Harshad Mehta: Offences He Committed Under The Indian Penal Code

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Harshad Mehta: Offences He Committed Under The Indian Penal Code

Written by: Adv. Akarsh Sharma

After the release of the 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 in 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 the stock market and worked as a jobber where he gained knowledge about the stock market.

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

Over the years he gained a good reputation in the field and of the 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 the Indian stock market, a scam of Rs.4000 crore (approx. Rs.24000/- according to today’s inflation). So let’s talk about how and by what actions his life turned from one of the biggest stockbrokers of the country to the person behind the biggest scam.

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

This is the point where brokers came into the picture of the 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 banks 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 his goodwill to breach the trust, he started creating fake receipts and asking banks to issue cheques in his name, according to the guidelines of R.B.I the cheque for securities should only be issued in 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 used to take securities from one bank and give them to another and when the time comes to return the securities with money and interest he uses 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 that 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 for the stock used to increase the used to withdraw his money from the stocks.

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

The offences committed by Harshad 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 the 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 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 IPC:

Section 467 Forgery of valuable security, will, etc.: Whoever forges a document which purports to be 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 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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