Harshad Mehta Scam: How the 1992 Securities Fraud Rocked India

Tax tribunal deletes a ₹1,021 crore addition 2026

Thirty-four years after the scam, the Income Tax Appellate Tribunal in Mumbai was still ruling on Harshad Mehta’s income for 1992–93. In Jyoti H. Mehta v. DCIT, a bench of Sandeep Gosain and Bijayananda Pruseth deleted an addition of ₹1,021.33 crore for a supposed “oversold” money-market position, finding calculation errors, omitted purchases and transactions wrongly treated as sales.

It also deleted a ₹524.54 crore addition tied to payments to State Bank of India and several smaller ones, while upholding about ₹6.16 crore of unexplained bank credits. The tax department’s fresh assessment in December 2016 had put his income for the year at ₹2,106.04 crore.

Special Court rejects the family’s ₹5,500 crore claim Legal

Mehta’s family had argued that the Custodian owed them refunds of more than ₹5,500 crore because the group’s assets exceeded its debts. The Special Court disagreed. Citing the Custodian’s figures as of 31 July 2021, it noted liabilities of about ₹22,606 crore against assets of about ₹3,605 crore, leaving some ₹19,000 crore uncovered.

Scam 1992 brings the story to a new generation Milestone

The web series Scam 1992: The Harshad Mehta Story, based on the book The Scam by Debashis Basu and Sucheta Dalal, became one of India’s most watched streaming shows and made Pratik Gandhi a star.

Four bank officials jailed, 25 years on Legal

Special Judge H.S. Mahajan convicted four former bank officials — M.S. Srinivasan of the State Bank of Saurashtra, Vinayak Deosthali and P.A. Karkhanis of UCO Bank, and R. Sitaraman of SBI’s securities wing — of corruption, criminal breach of trust and falsifying accounts to benefit Mehta. Each was sentenced to three years and fined ₹5,000.

Supreme Court rules on the NHB–UCO Bank case Legal

The Supreme Court decided appeals arising from one of the clearest examples of the scam’s mechanics. On 6 April 1992 the National Housing Bank lent ₹40 crore “at call” to UCO Bank, but the money was credited to Harshad Mehta’s account. The Special Court had convicted bank officials and others in 2003; the Supreme Court reviewed those convictions and sentences.

Harshad Mehta dies in custody Milestone

After complaining of chest pain in Thane jail, Mehta was taken to Thane Civil Hospital, where he died of a heart attack on 31 December 2001, aged 47. He had been convicted in four of the 27 criminal cases brought against him; the rest, plus hundreds of civil claims, were unresolved.

On 14 January 2003 the Supreme Court upheld his September 1999 conviction, which had carried five years’ rigorous imprisonment and a ₹25,000 fine.

Depositories Act: shares go electronic Reform

The Depositories Act, 1996 allowed shares and securities to be held and transferred electronically. The National Securities Depository Ltd began operating in November 1996, and dematerialised shares soon replaced the paper certificates and transfer deeds that had made forgery, bad deliveries and slow settlement common.

SEBI gets teeth Reform

SEBI had become a statutory regulator in 1992, but its enforcement powers were limited. The Securities Laws (Amendment) Act, 1995 let it impose monetary penalties, regulate more types of intermediaries and act against fraudulent and unfair trade practices.

Screen-based trading on the NSE Reform

The National Stock Exchange, set up by financial institutions as part of the reform plan, began trading in equities in November 1994 on a nationwide electronic screen-based system, five months after opening its wholesale debt market. Prices and trades became visible to all members at once, not only to brokers on the floor in Bombay.

The JPC report Probe

The Joint Parliamentary Committee presented its report on irregularities in securities and banking transactions. It criticised banks that let brokers handle their money and lapses in supervision, and estimated the scam at just under ₹5,000 crore.

The ₹1 crore suitcase allegation Probe

Out on bail, Mehta told a crowded press conference that he had personally handed ₹1 crore in a suitcase to Prime Minister P.V. Narasimha Rao at his residence in return for help. Rao and the Congress denied it. Investigators found no prima facie evidence and the charge was never proved, but it was the first time a sitting prime minister had faced such a public accusation.

The CBI arrests Mehta and his brothers Legal

The Central Bureau of Investigation arrested Harshad Mehta and his brothers Ashwin and Sudhir on charges including the misappropriation of more than 27 lakh shares of about 90 companies, worth about ₹250 crore. The case concerned shares that had been bought with bank money or belonged to others.

Special Court Act and the JPC Legal

The ordinance of 6 June became the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992. The Custodian notified brokers and others, and all their property was automatically attached. In the same month Parliament formed a Joint Parliamentary Committee, chaired by Ram Niwas Mirdha, to investigate.

A special court and a Custodian Legal

The President promulgated an ordinance creating a Special Court in Bombay, presided over by a sitting High Court judge, and a Custodian empowered to notify anyone involved in securities offences between 1 April 1991 and 6 June 1992. Notification froze all of that person’s property.

The Janakiraman Committee’s first report Probe

The RBI committee’s interim report began laying out how banks had paid money without receiving securities. Its findings put the total of such unbacked transactions at about ₹3,542 crore, or about ₹3,192 crore after setting off securities found at one bank. Further reports followed into 1993.

The RBI sets up the Janakiraman Committee Probe

A week after the first report, the Reserve Bank of India appointed a committee under Deputy Governor R. Janakiraman to look into irregularities in funds management by banks and financial institutions, especially in government securities and public-sector bonds.

The Sensex crashes 12.77% Crash

As banks rushed to reverse their deals and brokers were forced to sell, the Sensex fell 570 points, or 12.77%, to 3,870. The slide continued for months, taking the index to around 2,500 and erasing much of the gain of the previous year.

Sucheta Dalal breaks the story Milestone

Journalist Sucheta Dalal reported in The Times of India that State Bank of India’s government-securities portfolio had a large shortfall: the bank had paid money in ready-forward deals routed through Harshad Mehta but did not hold the securities it should have. Other banks soon found similar gaps.

The Sensex peaks near 4,500 Milestone

Between April 1991 and April 1992 the Sensex rose from about 1,194 to about 4,467, its biggest one-year gain ever. Mehta’s favourite shares rose much faster: ACC climbed from about ₹200 to nearly ₹9,000. Some of the buying was funded with money that had left the banking system through the securities market.

₹40 crore of NHB money reaches a broker Milestone

On this day, according to the CBI case later decided by the Supreme Court, the National Housing Bank lent ₹40 crore to UCO Bank as call money. Instead of staying in UCO Bank’s books, it was credited to Harshad Mehta’s account. NHB was eventually the biggest loser of the scam, with about ₹1,199 crore at stake.

SEBI becomes a statutory regulator Reform

The Securities and Exchange Board of India, created in 1988 without legal powers, received statutory status under the SEBI Act. The old Controller of Capital Issues, which fixed share-issue prices, was abolished a few months later.

Liberalisation and a hungry market Milestone

India’s 1991 economic reforms opened the economy and lifted business confidence. In the money market, banks were required to hold large amounts of government securities at low interest rates, and their treasuries looked for ways to earn more. Brokers offered to help, often by handling both money and securities for both sides of a deal.

The rise of Harshad Mehta Milestone

Harshad Shantilal Mehta grew up in Bombay, completed a B.Com in 1976 and worked in a series of jobs before joining the stock market as a jobber’s clerk in the early 1980s. He later became a member of the Bombay Stock Exchange and set up Grow More Research and Asset Management in 1986.

By 1990–91 the press called him the “Big Bull”; a business magazine cover named him the “Raging Bull”.