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Key takeaways

  • Harshad Mehta scam is one of the largest financial and stock market scammers in India. His conduct in misleading people about the stock and financial markets, caused numerous banks to lose money and go bankrupt.
  • Harshad Mehta’s offences under the Indian Penal Code include the offences, such as bribery, cheating, criminal conspiracy, and falsifying accounts.
  • One of the crime Harshad Mehta was convicted for is bribery, under IPC Section 171E discusses the punishment for bribery. Bribery is a crime that carries a sentence that can include up to one year imprisonment, a fine, or both.

Harshad Mehta has been named as one of the largest financial and stock market scammers in India. His conduct caused numerous banks to lose money and go bankrupt. When it came to misleading people about the stock and financial markets, he was an intelligent and knowledgeable man. He rose to fame in India in the early 1991–1992 period for his knowledge of the stock and financial markets. Nowadays, people are more rigorous about checking their share markets and learning about them online because it is easy to do so. Due to the lack of widespread internet use in 1991–1992, such was not the case.

Harshad was the richest man between 1991 and 1992, beating out wealthy professions like actors. The countless scams perpetrated by this individual are well known. He has deceived a large number of wealthy individuals and even had political backing. He was knowledgeable about every facet of financial marketing and share marketing. He acted as a financial intermediary between banks.

Harshad Mehta Scam, 1992

Until the early 1990s, banks could trade on the stock market. With his connections to bank officials, Harshad persuaded the banks to move the money directly into his personal bank account in exchange for a higher rate of interest. The banks also created phoney financial records in his name. He obtained large sums of money by defrauding banks and utilising it to buy a few particular shares, which led to an increase in the price of those shares. This would entice additional investors to purchase those particular shares, driving up the price of those shares quickly. Then, to reap the substantial profit, he would covertly sell his shares.

After that, people began to look for Harshad. The tax institution conducted searches on February 28, 1992. He was charged with 74 criminal offences and found guilty by the Janakiraman Committee, which the RBI set up. He and his brothers, who worked together to plan and carry out the operation, were detained by the Central Bureau of Investigation in November 1992. As a result of the scandal, India's financial regulatory structure has undergone significant changes. In 1995, the Securities Laws Amendments Act was passed. After serving three months in jail, Harshad and his brothers were released on bail. A few weeks later, he and his attorney Ram Jethmalani made an open declaration that he had donated Rs 1 crore to Prime Minister PV Narasimha Rao as part of the Congress' involvement to get him "off the hook."

Some stock market participants greeted Mehta with delight after his release. After that, he often reappeared as a "new age" stock market guru. By 1997, he even had his own website and newspaper column where he offered readers advice on which stocks to buy and sell. There was yet another piece of criminal evidence used against Mehta. Only 34 of the 72 allegations that the CBI brought against Mehta in October 1997 were authorised by the Special Court, which was set up to address issues related to securities fraud. In September 1999, the Bombay High Court handed down a five-year prison term for him and three other defendants for their role in the larger securities fraud that involved the 380.97-million-rupee Maruti Udyog Ltd cases.

However, in 2001, he was found guilty of misusing Rs. 2.5 billion from 2.7 million "missing shares" of 90 blue-chip companies. He was given bail across every case. This time, he was denied bail, and on December 31, 2001, at the age of 47, he passed away at Tihar prison from a heart attack. His appeal was turned down after he passed away in 2003. His remaining criminal cases were dropped as a result of his passing, but his civil lawsuits for money damages went through.

Punishments under the Indian Penal Code

Harshad Mehta’s offences under this act include the offences, such as bribery, cheating, criminal conspiracy, and falsifying accounts. The Indian Penal Code, 1860's Chapter 18 contains the criminal offences committed by Harshad Mehta. The offense is covered by Section 463, and the punishment is covered by Sections 465 and 467, both of which deal with crimes involving forgery and the falsification of important documents like wills and securities.

Forgery: Forgery is covered by Section 465. A fake document or false electronic record created by anyone who intends to cause harm to the general public or a specific individual, to support a claim or title, to enter into an express or implied contract, to commit fraud or to have the potential to commit fraud, or who does any of these things.

According to Section 465, anyone who commits forgery would be sentenced to a term of imprisonment ranging from six months to four years as well as a fine.

Section 467 addresses the forging of important securities, wills, and other legal documents. A person who fabricates a document that purports to be a will, a valuable security, or who purports to grant anyone else the power to create or transfer a valuable security, receive the principal, interest, or dividends, or to receive or deliver money or movable property, faces a minimum one-year prison sentence and a maximum ten-year sentence in addition to a fine.

Bribery: Section 171E discusses the punishment for bribery. Bribery is a crime that carries a sentence that can include up to one year imprisonment, a fine, or both.

Cheating: Cheating and dishonest inducement of the transfer of property is covered by Section 420. Anyone who deceives and dishonestly induces the one who has been misled to transfer any property to another person, create, change, or destroy anything that can be signed or sealed and turned into a valuable security, or both, is punishable by up to seven years imprisonment and a fine.

Criminal conspiracy: The criminal conspiracy penalty is addressed in Section 120B, which provides that anybody who participates in a criminal conspiracy to commit an offence is subject to a sentence of death, life imprisonment, or rigorous imprisonment for a period of two years.

Falsification of accounts: Section 477A addresses the falsification of accounts. Anyone who, while employed or acting in their official capacity as a clerk, officer, or servant, wilfully and with the intent to defraud, destroys, modifies, mutilates, or falsifies any valuable security or account in their employer's possession or obtained by them or on their behalf, or wilfully and with the intent to defraud, assists or abets the making of any false entry, omits or modifies in accounts book or electronic record, shall be punished with imprisonment for a term which may extend to seven years or fine or both.


Since the scandal, the Indian stock market has advanced significantly. Other stock market frauds over the years have bankrupted investors and embarrassed regulatory organisations. Mehta, however, was the one who got things going. The incidents he staged continue to serve as a warning to the investors and authorities to exercise constant vigilance.

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