Harshad Mehta was known as the ‘Big Bull’ of Dalal Street and the ‘Amitabh Bachchan’ of the Indian stock market. He manipulated stocks by illegally obtaining money from several banks using fake bank receipts. He created a cycle of fraud involving big banks like the State Bank of India (SBI) and the National Housing Bank (NHB).
Harshad Shantilal Mehta was born on 29th July 1954, at Paneli Moti, Rajkot district in Gujarat. His early childhood was spent in Borivali, where his father was a textile businessman. He did his early study in Janta Public School, Bhilai. Mehta did not show any special promise in school and came to Mumbai after his schooling for higher studies and to find work. Mehta completed his B.Com in 1976 from Lala Lajpatrai College, Bombay and worked in a number of odd jobs for almost a decade. Mehta started his career as a sales person in New India Assurance Company Limited (NIACL). During this time, he decided to try his luck in the stock market and after a few days, resigned and joined a brokerage firm. In the early 1980s, he got hired for a clerical job at the brokerage firm Harjivandas Nemidas Securities where he worked a jobber for the broker Prasann Pranjivandas. By 1990, Harshad had risen to a position of prominence in the Indian securities industry, after years of success with his own company, Growmore. He believed that the general public is more attracted to organisations that have an English name rather than an Indian one.
A number of eminent people began to invest in his firm, and utilize his services. It was at this time that he began trading heavily in the shares of Associated Cement Company (ACC). The price of shares in the cement company eventually rose from ₹200 to ₹9,000 due to a mass buying from a group of brokers including Mehta. Just like this, whatever stocks he was interested in, skyrocketed. Everyone; super rich and middle-class people alike, invested wherever Harshad invested. He was on every magazine cover page at that time, most of them titled “Raging Bull”.
He had flashy lifestyle with a sea facing 15,000 square feet penthouse in Worli, with a mini golf course, swimming pool, and his fleet of cars including a Toyota Corolla, Lexus LS400, and Toyota Sera. It was truly a prosperous decade for Harshad. But this would all end soon.
In 1992, Mehta bribed bank employees to get fake bank receipts (BRs) issued. He used these BRs to get other banks to lend him money under the impression that they were lending against government securities. This amount was then put into the stock market to skyrocket share prices. Mehta then sold these shares at a significant profit and the principal amount was returned to the banks.
After the scam came to light, the tax department conducted a raid in Harshad’s house on February 28, 1992. Several documents and share certificates were seized. Soon after, he was imprisoned. He was convicted by both the Bombay High Court and the Supreme Court and charged with 74 criminal offences. His legal battles dragged on until 2001, when he passed away in jail from a cardiac arrest, at the age of 47.
The Harshad Mehta scam triggered many changes in India’s financial regulatory system. The Securities Laws (Amendments) Act was passed in 1995, widening Sebi’s jurisdiction and allowing it to regulate depositories, FIIs, venture capital funds and credit-rating agencies. To secure investor interest, Sebi could also make it mandatory for companies issuing securities to make disclosures.
The Indian stock market has come a long way since the scam. Over the years, there have been other stock market scams that left regulatory bodies in pressure. But Mehta was the one who started it all. His actions continue to serve as a reminder to both investors and regulators to remain vigilant at all times.