Major financial scams of India

1)Securities Scam(1992): In April 1992,a shortfall in the Government securities held by the SBI caused panic on Dalal street. He was known as the 'Big Bull'. However, his bull run did not last too long. He triggered a rise in the Bombay Stock Exchange in the year 1992 by trading in shares at a premium across many segments.Investments revealed that Rs.4000 crore was swindled in a scam involving top officers of many nationalised and foreign banks,as well as stockbrokers,bureaucrats and politicians.Stock markets shut down in panic and share prices plummeted by over 40 percent,causing a loss of market value to the tune of 100,000crore.Harshad Mehta used ready forward deals between banks to secure short –term loans against government securities,earning commissions worth of crores .He bribed officials of Bank of Karad and the metropolitan Cooperative bank to issue fake bank receipts which were sold to other banks who lent money to Mehta assuming that they were lent against government securities.

Taking advantages of the loopholes in the banking system, Harshad and his associates triggered a securities scam diverting funds to the tune of Rs 4000 crore (Rs 40 billion) from the banks to stockbrokers between April 1991 to May 1992.  Harshad Mehta worked with the New India Assurance Company before he moved ahead to try his luck in the stock markets. Mehta soon mastered the tricks of the trade and set out on dangerous game plan. Mehta has siphoned off huge sums of money from several banks and millions of investors were conned in the process. His scam was exposed, the markets crashed and he was arrested and banned for life from trading in the stock markets.  He was later charged with 72 criminal offences. A Special Court also sentenced Sudhir Mehta, Harshad Mehta's brother, and six others, including four bank officials, to rigorous imprisonment (RI) ranging from 1 year to 10 years on the charge of duping State Bank of India to the tune of Rs 600 crore (Rs 6 billion) in connection with the securities scam that rocked the financial markets in 1992. He died in 2002,litigations still pending against him.

2)Satyam Scam(2009): The Satyam Computer swindle is reportedly the largest corporate scam in India,exceeding Rs.24000 crore.Comapany chairman Ramalinga Raju quit after confessing to the board and SEBI that he cooked the books.In Satyam’s balance sheet of Rs.2008,Rs.5040 crore as cash assets were inflated to Rs.5361 crore,earning a non-existent interest of Rs.376crore.Company Debt was stated Rs.490crore as against Rs.2651 crore.Based on a high market valuation,Raju and his confederates offloaded their shares,making crores of rupees to buy land using the money to set up 374 infrastructure firms and eight investment companies.

The biggest corporate scam in Indias come from one of the most respected businessmen.Satyam founder By raju Ramalinga Raju resigned as its chairman after admitting to cooking up the account books.

His efforts to fill the "fictitious assets with real ones" through Maytas acquisition failed, after which he decided to confess the crime.

With a fraud involving about Rs 8,000 crore (Rs 80 billion), Satyam is heading for more trouble in the days ahead.

On Wednesday, India's fourth largest IT company lost a staggering Rs 10,000 crore (Rs 100 billion) in market capitalisation as investors reacted sharply and dumped shares, pushing down the scrip by 78 per cent to Rs 39.95 on the Bombay Stock Exchange.

The NYSE-listed firm could also face regulator action in the US.

"I am now prepared to subject myself to the laws of the land and face consequences thereof," Raju said in a letter to SEBI and the Board of Directors, while giving details of how the profits were inflated over the years and his failed attempts to "fill the fictitious assets with real ones."

Raju said the company's balance sheet as of September 30 carries "inflated (non-existent) cash and bank balances of Rs 5,040 crore (Rs 50.40 billion) as against Rs 5,361 crore (Rs 53.61 billion) reflected in the books”.

3)Ketan Parekh Scam (2001): After the UTI was bailed out by the government with Rs.4800 crore of taxpayers  money ,it purchased huge bulks of manipulated sharefours from “Pentafour bull” Ketan Parekh .The 2001 stock market crash prompted the SEBI to inspect the books of Parekh.The CBI arrested him on charges of defrauding The Bank Of India of about $30million.As hundreds went bankrupt and eight investors committed suicide,the markets lost Rs.1,15,000 crore to the scam.

Ketan Parekh followed Harshad  Mehta's footsteps to swindle crores of rupees from banks. A chartered accountant he used to run a family business, NH Securities. Ketan however had bigger plans in mind. He  targeted  smaller exchanges like the Allahabad Stock Exchange and the Calcutta Stock Exchange, and bought shares in fictitious names. His dealings revolved around shares of ten companies like Himachal Futuristic, Global Tele-Systems, SSI Ltd, DSQ Software, Zee Telefilms,  Silver line,  pent  media  Graphics and Satyam Computer (K-10 scripts). 

Ketan borrowed Rs 250 crore from Global Trust Bank to fuel his ambitions. Ketan along with his associates also managed to get Rs 1,000 crore from the Madhavpura Mercantile Co-operative Bank. 

According to RBI regulations, a broker is allowed a loan  of only Rs 15 crore (Rs 150 million). There was evidence of price rigging in the  scripts  of Global Trust Bank, Zee Telefilms, HFCL, Lupin Laboratories, Aftek Infosys and Padmini Polymer.

4)Bhansali Scam (1995):Businessman Chain Roop Bhansali invited investments in his financial outfits CRB capital Markets,CRB Share Custodial Services between 1992 and 1996,later transferring the money to fictious companies.CRB Capital Markets raised Rs.176 crore,CRB  Mutual Funds Rs.230 crore and fixed deposits earned him Rs.180crore.He also raised around Rs.900 crore from markets.Bhansali would pay the interest on investments by borrowing from the market,but he went bust in the 1995 stock market crash and busted in turn.

The Bhansali scam resulted in a loss of over Rs 1,200 crore (Rs 12 billion).He first launched the finance company CRB Capital Markets, followed by

CRB Mutual Fund and CRB Share Custodial Services. He ruled like  financial wizard 1992 to 1996 collecting money from the public through fixed deposits, bonds and debentures. The money was transferred to companies that never existed. CRB Capital Markets raised a whopping Rs 176 crore in three years. In 1994 CRB Mutual Funds raised Rs 230 crore and Rs 180 crore came via fixed deposits. Bhansali also succeeded to rise about Rs 900 crore from the markets.

However, his good days did not last long, after 1995 he received several jolts. Bhansali tried borrowing more money from the market. This led to a financial crisis.  It became difficult for Bhansali to sustain himself. The Reserve Bank of India (RBI) refused banking status to CRB and he was in the dock. SBI was one of the banks to be hit by his huge defaults.

5)Telgi Scam (1991): He paid for his own education at  Sarvodaya Vidyalaya by selling fruits and vegetables on trains. He is today famous (or infamous) for being he man behind one of  The Telgi case is another big scam that rocked India. The fake stamp racket involving Abdul Karim Telgi  was exposed in 2000. The loss is estimated to be Rs 171.33 crore (Rs 1.71 billion), it was initially pegged to be Rs 30,000 crore (Rs 300  billion), which was later clarified by the CBI as an exaggerated figure. In 1994, Abdul Karim Telgi acquired a stamp paper license from the Indian government and began printing fake stamp  papers. Telgi  bribed to get into the government security press in  Nasik  and bought special machines to print fake stamp papers. Telgi's networked spread across 13 states involving 176 offices, 1,000 employees and 123 bank accounts in 18cities.

Counterfeiter Abdul Karim Telgi printed fake stamp paper and appointed 300 agents to sell them in bulk in banks,foreign investors,insurance companies and stock market players,earning around 200 crores a month.The Telgi scandal had political implications;a narco test allegedly revealed the involvement of Maharashtra political leaders like chhagan bhujbal.On june 28,2007 Telgi was awarded 13 years of Rigorous imprisonment and fined Rs.202 crore along with his 42 accomplices.


on 09 February 2012
Published in Corporate Law
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