Business Today

Big Bull Harshad Mehta pays dues 9 years after death

The Custodian of the attached properties and assets of the Harshad Mehta Group made payments of Rs 1,995.66 crore to the I-T department and Rs 199.25 crore to State Bank of India.

Lalatendu Mishra   Mumbai     Last Updated: March 17, 2011  | 09:08 IST

Harshad Mehta the scamster might have died in 2002 but the Income Tax (I-T) department and public sector banks have managed to recover a large part of their claims arising out of the 1992 securities scam from the liquidated assets of India's first Big Bull.

As per the Supreme Court's (SC) directives, the Custodian of the attached properties and assets of the Harshad Mehta Group (HMG) on Wednesday made payments of Rs 1,995.66 crore to the I-T department and Rs 199.25 crore to the State Bank of India (SBI), which were among the earliest claimants to recover their dues.

On Wednesday, a total of Rs 2,196 crore was paid by the Custodian. So far, over Rs 4,000 crore, including the latest disbursal have been paid on behalf of the HMG alone. Of this, the I-T department has received Rs 3,200 crore and the balance Rs 800 crore has gone to the SBI, including Wednesday's Rs 200 crore. The Custodian still has a balance of Rs 500 crore funds available from the HMG assets and another Rs 1,000 crore could be augmented from auction of properties and disposal of assets of Mehta, the Custodian said.


Harshad Shantilal Mehta was born in a modest Gujarati family. He was alleged to have engineered the rise of the BSE in 1992 by exploiting several loopholes in the country's banking system.

Mehta and his associates siphoned off funds from inter-bank transactions and bought shares in huge numbers at a premium across segments, triggering the rise in the Sensex.

When the scheme was exposed, banks started demanding their money back, causing the collapse. He was later charged with 72 criminal offenses and more than 600 civil action suits were filed against him.

In April 1992, press reports indicated that there was a shortfall in the govt securities held by the State Bank of India (SBI). In about a month, investigations uncovered the securities scam involving misappropriation of funds to the tune of Rs 3,500 crore.

The scam engulfed top executives of large nationalised banks, foreign banks, financial institutions, brokers, bureaucrats & politicians.

In less than two months following the scam, the stock prices dropped by over 40%, wiping out market value to the tune of a whopping Rs 100,000 crore.
"As per law we are only settling the principal claims of the revenue departments (I-T), banks and financial institutions. With this payment, the dues from the HMG to the I-T department are fully settled," said Satish Loomba, Custodian of the movable, unmovable and other assets of all the 1992 security scam accused.

"This release made against the outstanding dues of late Harshad Mehta and related entities is the largest and first of its kind. Other claims towards interest, fines and levies could be settled at the end subject to availability of funds," he added.

Loomba, a bureaucrat with the finance ministry is the current Custodian and he expressed happiness that at last justice has been done. The Custodian was appointed by the Central government to deal with the securities scam of 1992.

"Our priority demand has been settled. This extremely large demand was pending since long. But we will pursue our other claims towards interest and fines," said Nilima Mansukhani, chief commissioner of Income Tax, Maharashtra after receiving the payment.

The SBI had a total principal amount claim of Rs 1,000 crore out of which a large portion has been settled. Financial institutions have also received some money.

But Standard Chartered Bank, which had made a claim of Rs 500 crore is yet to get a penny as it was one of the late claimants.

Though the total claim from the HMG is of over Rs 20,000 crore, the court is only considering claims towards the principal amount for the time being. The Custodian said that he has sufficient funds to meet the liability from banks and FIs concerning the HMG. Previously Rs 1,200 crore has been paid to the I-T department and banks on behalf of other accused involved in the scam. The Custodian said that he can still recover additional Rs 1,000-1,500 crore from attached and seized assets of groups other than HMG. All the payments that have been made so far are interim in nature and have been released by the Custodian on the basis of undertakings submitted by the department of revenue, government of India and SBI that the amounts will be brought back, if so ordered by the Special Court that is trying the cases.

The Special Court (Trial of Offences Relating to Transaction in Securities) was set up by an Act of Parliament in 1992 to deal with the extraordinary situation arising out of the securities scam.

The main objective was to recover the huge amount of money lost by the banks and restoration of public confidence in the financial system.

The Custodian is the principal administrative officer under the Act for the attachment, management and liquidation of the assets of notified persons(convicts) who functions under a system of concurrent judicial review by a special court comprising sitting high court judges at Mumbai.

The appeal against the orders of the special court lies with the Supreme Court alone.

Courtesy: Mail Today

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