Largest stock market Scam .. Harshad Mehta ..In short

Harshad Mehta - SCAM HIGHLIGHTS

Harshad Mehta group of firms, in criminal conspiracy with officials of various banks, dishonestly and fraudulently, caused loss to banks to the tune of Rs 2000 crore as per current estimate.

There are three methods by which transactions in securities took place between the banks. The first is the physical handing over of securities by the selling bank to the buying bank, which is done only occasionally due to the cumbersome procedure involved in the actual transfer of voluminous securities. Many of the securities were not in the possession of the selling bank but were made available only as credit balance in the SGL account of RBI.

Transactions in such securities also took place between banks by way of issuing bank receipts (BRs), followed by actual transfer of securities in case of outright sale.

During 1991-92, the total transactions in government securities etc. by SBI, which were done through brokers, were of the order of Rs 41,252 crore. Out of this, Rs. 17,573 crore were put through the Harshad Mehta group of firms. The balance transactions of Rs. 23,679 crore were through 15 other brokers.

Mr C.L.Khemani, DMD (T and IM) and SBI officials were responsible for showing undue favour to Harshad Mehta.

The current account of Harshad Mehta with SBI had only Rs 87.60 lakh in April/May 1991. By the end of June 1991, this rose to Rs 129.03 lakh. By April 8 1992,  the figures leaped to Rs 1239.76 crore.

A very large number of sale/purchase transactions approved by SBI were with Punjab National Bank.

The SBI had in December 1991 entered into a sale contract for Rs 845.09 crore and purchase contract for Rs 725.58 crore, both with PNB and a purchase contract of Rs 98.10 crore with the State Bank of Saurashtra.

Several statements of SBI accounts were recovered from the room of Mr C.L.Khemani during a joint surprise check conducted by  CBI and SBI officers on April 28.

There was a shortfall of about Rs 669 crore in securities held by SBI as on March 31. When the

shortfall was discovered, the Harshad Mehta group paid to SBI a total sum of Rs 622.72 crore between a specific period by way of nine cheques. It is thus clear that the Mehta group owned the shortfall was due to their machinations.

Due to Harshad Mehta's machinations, there was reduction in the holdings of securities by the SBI in their SGL account and, at the same time, the SBI did not receive the cost of such securities which they sold to other banks.