Abstract of the Case:

The Central Bureau of Investigation had arrested Mehta and his brothers on 9 November 1992 for allegedly embezzling more than 2.8 million shares of almost 90 companies through forged share transfer forms. The value of the shares, which were embezzled by them were Rs. 250 crore which is equal to 19 billion or US $230 million in 2023.


In the early 1990s, Harshad Mehta started the assisting the transactions among the Indian banks who were acting as mediator by providing a way were a broker communicate between two banks. The stocks which were listed in the Bombay Stock Exchange, Harshad Mehta used to raise funds from different banks and here after started inventing them in those stocks to expand the prices unnaturally. On 16th June,1993 he raised an excursion by making an announcement publicly that, Mr. P.V. Narsimha Rao who was the Prime Minister and congress President at that time was paid 1 crore by Mehta as a donation for getting him out of the case.

Appearance of the Case:

Harshad Mehta had taken possession of around Rs. 1,000 from the banks for buying stocks from Bombay Stock Exchange. The stock market had started growing money after he started putting money in the stock market. The retailers started following Mehta and, they followed the steps which Mehta was using for investing money. They started following the footsteps of “Big Bull”.

In the period between April 1991 and April 1992, the highest annual return for the index was 4,467, it was because of the Sensex as it rose rapidly and returned 274% from 1,194 points to 4,467.

He asked the banks to transfer money in his personal accounts by affectioning them that he will buy securities from other banks and promised higher rates to the banks. That was the time when the banks needed to go through the brokers to buy securities and forward bonds from other banks. For increasing the demand of certain shares (such as shares of good instituted companies like Videocon, ACC and Sterlite Industries) impressively, sells the shares and gave only one part of it and kept the rest to himself. As a result, the stock like ACC has reached nearly Rs. 9000 in 3 months only (which was trading for Rs. 200 per share in 1991).

Impact of the Case:

The Government securities were decreased (as reported by the State Bank of India), the scam which Harshad Mehta was doing, came into light. After that, it was found in the investigation that the scam was of around Rs. 3500 crores. After uncovering the Harshad Mehta Scam, there was a great downfall in the market i.e., the market was crashed by 72%, which was the biggest fall and a scurvy phase which continued for 2 years.


The reason which made Harshad Mehta responsible for the crimes is because of its involvement in manipulating the stock market/market, availing the perforation of the banking system, defalcation etc. He was found guilty for 23 crimes, but he was found dead in the prison after being imputed for only four.

In Harshad Mehta Scam case, while supporting the ITAT,s ruling, it was held by the Bombay High Court that, since the CIT(A) had removed the assessed addition in the 1st round of proceedings and the connected matters have arrived at conclusiveness, the Assessing Officer could not have estimated additions again.

Harshad Mehta was arrested and given a punishment, 5 years rigorous imprisonment, in November 1992.

He also filed a petition for appeal but due to cardiac arrest, died in jail in 2001.


At last, the verdict was pronounced by the court, accounting the parties guilty for their actions. The legal series of events resulted in convictions and punishments which were given to the individuals who were found guilty in that case by the court. Harshad Mehta was the prime suspect in the case of scam, thus was given the punishment of imprisonment and files.


How was the stock market manipulated by Harshad Mehta?

Which company Invested in Harshad Market?

What was the Harshad Mehta scam all about?








Author: Anjali Kumari

BBA.LL.B (Hons)

Teerthanker Mahaveer University

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