Ms. Deepika Mohnani, BA LLB, National Law Institute University, Bhopal
ABSTRACT
The scam, worth approximately INR 3500 crore, involved the fraudulent manipulation of securities transactions through fake bank receipts (BRs). Mehta’s deception was not merely an individual act but a systemic failure, exacerbated by a lack of oversight and regulatory vigilance. His fraudulent activities went unnoticed for years due to lax enforcement of banking and stock market regulations. It was only after an investigative report by journalist Sucheta Dalal in The Times of India that the scam was exposed, leading to multiple investigations, legal proceedings, and an overhaul of India's financial regulations.
Introduction
The biggest stock market swindle in Indian history is thought to have been the Harshad Mehta affair. It revealed how ineffective India's stock market governance and banking laws were. The scandal exposed the flaws in India's financial institutions and regulatory agencies during a time of economic liberalization, privatization, and globalization (LPG). Stockbroker Harshad Mehta made enormous sums of money by taking advantage of weaknesses in the banking system, which led to a stock market meltdown that put thousands of investors in dire straits.
Fake bank receipts (BRs) were used to fraudulently manipulate securities transactions in this scam, which had a total estimated value of INR 3542 crore($7 billion)1. Mehta's deceit was a systemic failure rather than just an isolated incident, made worse by a lack of regulatory monitoring and control. Because banking and stock market restrictions were not strictly enforced, his fraudulent operations remained undetected for years. Only after journalist Sucheta Dalal's investigative piece in The Times of India did the scandal come to light, resulting in numerous investigations, court cases, and a revision of India's financial laws.
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