Harshad Mehta was a Mumbai-based stockbroker. He is infamous for withdrawing large amounts of cash from banks and using it to artificially manipulate the share price in the Bombay Stock Exchange (BSE). The Indian banking system has many loopholes and Harshad took advantage of it to manipulate the Indian stock market according to his wish. Mehta is known for carrying out many transactions that are still considered fraudulent.
Mehta’s involvement in the 1992 Indian securities scam made him famous for his scams and since then heis known as a market manipulator. Although according to some journalists, Harshad Mehta did not actually commit any crime, he “simply exploited the loopholes in the system.” The security scam committed by Harshad worth Rs 4,000 crores is equivalent to Rs 24,000 crores or more in the year 2021. He was convicted for the financial crimes he had performed in the year 1998 and later in the year 2001 he died of a heart attack.
Harshad Mehta Biography
Harshad Mehta was born into a middle-class Gujarati Jain Family. He was born on 29 July 1954. He was 47 years old when he died. Harshad Mehta’s father had a small textile business and he spent most of his life living in Mumbai. Later, his entire family moved to Raipur, Chhattisgarh. Harshad completed his schooling at Holy Cross Byron Bazar Higher Secondary School in Raipur. After completing his schooling, he returned to Mumbai to pursue B.Com from Lala Lajpat Rai College. He started his higher studies in 1976.
Harshad Mehta Family and Siblings
Harshad Mehta’s father, Shantilal Mehta had a very small textile business. His mother Rasilaben Mehta was a housewife. Mehta had three siblings named Ashwin Mehta, Sudhir Mehta, and Hitesh Mehta. Both Harshad and his brother Ashwin were into the stockbroking business. Ashwin at the age of 50 completed his studies in Law and earned a degree for himself. Later, he fought for himself in court to clear all pending cases against him.
Relationship, Children’s and Wife
Jyoti Mehta was the wife of Harshad Mehta. The couple had a son named Atur Mehta. While the internet is full of various pictures of Harshad Mehta and his family members, you will not be able to find a picture of his son, Atur. Harshad was very protective about his family and never brought his son into the limelight of the media.
Harshad Mehta Career
Apart from pursuing B.Com from Lala Lajpatrai College in Mumbai, Harshad performed several job roles along with continuing his studies. He worked for a cement selling company, categorized diamonds, and had many other job roles as well. Mehta also worked as a salesman in New India Assurance Company Limited. It was during this time his interest in the stock market started growing and he started indulging in the stock market from the year 1980s. The moment he understood the amount of profit he could earn working as a stockbroker, he resigned from his existing job role. Later he started joining P. Ambalal – a very popular stockbroker associated with the Bombay Stock Exchange (BSE). He continued working under P. Ambalal for a year and later joined as a lower clerk at Harjivandas Nemidas Securities (A popular stock brokerage firm).
Rise of Harshad Mehta
This is where he met Prasann Pranjivandas. Harshad Mehta considered Prasann as his ‘Guru.’ He continued working for the stock brokerage firm for quite some time and after accumulating enough knowledge about stock brokerage, he started his own stock brokerage firm and named it “GrowMore Research and Asset Management.” Within very little time Harshad managed to impress a lot of people and they started investing in his firm.
Mehta literally went from rags to riches within a very less amount of time. During this time he became very famous and the media started highlighting his work. Soon he became very famous and was often referred to as the ‘The Amitabh Bachchan of Stock Market’ and the ‘The Big Bull.” He started earning crores within no time and bought a sea-facing 15,000 square feet penthouse in Mumbai, Worli. Harshad was very interested in automobiles and over the years he bought many fancy cars. His car collection included an imported model of Toyota Lexus which was worth 40lakhs at that time.
Harshad Mehta dominating the stock market
For more than 8 years, Harshad Mehta performed several job roles. After starting his own stock brokerage firm, he started dominating the stock market. Due to his sharp business mind, Harshad soon became a broker at the Bombay Stock Exchange in the year 1984. Within just a few years he soon became one of the most powerful and famous stock market brokers in Bombay.
Harshad continued working in Bombay Stock Exchange and people started investing in his firm. Mehta achieved a lot of fame within just a few years of working as a stockbroker which gained a lot of media attention. Harshad Mehta appeared in several newspaper headlines because he managed to achieve a lot during a very short span of time.
Harshad Mehta and Scam 1992
During the 90s, Harshad became a very known face in the world of the stock market. But rather than using the money he earned in an honest manner, Harshad continued misusing the amount earned. This later got him into several financial controversies around the country. Banks during that time were not allowed to take any kind of monetary loans from other banks. If at all it was necessary for a financial body to take a loan from another bank, the bank had to deposit their bonds and bank receipts. Also, this was an indirect process and required the intervention of brokers. Harshad Mehta used this entire process incorrectly to his advantage.
Over the years Mehta continued using bank receipts and bonds to commit several scams. Harshad was very clever and withdrew money from banks and invested heavily in the stock market to earn huge returns. The country was going through a recession during this time, due to which he had to face huge losses. Furthermore, banks started asking for his money and it was during this time his scams started revealing. Slowly Harshad’s image in the stock market started deteriorating and people started calling him a liar.
Other crimes committed by Harshad Mehta
Later, he was charged for committing around 72 criminal activities that involved several financial scams. Additionally, about 600 civil action lawsuits were filed against him. He was banned by SEBI for performing any transactions related to the stock market.
A number of people started suspecting the lavish life of Harshad. Sucheta Dalal, a Times of India journalist, went a few steps ahead and started her investigation regarding Harshad Mehta and how he managed to accumulate a huge amount of wealth within a short span of time. Eventually, after a series of investigations on April 23, 1992, Sucheta published her story discussing all the unethical ways Harshad manipulated the stock market. Sucheta revealed that Mehta scammed around Rs 5 Billion from the State Bank of India by disappearing an SGL receipt.
How Harshad Mehta performed the 1992 Scam operations?
We already know that banks were not allowed to take loans from any other bank during the late 90s. However, let’s say bank X wants to take a loan from bank Z. Mehta would approach bank X (the bank that has to sell its securities in order to take the loan). He would ask the bank to allow him some time to find a bank that wants to provide a loan.
Later, Harshad would approach bank Z (the bank that is willing to provide a loan to bank X) as a broker and would tell the bank that he will be able to provide the securities that they want and in return, the bank has to issue a cheque in his name. Mehta in this case also asked for some extra time.
According to the RBI, Indian banks can only issue cheques in the name of the borrowing bank and not in the name of the broker. But banks involved in this scam issued cheques in the name of the broker. This was the main loophole in the Indian banking system.
How was this beneficial for Mehta
Remember Mehta would ask both the banks for some extra time?
Mehta would invest the money he took from the bank into the stock market. He would pick shares from certain well-performing companies like Videocon, ACC, and Sterlite Industries to hike up the demand for shares in the market. Later he would sell the shares and return the money he took from the bank and keep the profit with himself.
Mehta would approach various banks while performing the scam. He would specifically approach banks that are willing to sell or buy securities, this scales the chain to a great extent. Mehta continued earning more which made him greedy. Mehta continued scamming and took the entire situation to a whole new level. To earn more he approached banks that would print fake bank receipts for him.
Impact of Scam 1992 on the Banking System
The 1992 scam had a huge impact on the Indian economy and resulted in the crashing of the Indian financial market. Additionally, the scam impacted the capital market and the banking sector of the country to a huge extent, it took several years for both of these industries to manage the loss. Sensex stood at 4467 points in 1992, however, with the revelation of the scam, Sensex suddenly crashed to 2529 points in the month of August. More than Rs 1,00,000 crores were wiped off from the Indian economy.
In the 1992 scam, besides Harshad Mehta and his brothers, several other Indian politicians were also involved. The Supreme Court of India accused Harshad of scamming more than 5 thousand crores in the Indian financial market. Every individual involved in the scam was heavily punished by the Indian government.
After the exposure of the scam in 1992, most banks were left with an invalid BR and a whopping amount of loss. This later led to the suicide of Mr. B.B Shetty, the Chairman of Vijaya Bank. Mr. Shetty was accused of issuing fake cheques to Harshad Mehta repeatedly.
Impact of Scam 1992 on Indian Politics
The scam 1992 exposed a lot of politicians who were involved with Harshad Mehta. S. Venkitaramanan, then the governor of RBI was also involved in the scam along with well-known stockbrokers like Ajay Kayan, Aditya Birla, and Pallav Sheth. With the revelation, the political environment in the country started heating up and later Harshad Mehta in one of his press conferences claimed to have paid an amount of Rs 1 crore to P.V. Narasimha Rao, the then Prime Minister of India to stay away from the scam case.
Who arrested Harshad Mehta?
2nd November 1992 the CBI (Central Bureau of Investigation) arrested Harshad Mehta. Mehta was charged for 70 criminal cases and 600 civil lawsuits. Mehta spent 3 months in jail and was released. However, in 1997 he was arrested again and was put in Thane Jail. On 31st December 2001, while everybody was celebrating Happy New Year, Mehta was suffering from chest pain and was admitted to Thane Civil Hospital. Mehta lost his life fighting against life and died.
Film and Book Adaptation
Harshad Mehta is one of the most popular scammers in Indian history. Below we have listed some of the books and movies that are based on Harshad Mehta.
- The Scam: Who Won, Who Lost, Who Got Away (1993) – Book
- The Scam: From Harshad Mehta to Ketan Parekh (2001) – Book
- Scam 1992: The Harshad Mehta Story – Web series. [This is a very popular web series based on Harshad Mehta, you can watch the series on SonyLIV.
- The Big Bull (2021) – Movie. The movie stars Abhishek Bachchan and is available to watch on Hotstar.
- Aankhein (1993) – Movie. This is another movie that depicts the life of Harshad Mehta. Natwar Shah is the lead actor for the series.
- Gafla (2006) – Movie. This is a Bollywood crime movie inspired by the life of Harshad Mehta.
It may also interest you to find out what Harshad Mehta’s brother, Ashwin Mehta is up to these days? Read it here.
