Harshad Mehta: Offences He Committed Under The Indian Penal Code

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Written by: Adv. Akarsh Sharma

After the release of web series Scam 1992: The Harshad Mehta Story there has been an increase in the fan following of Harshad Mehta it’s like a wave flowing the direction of his support.

Harshad S. Mehta was a lower middle class man with big dreams. He completed his education in Mumbai and started doing small jobs, soon he gained interest in stock market and worked as jobber where he gained the knowledge about stock market.

In the year 1984 he joined BSE (Bombay Stock Exchange) and started his own firm under the name “GrowMore Research and Asset Management”.

Over the years he gained a good reputation in the field and of stock market he was called “The Amitabh Bachchan of the stock market”, and soon he was famous in media with the name “The Big Bull”. 

As everyone saw in the series how Harshad Mehta did the biggest scam in the history of Indian stock market, a scam of Rs.4000 crore (approx. Rs.24000/- according todays inflation). So let’s talk about how and by what actions his life turned from one of the biggest stock brokers of the country to person behind the biggest scam.

Harshad Mehta started by entering in the stock market and earing a good profit but in a hurry to earn more he stepped in the securities market where he worked as a broker of securities between the banks. In those times banks use to maintain certain amount of securities and if a bank falls short of the security it use to take security from other bank at a certain amount and after few days (approx. time of 15 days) use to return securities with interest.

This is the point where brokers came in picture of securities market, brokers use to act as mediators between 2 banks and use to earn commissions. This was the point where Harshad Mehta started his path towards destruction.

He started asking banks to give him securities and use to ask for some time to find the buyers for those securities and later on he use to handover those securities to other bank in this process the banks never use to know with whom they are dealing until the final agreement and by this method he started gaining trust and goodwill form the banks.

Soon he started using the his goodwill to breach the trust, he started creating fake receipts and asking banks to issue cheques on his name, according to the guidelines of R.B.I the cheque for securities should only be issued on the name of a bank and not a person.

Usually in the transactions of the securities there use to be only 2 banks, but Harshad Mehta created a chain where he use to take securities from one bank and give to another and when the time comes to return the securities with money and interest he use to go to 3rd bank and give securities to him ask for money and return the money to 1st bank. Like this he created a chain of banks who lend money to each other on fake bank receipts.

The cheques he use to get issued on his name were used to manipulate the stock market as being a bull of the stock market he used that money to keep the stock prices high and when the demand of the stock use to increase he use to withdraw his money from the stocks.

This is how Harshad Mehta earned a fortune, and this is the story which everyone knows but now let’s takes a look at what sections his actions attracted from the Indian Penal Code.

The offences committed by Hrashad Mehta can be found in Chapter 18 of the Indian Penal Code, 1860. According to the definitions these actions attract section 465 Punishment for forgery and section 467 forgeries of valuable securities, will etc.

To understand these two sections first one should know section 463 which is definition of Forgery:

Section 463 Forgery: [Whoever makes any false documents or false electronic record or part of a document or electronic record, with intent to cause damage or injury], to the public or to any person, or to support any claim or title, or to cause any person to part with property, or to enter into any express or implied contract, or with intent to commit fraud or that fraud may be committed, commits forgery.

Section 465 is a continuation of this section it defines the punishment of Forgery:

Section 465 Punishment for forgery: Whoever commits forgery shall be punished with imprisonment of either description for a term which may extend to two years, or with fine, or with both.

Section 467 connects the whole study with the with IPC:

Setion 467 Forgery of valuable security, will, etc.: Whoever forges a document which purports to be a valuable security or a will, or an authority to adopt a son, or which purports to give authority to any person to make or transfer any valuable security, or to receive the principal, interest or dividends thereon, or to receive or deliver any money, movable property, or valuable security, or any document purporting to be an acquittance or receipt acknowledging the payment of money, or an acquittance or receipt for the delivery of any movable property or valuable security, shall be punished with 1[imprisonment for life], or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine.

After the exposing of the Scam Harshad Mehta was charged with over 600 civil cases and 70 criminal cases again a high number on records. Although Harshad Mehta was a great intelligent man with big dreams but the path he choose to achieve his goals were not correct, which lead to his downfall and eventually to his demise.    


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