General, Stock Market

STOCK MARKET SCAMS IN INDIA

stock-market-scams-in-india

The stock market refers to the place where the issuing and trading of equities or stocks of public companies, bonds, and other securities take place. A scam is a means of getting money by deception or in an illegal way with a fake identity or documents. We have witnessed many scams in India. Some of these have caused a lot of financial distress to the common man.

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The SEBI (Securities Exchange Board of India) has been receiving rules and regulation in an aim to plug the loop holes in the securities market. Inspite of implementing many rules and regulations by SEBI it is failing to eradicate the scams.

Here, we can have the examples of stock market scams that took in India.

HARSHAD MEHTA

He was an Indian stock broker born in Gujarat in 1954 and who has a major hand in Securities Scam of 1992. In 1984 he became the part of stock market as a stock broker and established his own firm called Grow More Research and Asset Management he started trading actively in 1986 Harshad Mehta and his associates fooled many investors’ diverted funds from banks to stock brokers between April 1991 to May 1992.The amount of scam is Rs.5000 crores. Sucheta dalal is journalist who exposed the scam of Mehta in the column of TOI (The Times of India). The bank lends against government securities just as a broker. The borrowing bank actually sells the securities to the lending and buys back the securities at a higher rate. It was a ready forward deal in the form of short term loan from one bank to another and his associates along with him achieved a great success in diverting funds. He was arrested after the scam is disclosed.

KETAN PAREKH

Ketan Parekh is a former stock broker who has involved in a scam took in the period of 1998-2001. Parekh purchased large stakes in less known small companies and jacked up their prices through circular trading with other traders. Later other promoters and industrialists gave funds to rise up their companies share prices. RBI commenced an investigation against Parekh. He carried out this large scale dump in the evening after the regular trading hours and that resulted in the crash of market. He deceived banks and stock exchanges like Allahabad Stock Exchange and Calcutta Stock Exchange and bought the shares in fictitious names for the purpose of manipulating the share prices in companies. He was included in many scams and in 2014 he was convicted by a special CBI court for cheating and sentenced to two years imprisonment. Ketan was a CA who used to run family business NH securities.

SATYAM SCAM

It is the well-known and one of the biggest scams that took in India affecting India based company Satyam computer services in 2009. On 13 April 2009, through a formal public auction process and took over 46% and owned by Mahindra and Mahindra then satyam rebranded as “Mahindra Satyam” The chairman of the company Ramalinga Raju confessed that he was responsible for the manipulation that are disclosed in accounts of the company by showing the increased sales and profits from 2003.

ROOP BHANSALI SCAM

Roop bhansali who started the investment banking firm named CRB which was the top in investment banking firms. He collected money from mutual funds, fixed deposits, debentures in the name of non-existing companies and transferred the money to other shell companies and to the investors who invested with him. He offered lot of attractive schemes and made the public and big organization to invest in his financial outfits. He made huge money through his various financial outfits. Thus, he was able to own money worth Rs.900 crores. This scam resulted in a loss over Rs.1, 200 crores. He first launched the finance company CRB Capital Markets and ruled during the period of 1992 to 1996.

SUBRATA ROY

Subrata Roy, the chairman of Sahara India, born in Bihar failed to pay more than Rs.24000 crores including the interests to his investors and he was eventually arrested on 28th Feb 2014. He founded company in 1978. Sahara claims that the company’s assets are more than its liabilities and so far has deposited more than 20000 crores which will in due course come back to Sahara India as it has already repaid 95% of its investors. It was also reported that Sahara has paid rs.725.97 crores as TDS (Tax Deducted at Source) to the Income tax department. Later the Supreme Court of India granted interim bail on a condition of paying 10000 crores to SEBI the failure of which lead him towards Tihar jail. This case can also be called as Sahara India Pariwar investor fraud case.

 

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CA Rachit Jain

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