rupee devalued by 18-19 %
January 15, 1992
The Sensex crossed the 2,000-mark and closed at 2,020 followed by the
liberal economic policy initiatives undertaken by the then finance minister and
current Prime Minister Dr Manmohan Singh.
February 29, 1992
The Sensex surged past the 3000 mark in the wake of the market-friendly
Budget announced by the then Finance Minister, Dr Manmohan Singh.
March 30, 1992
The Sensex crossed the 4,000-mark and closed at 4,091 on the expectations
of a liberal export-import policy. It was then that the Harshad Mehta scam hit the
markets and Sensex witnessed unabated selling.
October 8, 1999
The Sensex crossed the 5,000-mark as the BJP-led coalition won the
majority in the 13th Lok Sabha election.
2000s
February 11, 2000
The infotech boom helped the Sensex to cross the 6,000-mark and hit and all
time high of 6,006.
June 20, 2005
The news of the settlement between the Ambani brothers boosted investor
sentiments and the scrips of RIL, Reliance Energy, Reliance Capital, and IPCL
made huge gains. This helped the Sensex crossed 7,000 points for the first time.
September 8, 2005
The Bombay Stock Exchange's benchmark 30-share index -- the Sensex --
crossed the 8000 level following brisk buying by foreign and domestic funds in
early trading.
November 28, 2005
The Sensex on November 28, 2005 crossed the magical figure of 9000 to
touch 9000.32 points during mid-session at the Bombay Stock Exchange on the
back of frantic buying spree by foreign institutional investors and well supported
by local operators as well as retail investors.
February 6, 2006
The Sensex on February 6, 2006 touched 10,003 points during mid-session.
The Sensex finally closed above the 10K-mark on February 7, 2006.
March 21, 2006
The Sensex on March 21, 2006 crossed the magical figure of 11,000 and touched a
life-time peak of 11,001 points during mid-session at the Bombay Stock Exchange
for the first time. However, it was on March 27, 2006 that the Sensex first closed at
over 11,000 points.
April 20, 2006
The Sensex on April 20, 2006 crossed the 12,000-mark and closed at a peak
of 12,040 points for the first time.
October 30, 2006
The Sensex on October 30, 2006 crossed the magical figure of 13,000 and
closed at 13,024.26 points, up 117.45 points or 0.9%. It took 135 days for the
Sensex to move from 12,000 to 13,000 and 123 days to move from 12,500 to
13,000.
December 5, 2006
The Sensex on December 5, 2006 crossed the 14,000-mark to touch 14,028
points. It took 36 days for the Sensex to move from 13,000 to the 14,000 mark.
July 6, 2007
The Sensex on July 6, 2007 crossed the magical figure of 15,000 to touch
15,005 points in afternoon trade. It took seven months for the Sensex to move from
14,000 to 15,000 points.
September 19, 2007
The Sensex scaled yet another milestone during early morning trade on
September 19, 2007. Within minutes after trading began, the Sensex crossed
16,000, rising by 450 points from the previous close. The 30-share Bombay Stock
Exchange's sensitive index took 53 days to reach 16,000 from 15,000. Nifty also
touched a new high at 4659, up 113 points.
The Sensex finally ended with a gain of 654 points at 16,323. The NSE Nifty
gained 186 points to close at 4,732.
September 26, 2007
The Sensex scaled yet another height during early morning trade on
September 26, 2007. Within minutes after trading began, the Sensex crossed the
17,000-mark . Some profit taking towards the end, saw the index slip into red to
16,887 - down 187 points from the day's high. The Sensex ended with a gain of 22
points at 16,921.
October 09, 2007
The BSE Sensex crossed the 18,000-mark on October 09, 2007. It took just
8 days to cross 18,000 points from the 17,000 mark. The index zoomed to a new
all-time intra-day high of 18,327. It finally gained 789 points to close at an all-time
high of 18,280. The market set several new records including the biggest single
day gain of 789 points at close, as well as the largest intra-day gains of 993 points
in absolute term backed by frenzied buying after the news of the UPA and Left
meeting on October 22 put an end to the worries of an impending election.
October 15, 2007
The Sensex crossed the 19,000-mark backed by revival of funds-based
buying in blue chip stocks in metal, capital goods and refinery sectors. The index
gained the last 1,000 points in just four trading days. The index touched a fresh all-
time intra-day high of 19,096, and finally ended with a smart gain of 640 points at
19,059.The Nifty gained 242 points to close at 5,670.
October 29, 2007
The Sensex crossed the 20,000 mark on the back of aggressive buying by
funds ahead of the US Federal Reserve meeting. The index took only 10 trading
days to gain 1,000 points after the index crossed the 19,000-mark on October 15.
The major drivers of today's rally were index heavyweights Larsen and Toubro,
Reliance Industries, ICICI Bank, HDFC Bank and SBI among others. The 30-share
index spurted in the last five minutes of trade to fly-past the crucial level and
scaled a new intra-day peak at 20,024.87 points before ending at its fresh closing
high of 19,977.67, a gain of 734.50 points. The NSE Nifty rose to a record high
5,922.50 points before ending at 5,905.90, showing a hefty gain of 203.60 points.
January 8, 2008
The sensex peaks. It crossed the 21,000 mark in intra-day trading after 49
trading sessions. This was backed by high market confidence of increased FII
investment and strong corporate results for the third quarter. However, it later fell
back due to profit booking.
3.5 SENSEX Archives
For the period From Year 1991 to Year 2006
Year Open High Low
1991 1,027.38 1,955.29 947.14
1992 1,957.33 4,546.58 1,945.48
1993 2,617.78 3,459.07 1,980.06
1994 3,436.87 4,643.31 3,405.88
1995 3,910.16 3,943.66 2,891.45
1996 3,114.08 4,131.22 2,713.12
1997 3,096.65 4,605.41 3,096.65
1998 3,658.34 4,322.00 2,741.22
1999 3,064.95 5,150.99 3,042.25
2000 5,209.54 6,150.69 3,491.55
2001 3,990.65 4,462.11 2,594.87
2001 3,990.65 4,462.11 2,594.87
2002 3,262.01 3,758.27 2,828.48
2003 3,383.85 5,920.76 2,904.44
2004 5,872.48 6,617.15 4,227.50
2005 6,626.49 9,442.98 6,069.33
2006 9,422.49 14,035.30 8,799.01
4. Securities and Exchange Board of India (SEBI):-
4.1 Introduction
SEBI is the Regulator for the Securities Market in India. Originally set up by
the Government of India in 1988, it acquired statutory form in 1992 with SEBI Act
1992 being passed by the Indian Parliament.Chaired by C B Bhave, SEBI is
headquartered in the popular business district of Bandra-Kurla complex in
Mumbai, and has Northern, Eastern and Southern regional offices in New Delhi,
Kolkata and Chennai. It is in the news that a new Western Regional Office has
been proposed at Ahmedabad.
4.2 Function of SEBI
SEBI has to be responsive to the needs of three groups, which constitute the
market:
The issuers of securities
The investors
The market intermediaries.
SEBI has three functions rolled into one body quasi-legislative, quasi-
judicial and quasi-executive. It drafts regulations in its legislative capacity, it
conducts investigation and enforcement action in its executive function and it
passes rulings and orders in its judicial capacity. Though this makes it very
powerful, there is an appeals process to create accountability. There is a Securities
Appellate Tribunal which is a three member tribunal and is presently headed by a
former Chief Justice of a High court - Mr. Justice NK Sodhi. A second appeal lies
directly to the Supreme Court.
SEBI has enjoyed success as a regulator by pushing systemic reforms
aggressively and successively (e.g. the quick movement towards making the
markets electronic and paperless rolling settlement on T+2 basis). SEBI has been
active in seting up the regulations as required under law.
4.3 Objectives of SEBI:-
Primary objectives : to promote healthy & orderly growth of securities market &
protect investors.
To maintain steady flow of savings into capital markets.
To regulate securities market & ensure fair practice by issuers to help them raise
resources at minimum cost.
To promote efficient services by brokers, merchant bankers and other
intermediaries to make them professional and competitive.
4.4 Powers of SEBI:-
To call periodical returns from recognised stock exchanges
To ask explanation from recognised stock exchanges / their members
To direct enquiries on any stock exchange
To make / amend by laws of recognised stock exchanges
To compel listing of securities by public companies
To control * regulate stock exchanges
To levy fees or charges for carrying out the purpose of regulations
To declare applicability of Sec 17 of Securities contract (Regulation) Act to grant
licenses to dealers of securities.
5 THE 1992 SECURITIES SCAM:-
(a.k.a)Harshad Mehta Scandal:
5.1 HISTORY:-
Harshad Mehta was an Indian stockbroker caught in a scandal beginning in 1992.
He died of a massive heart attack in 2001, while the legal issues were still being
litigated. Early life Harshad Shantilal Mehta was born in a Gujarati jain family of
modest means. His father was a small businessman. His mother's name was
Rasilaben Mehta. His early childhood was spent in the industrial city of Bombay.
Due to indifferent health of Harshad’s father in the humid environs of Bombay, the
family shifted their residence in the mid-1960s to Raipur, then in Madhya Pradesh
and currently the capital of Chattisgarh state. An Amul advertisement of
1999 during the conterversy over MUL saying it as "The Big Bhool" (Bhool in
Hindi means Blunder) He studied at the Holy Cross High School, located at Byron
Bazaar. After completing his secondary education Harshad left for Bombay. While
doing odd jobs he joined Lala Lajpat Rai College for a Bachelor’s degree in
Commerce.
After completing his graduation, Harshad Mehta 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 Bombay. After his graduation
Ashwin joined (ICICI) Industrial Credit and Investment Corporation of India. They
had rented a small flat in Ghatkopar for living.
In the late seventies every evening Harshad and Ashwin started to analyze tips
generated from respective offices and from cyclostyled investment letters, which
had made their appearance during that time. In the early eighties he quit his job and
sought a job with stock broker P. Ambalal 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 theatre and nine hole golf course. His brand new Toyota Lexus
and a fleet of cars gave credibility to his show off. This in no time made him the
nondescript broker to super star of financial world. 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.
His favorite stocks included
· ACC
· Apollo Tyres
· Reliance
· Tata Iron and Steel Co. (TISCO)
· BPL
· Sterlite
· Videocon.
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.
As an aftermath of the shockwaves which engulfed the Indian financial sector, 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 31st 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). Rumour 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 pressurise
Harshad's family by threatening his very existence. 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.
Harshad Shantilal Mehta was born in a Gujarati Jain family of modest means. His
early childhood was spent
in Mumbai where his father was a small-time businessman. Later, the family
moved to Raipur in Madhya Pradesh after doctors advised his father to move to a
drier place on account of his indifferent health.
But Raipur could not hold back Mehta for long and he was back in the city after
completing his schooling, much against his father’s wishes. Mehta first started
working as a dispatch clerk in the New India Assurance Company. Over the years,
he got interested in the stock markets and along with brother Ashwin, who by
then had left his job with the Industrial Credit and Investment Corporation of India,
started investing heavily in the stock market. As they learnt the ropes of the trade,
they went from boom to bust a couple of times and survived. Mehta gradually rose
to become a stock broker on the Bombay Stock Exchange, who did very
well for himself. At his peak, he lived almost like a movie star in a 15,000 square
feet house, which had a swimming pool as well as a golf patch. He also had a taste
for flashy cars, which ultimately led to his
downfall. Newsmakers of the week: View Slideshow “The year was 1990. Years
had gone by and the driving ambitions of a young man in the faceless crowd had
been realised. Harshad Mehta was making waves in the stock market. He had been
buying shares heavily since the beginning of 1990. The shares which attracted
attention were those of Associated Cement Company (ACC),” write the authors.
The price of ACC was bid up to Rs 10,000. For those who asked, Mehta had the
replacement cost theory as an explanation. The theory basically argues that old
companies should be valued on the basis of the amount of money which would be
required to create another such company. Through the second half of 1991, Mehta
was the darling of the business media and earned the sobriquet of the ‘Big Bull’,
who was said to have started the bull run. But, where was Mehta getting his
endless supply of money from? Nobody had a clue.
On April 23, 1992, journalist Sucheta Dalal in a column in The Times of India,
exposed the dubious ways of
Harshad Metha. The broker was dipping illegally into the banking system to
finance his buying.“In 1992, when I broke the story about the Rs 600 crore that he
had swiped from the State Bank of India, it was his visits to the bank’s
headquarters in a flashy Toyota Lexus that was the tip-off. Those days, the Lexus
had just been launched in the international market and importing it cost a neat
package,” Dalal wrote
in one of her columns later. The authors explain: “The crucial mechanism through
which the scam was effected was the ready forward (RF) deal. The RF is in
essence a secured short-term (typically 15-day) loan from one bank to another.
Crudely put, the bank lends against government securities just as a pawnbroker
lends against jewellery….The borrowing bank actually sells the securities to the
lending bank and buys them back at the end of the period of the loan, typically at a
slightly higher price.” It was this ready forward deal that Harshad Mehta and his
cronies used with great success to channel money from the banking system. A
typical ready forward deal involved two banks brought together by a broker in
lieu of a commission. The broker handles neither the cash nor the securities,
though that wasn’t the case in the lead-up to the scam. “In this settlement process,
deliveries of securities and payments were made through the broker. That is, the
seller handed over the securities to the broker, who passed them to the buyer, while
the buyer gave the cheque to the broker, who then made the payment to the seller.
In this settlement process, the buyer and the seller might not even know whom they
had traded with, either being know only to the broker.” This the brokers could
manage primarily because by now they had become market makers and had started
trading on their account. To keep up a semblance of legality, they pretended
to be undertaking the transactions on behalf of a bank. Another instrument used in
a big way was the bank receipt (BR). In a ready forward deal, securities were not
moved back and forth in actuality. Instead, the borrower, i.e. the seller of
securities, gave the buyer of the securities a BR. As the authors write, a BR
“confirms the sale of securities. It acts as a receipt for the money received by the
selling bank. Hence the name - bank receipt. It promises to deliver the securities to
the buyer. It also states that in the mean time, the seller holds the securities in trust
of the buyer.” Having figured this out, Metha needed banks, which
could issue fake BRs, or BRs not backed by any government securities. “Two
small and little known banks - the Bank of Karad (BOK) and the Metorpolitan Co-
operative Bank (MCB) - came in handy for this purpose. These banks were willing
to issue BRs as and when required, for a fee,” the authors point out.
Once these fake BRs were issued, they were passed on to other banks and the
banks in turn gave money to Mehta, obviously assuming that they were lending
against government securities when this was not really the case. This money was
used to drive up the prices of stocks in the stock market. When time came to
return the money, the shares were sold for a profit and the BR was retired. The
money due to the bank was returned. The game went on as long as the stock prices
kept going up, and no one had a clue about Mehta’s modus operandi. Once the
scam was exposed, though, a lot of banks were left holding BRs which did not
have any value - the banking system had been swindled of a whopping Rs 4,000
crore. Mehta made a brief comeback as a stock market guru, giving tips on his own
website as well as a weekly newspaper column. This time around, he was in
cahoots with owners of a few companies and recommended only those shares. This
game, too, did not last long. Interestingly, however, by the time he died, Mehta had
been convicted in only one of the many cases filed against him.
5.2 The making of the 1992 security scam:-
Mehta, along with his associates, was accused of manipulating the rise in the
Bombay Stock Exchange (BSE) in 1992. They took advantage of the many
loopholes in the banking system and drained off funds from inter-bank
transactions. Subsequently, they bought huge amounts of shares at a premium
across many industry verticals causing the Sensex to rise dramatically. However,
this was not to continue. The exposure of Mehta's modus operandi led banks to
start demanding their money back, causing the Sensex to plunge almost
dramatically as it had risen. Mehta was later charged with 72 criminal offences
while over 600 civil action suits were filed against him. Significantly, the Harshad
Mehta security scandal also became the flavor of Bollywood with Sameer
Hanchate's film Gafla.
5.3 Huge Financial Scandal Shakes Indian Politics:-By EDWARD A. GARGAN
Published: June 09, 1992
A $1 billion banking and securities scandal, the largest in India's history, has
rapidly spread through the stock markets and banking system and is now creeping
onto the political landscape.
Several major banks, including the State Bank of India, the country's largest, have
found themselves short by hundreds of millions of dollars after making dubious
loans to stock speculators. In addition, one of the country's biggest securities
brokers is behind bars, the chairmen of several banks have been forced to resign
and one committed suicide.
Opposition political leaders, saying that the Government is covering up the scandal
or at least allowed it to occur through negligence, are demanding the resignation of
the Finance Minister and the head of the central bank. The Prime Minister, P. V.
Narasimha Rao, is fending off his opponents and has ordered a special court
created to try those associated with the scandal. Trying to Unravel the Fraud
For two months, investigators have been going through rooms-full of documents,
decoding computer disks and raiding homes and offices, all to try to unravel the
extent of the financial fraud. While they do so, the implications of it all are still
uncertain.
The investigations led to the filing of charges last week against 10 brokers and
bankers, including Harshad Mehta, Bombay's most flamboyant securities dealer.
He is charged with fraud in buying and selling securities, bribery, using forged
documents and conspiracy. Still, the exact nature and extent of the financial
misdeeds and bank losses have not been detailed.
But what is clear is that a half-dozen big banks lent hundreds of millions of dollars
to brokers in unsecured loans to finance speculation in the stock and bond markets.
By last week, more than $1 billion was missing from the ledgers, leaving some of
the banks technically insolvent.
While he has not granted interviews about the charges against him, Mr. Mehta sent
a letter to the Central Bureau of Investigation, India's equivalent of the F.B.I.,
vigorously defending himself. "Neither I nor any of my companies have done
anything in violation of any law," he said in the letter. "All our transactions have
been in accordance with prevailing practice -- a practice which is by no means
secret or clandestine."
Fueled by a buying frenzy, the Bombay Stock Exchange index more than doubled
in the last year. But in late April, news began to spread that Mr. Mehta might have
skated beyond even the fuzzy edges of Indian securities laws to gain control of
more than one-third of the State Bank of India's business in Government securities.
That is also when it and other banks were found to be holding worthless
promissory notes for hundreds of millions of dollars. The stock market began a
plunge that has not stopped.
The very size of the scandal, trumpeted daily across the front pages of the country's
newspapers, has created a climate of fear among political leaders and a spirit of
vengeance among the Government's left-wing opposition, which feels betrayed by
the yearlong march toward a free-market economy.
As a result, Mr. Mehta and the others arrested so far have been denied bail and are
being forced to sleep on the cement floor of holding cells in a Bombay police
station. A Government directive has ordered that his assets be confiscated.
When Prime Minister Rao announced the abandonment of the country's long
romance with socialism last year, no one was more delighted than the brokers and
traders of the Bombay Stock Exchange, people who believed that it was finally
permissible to make money in India.
For months, the customary bedlam of Dalal, or "Trader," Street, site of the stock
exchange, has approached a frenzy resembling a well-shaken beehive. On the
exchange floor, the normally unrestrained blue-jacketed traders have hustled with a
new-found ferocity that drove the exchange index up more than 60 percent in just
three months before the decline began. Stuffed along the exchange's gloomy
hallways are touts, tipsters and the tantalized, sweating and pushing and waving
fistfuls of money.
"The problem is not Mehta," said Debashis Basu, a financial writer for Business
Today. "This is a unique time in the economic history of India, when the old
control structures are being torn down. It is always at these moments that scamsters
creep out of the woodwork."
The chairman of the Securities and Exchange Board, G. V. Ramakrishna, said:
"Most players in the capital markets felt they were beyond regulation. We are now
trying to bring about some sensible regulations of the market in line with other
developing countries' capital markets."
5.4 The 1992 security scam and its exposure:-
Mehta's illicit methods of manipulating the stock market were exposed on April 23,
1992, when veteran columnist Sucheta Dalal wrote an article in India's national
daily The Times of India. Dalal’s column read: “The crucial mechanism through
which the scam was effected was the ready forward (RF) deal. The RF is in
essence a secured short-term (typically 15-day) loan from one bank to another.
Crudely put, the bank lends against government securities just as a pawnbroker
lends against jewelers. The borrowing bank actually sells the securities to the
lending bank and buys them back at the end of the period of the loan, typically at a
slightly higher price.” In a ready-forward deal, a broker usually brings together two
banks for which he is paid a commission. Although the broker does not handle the
cash or the securities, this was not the case in the prelude to the Mehta scam.
Mehta and his associates used this RF deal with great success to channel money
through banks.
The securities and payments were delivered through the broker in the settlement
process. The broker functioned as an intermediary who received the securities from
the seller and handed them over to the buyer; and he received the check from the
buyer and subsequently made the payment to the seller. Such a settlement process
meant that both the buyer and the seller may not even know the identity of the
other as only the broker knew both of them. The brokers could manage this method
expertly as they had already become market makers by then and had started trading
on their account. They pretended to be undertaking the transactions on behalf of a
bank to maintain a façade of legality.
Mehta and his associates used another instrument called the bank receipt (BR).
Securities were not traded in reality in a ready forward deal but the seller gave the
buyer a BR which is a confirmation of the sale of securities. A BR is a receipt for
the money received by the selling bank and pledges to deliver the securities to the
buyer. In the meantime, the securities are held in the seller’s trust by the buyer.
5.5 Where has all the money gone?
It is well known that while Harshad Mehta was the big bull in the stock market,
there was an equally powerful bear cartel, represented by Hiten Dalal, A.D.
Narottam and others, operating in the market with money cheated out of the banks.
Since the stock prices rose steeply during the period of the scam, it is likely that a
considerable part of the money swindled by this group would have been spent on
financing the losses in the stock markets.
It is rumored that a part of the money was sent out of India through the Havala
racket, converted into dollars/pounds, and brought back as India Development
Bonds. These bonds are redeemable in dollars/pounds and the holders cannot be
asked to disclose the source of their holdings. Thus, this money is beyond the reach
of any of the investigating agencies.
A part of the money must have been spent as bribes and kickbacks to the various
accomplices in the banks and possibly in the bureaucracy and in the political
system.
As stated earlier, a part of the money might have been used to finance the losses
taken by the brokers to window-dress various banks' balance sheets. In other
words, part of the money that went out of the banking system came back to it. In
sum, it appears that only a small fraction of the funds swindled is recoverable.
5.6 Impact of scam:-
Impact of the Scam The immediate impact of the scam was 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. Since the accused were active brokers in the stock
markets, the number of shares which had passed through their hands in the last one
year was colossal. All these shares became "tainted" shares, and
overnight they became worthless pieces of paper as they could not be delivered in
the market. Genuine investors who had bought these shares well before the scam
came to light and even got them registered in their names found themselves being
robbed by the government. This resulted in a chaotic situation in the market since
no one was certain as to which shares were tainted and which were not.
The government's liberalization policies came under severe criticism after
the scam, with Harshad Mehta and others being described as the products of these
policies. Bowing to the political pressures and the bad press it received during the
scam, the liberalization policies were put on hold for a while by the government.
The Securities Exchange Board of India (SEBI) postponed sanctioning of private
sector mutual funds. The much talked about entry of foreign pension funds and
mutual funds became more remote than ever. The Euro-issues planned by several
Indian companies were delayed since the ability of Indian companies to raise
equity capital in world markets was severely compromised.
5.7 I-T, PSBs recover dues nine years after Mehta's death:-
Nine years after Harsad Mehta died, the I-T department and public sector banks
(PSBs) have successfully recovered a significant portion of their claims emerging
out of the securities scam from his liquidated assets. The Supreme Court directed
the Custodian of the attached properties and assets of the Harshad Mehta Group
(HMG) in March 2011 to make payments of Rs1,995.66-crore to the I-T
department and Rs 199.25-crore to the State Bank of India (SBI), making the two
institutions two of the earliest claimants to recover their dues.
While the SBI’s total principal amount claim of Rs 1,000-crore have been largely
settled, financial institutions have also received some money. However, Standard
Chartered Bank, which had claimed Rs 500-crore, has yet to recover its dues it was
one of the late claimants. Although the total claim over the HMG is of more than
Rs 20,000-crore, the apex court has said that for the present, it would only consider
claims towards the principal amount.
5.8 IT Recovery
The special court hearing the cases related to the securities scam 1992 involving
Harshad Mehta and others on Friday released Rs 400 crore from the custodian's
funds as pending arrears to the Income-Tax (I-T) department. This puts an end to
the 10-year-old legal battle of the I-T department for the Big Bull's arrears.
Confirming the development, senior IT officials said: "The State Bank of India
[SBI] vehemently opposed the special court's move to release Rs 400 crore to the I-
T department in the court." SBI had reportedly raised a claim of Rs 3,000 crore
from the custodian.
Sources in the custodian's office said as per the laid-down rules, the first priority
for availing of the share in the attached property of the notified parties goes to the
I-T department under the act of various government departments. The second
priority is given to banks and financial institutions (FIs).
Both the I-T department and SBI is now making all-out efforts to recover its funds
from the custodian, who looks after the attached properties of the notified parties
and is even ready to strike a compromise on the total interest valuation, which is
over Rs 1,500 crore. SBI has already made provisions for Rs 700 crore in its
books.
The bank is also looking for the share of the late Big Bull's real estate,
which can be attached by the custodian to settle the dues of the bank.
The I-T department had filed a suit way back in 1993 in the special court headed
by Justice S N Variava. The custodian has already sold benamishares of Mehta
worth Rs 750 crore.
The Associated Cement Company shares will the last in the benami lot after which
the custodian will target the real estate properties of the tainted broker (See '').
According to custodian sources, the sale of the real estate is expected to fetch
around Rs 100 crore. All these transactions are expected to be completed in the
next seven to eight months.
The majority of the benami shares have been purchased by FIs and banks (like Life
Insurance Corporation and State Bank of India). The FIs picked these shares at a
discounted price compared to the current market price.
5.9 END OF THE BIG BULL:-
Mumbai: Just as the year 2001 was coming to an end, Harshad Shantilal
Mehta, boss of Growmore Research and Asset Management, died of a massive
heart attack in a jail in Thane. And thus came to an end the life of
a man who is probably the most famous character ever to have emerged from the
Indian stock market. In the book, The Great Indian Scam: Story of the missing Rs
4,000 crore, Samir K Barua and Jayanth R Varma explain how Harshad Mehta
pulled off one of the most audacious scams in the history of the Indian stock
market.
5.10 Outcome:-
Mehta continued with his manipulative tactics, triggering a massive rise in the
prices of stock and thereby creating a feel-good market trajectory. However, upon
the exposure of the scam, several banks found they were holding BRs of no value
at all. Mehta had by then swindled the banks of a staggering Rs 4,000 crore. The
scam came under scathing criticism in the Indian Parliament, leading to Mehta's
eventual imprisonment. The scam’s exposure led to the death of the Chairman of
the Vijaya Bank who reportedly committed suicide over the exposure. He was
guilty of having issued checks to Mehta and knew the backlash of accusations he
would have to face from the public.
A few years later, Mehta made a brief comeback as a stock market expert and
started providing investment tips on his website and in a weekly newspaper
column. He worked with the owners of a few companies and recommended the
shares of those companies only. When he died in 2002, Mehta had been convicted
in only one of the 27 cases filed against him. What attracted the taxman’s attention
was Mehta's advance tax payment of Rs 28-crore for the financial year 1991-92.
Another eye-catcher was his extravagant lifestyle.
5.11 Journalist who expose the BIGG-BULL:-
Ms Sucheta Dalal is an award-winning business journalist and author
and her career is founded on many newsbreaks, insightful analysis and
high integrity. She has been a journalist for 25 years and was conferred
the prestigious Padma Shri for journalism in 2006. The 'Padma Awards',
announced on the eve of India's Republic Day, are among the highest
civilian awards in the country and are conferred for distinguished service
and excellence in various fields. She was awarded the Chameli Devi
Award instituted by the Media Foundation for excellence in journalism,
and Femina’s Woman of Substance award for her work on the Harshad
Mehta scam in 1992 and related writing.
Sucheta is a BSc. in Statistics from Karnatak College, followed up with
a graduate and post graduate degree in law (LLB and LLM) from
Bombay University. Her journalistic career began in 1984 with Fortune
India, an investment magazine. She has subsequently worked with
Business Standard and The Economic Times and then went on to
become Financial Editor of The Times of India. She has been a
columnist and consulting editor for The Indian Express group until 2008.
She is now a Consulting Editor for MoneyLIFE a personal finance
fortnightly (www.moneylife.in). Her columns are also published by
various publications including the Dainik Hindustan.
Sucheta's areas of interest are the capital market, investor related issues,
consumer issues and the infrastructure sector. She is well-known for her
numerous investigative pieces in all these areas and most notably for
breaking the securities scam in 1992 which was India’s biggest financial
scandal until then.
She has co-authored a book on the securities scam with her husband
Debashis Basu called The Scam: Who Won, Who lost, Who got away
(1993). This book, which was a best seller that year, has been revised,
updated and re-released in 2001 and again in 2005 (It is now called The
Scam: From Harshad Mehta To Ketan Parekh). In March 2000, she
wrote a biography of A.D.Shroff, who was considered a financial genius
in the 1950s. (Published by Viking books of Penguin). Pathbreakers -- a
book of 26 inspiring interviews with eminent Indians -- by Sucheta Dalal
and Debashis Basu was also released in July 2007.
Ms Dalal takes active interest in consumer and investor related issues.
She has been a Member of the Investor Protection and Education Fund
set up by the Government of India under the Department of Company
Affairs and a member of the Primary Market Advisory Committee of the
Securities and Exchange Board of India. She is a Trustee of the
Consumer Education and Research Centre of Ahmedabad, which is
among the largest consumer and investor advocacy groups in India. She
is also a Member of Bank of Baroda’s Standing Committee on consumer
services and on the board of Credibility Alliance, which is a consortium
of voluntary organisations committed towards enhancing accountability
and transparency in the voluntary sector through good governance.
Conclusion:-
Corporate Governance is the value framework, ethical framework and moral
framework within which businesses make decisions.
Business must harness the power of ethics which is assuming a new level of
importance and power.
When large sums of money are involved, greed causes people to become
unethical.
People should aleays keep in their mind that anything which have been started
with the wrong intention will give us a short term success and p;easure , but
ultimately the end woulb be very fatal .
As we have seen in the above project that Mr. HARSHAD MEHTA , a well
known broker, a multi-millioner has ended up his life in jail or in the judicial
custody .
Overall to conclude this , ethics should be given more importance than greed .
People should understand that their mistake are caused to end numbers of people
who r associated with them.
BIBLOGRAPHY:-
www.google.com
www.bseindia.com
www.nseindia.com
www.sebi.com
www.wikipedia.com
