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Monies paid by banks to M/s. Harshad S. Mehta could not have been deposited in his bank accounts as that amounted to siphoning monies from the banks and by such a deposit Harshad committed a crime.


  • In terms of notification issued by the Government u/s 16(1) of the Securities Contract (Regulation) Act, 1956 on 27.06.1969 “no person in the territory to which the said Act extends, shall enter into any contract or the sale or purchase of securities other than spot delivery contract or contract for cash or hand delivery or special delivery in any securities as is permissible under the said Act and the Rules, Bye-laws and Regulations of a recognized stock exchange. Thus, banks were legally required to engage the services of a registered members of a Stock Exchange in order to purchase and sell Government Securities, Public Sector Bonds, Units of Unit Trust of India as per the provisions of Securities Contract Regulations Act, 1956 (SCRA) and  Rules, Regulations and Bye-laws framed by the Bombay Stock Exchange (BSE). In fact, these securities were listed on BSE and therefore a valid contract in them could be entered into only by engaging services of a registered member of a stock exchange.

  • That M/s Harshad Mehta was governed by SCRA and Rules, Regulations and Bye-laws of BSE and which permitted him to act both as principal and as broker. Harshad had expertise in market making (jobbing) and to impart liquidity in money market he was undertaking large number of transactions as principal (for self) and was not being paid any brokerage by the banks and Financial Institutions (FIs) who always knew that M/s Harshad Mehta was acting as principal and was the true counterparty in most of his transactions.

  • In terms of Rules, Regulations and Bye-laws of BSE Harshad was within his right to deposit the Pay Orders received from banks and FIs and other clients into his bank account as legally it was his responsibility to perform each and every contract entered into by his brokerage firm.

  • Several banks had extended facilities to the leading brokerage firms what was commonly called as “Routing Facility” under which the banks were receiving Pay Orders in its name and giving the credits in respect of the same to their clients like M/s Harshad Mehta. When the banks and FIs entered into contracts with M/s Harshad Mehta they were handing over the Pay Orders to Harshad drawn in the name of his bankers against which under above Routing Facility the banks were giving credit and this practice was in existence atleast for 2 decades before Harshad entered into money market business. RBI always knew of such a practice widely prevalent in the market and to regulate the same RBI had also issued Private & Confidential Circular on all the banks on 26.07.1991, copy of which is enclosed.

  • That therefore any amounts credited into the bank account of M/s. Harshad S. Mehta against the contracts entered into by his brokerage firm did not amount to siphoning of monies from banks much less it was any crime or scam as falsely reported in the media. The CBI filed all cases completely ignoring the fact that M/s Harshad Mehta was governed by the Rules, Regulations and Bye-laws of the BSE and it never brought them on the record of charge-sheets filed by it. It was falsely presumed that crediting of cheques in the account of brokers was illegal.

  • Thus without even appreciating that M/s. Harshad S. Mehta was governed only by the Rules, Regulations and Bye-laws of BSE the valid transactions entered into by Harshad were given a colour of criminality.


The CBI registered a number of criminal cases against Harshad in respect of completed transactions where large profits were earned by banks and PSUs even when no FIRs were filed against him. The cases were registered by CBI on suo-motu basis just to multiply cases against him. That out of 25 cases, 21 were registered suo-moto by CBI. List os which is enclosed.


  • The CBI investigated on pre-determined lines without disclosing the material fact that Harshad was governed only by the Rules, Regulations and Bye-laws of BSE and therefore could not be proceeded against any violations committed by banks and PSUs of Private and Confidential Circulars issued on banks by RBI and issued on PSUs by Ministry of Finance. In fact, almost all his transactions were reduced to written contracts specifying that they were governed only by the Rules, Regulations and Bye-laws of BSE and a sample of Contract Note are enclosed.

  • In all charge sheets registered by CBI it did not place the above Rules, Regulations and Bye-laws of BSE on record but instead made baseless allegations on Harshad for violation of Private and Confidential Circulars issued on banks and on PSUs as above without adducing an iota of evidence establishing Harshad’s knowledge of such Circulars. In any event, they were not binding on Harshad. The banks and PSUs have been found to have violated these Circulars in order to earn profits. As per law laid down by Hon’ble Supreme Court in BOI Finance vs Custodian reported as (1997) 10 SCC 488, such private and confidential circulars could not be binding to HSM, even for civil liabilities much for criminal cases.

  • Contracts were entered into on most competitive terms after inviting quotations from all the brokers and the banks and PSUs made enormous profits in the transactions entered into with M/s Harshad S Mehta. The profits of all the banks rose very sharply on account of such transactions.

  • There was no requirement for M/s Harshad S Mehta to disclose the name of counterparty and only therefore the above Contract Notes did not specify any names. In any event, banks and PSUs always knew that their Contracts were with M/s. Harshad S Mehta on a principal to principal basis which gets confirmed by the fact that they have not paid any brokerage to M/s Harshad S Mehta. The Hon’ble Special Court has passed several orders about falsification of records by banks showing transactions with HSM as a broker. A list of which orders is enclosed.

  • That only on the date of delivery, the banks and PSUs were given delivery orders, sample of one delivery order is enclosed. The delivery orders conveyed the name of the banks from whom delivery would be received and payment would be required to be made to that bank. For transactions entered into by M/s Harshad S Mehta as a principal in most cases they were performed after netting out several transactions through the routing banks whose names were always known to the banks and PSUs.

  • Only when CBI brought the records of the banks and PSUs in the charge sheets, it was discovered for the first time that they were making false entries in their books showing Harshad as broker and name of any bank or the delivering bank as the counterparty. The CBI levelled its allegations on the basis of such false entries which were made only to comply with Private and Confidential Circulars. The Special Court has passed several orders criticizing the banks for such falsification. A list of which orders is enclosed.

  • Atleast RBI has addressed 3 letters to Custodian informing him the facts of securities belonging to Harshad which were found to be lying with several banks but were not handed over to the Custodian.

  • CBI made allegations by presuming that the records of banks and PSUs were true and it could complete trial in only one case of Maruti Udyog Ltd.  In the said case, no amounts were outstanding and atleast on two occasions Harshad had lent money to Maruti Udyog Ltd.  While his appeal challenging his conviction was pending before Hon’ble Supreme Court, he expired in judicial custody.  The Hon’ble Supreme Court later reduced the sentences in case of all accused to time spent where one of the three Judges concluded that there was no criminal offence committed. 

  • In terms of Bye-law 236 of BSE, a client purchasing securities had a legal obligation to make payment towards purchase of securities either to M/s. Harshad S. Mehta or to any third party on his behalf. That only after payments were first received, the securities would become deliverable to the clients.  Likewise, as per Bye-law 237, a client selling securities had a obligation to deliver securities to M/s. Harshad S. Mehta and the amounts became payable later.

  • That once monies were deposited in the bank account of M/s. Harshad S. Mehta it would lose its identity and M/s. Harshad S. Mehta would have an obligation to deliver the securities. At the relevant time and until 1994, there were no Regulations to keep the monies and securities belonging to clients under a separate account which were later introduced by Securities & Exchange Board of India (SEBI).

  • Thus, the allegations that criminal offences were committed by Harshad by non-delivery of securities to banks and PSUs were false and at best could amount to a civil dispute and knowing this fully well most of the banks and PSUs did not file any FIR against Harshad.


On 23rd April 1992, Ms. Sucheta Dalal carried a front-page headline story in Times of India that “Big Bull” being broker of SBI was asked to square up securities of Rs.500 Crores without naming Harshad but using his sobriquet because Chairman of SBI had denied the truthfulness of her story. She alleged that it was a huge scam and since then has taken credit for discovering it through her “Investigative Journalism”. Later alongwith her husband Debashish Basu she wrote a book titled “The Scam Who Won, Who Lost, Who Got Away” in which she has revealed her source and how she broke the story despite denial of SBI. In this book which has been updated later even after 2000 she has made several crucial admissions. Ms. Sucheta Dalal also received Padma Shri Award in 2006.


  • Ms. Sucheta Dalal with her colleague deliberately published a completely false, libelous and mischievous story governed by the mala fide object to finish Harshad Mehta and to bring down the booming stock market by creating a panic around Harshad as he was a leading player of the market. The above allegations against her get conclusively established by the evidence being placed by me, by admissions she has made in her above book and also by the subsequent events including judgments and orders passed by Hon’ble Special Court all of which are explained hereinafter.

  • The story broke by her was completely false as it was written 22.04.1992 for publication in TOI on 23.04.1992. I am adducing conclusive evidence to prove that when she wrote the story on 22.04.1992 no amounts were payable to SBI as within 4 working days from 11.04.1992 Harshad paid to SBI as per their demand Rs.616.17 Crores as under:






Pay order of Grindlays Bank



3 Pay orders from Grindlays Bank



2 Pay orders from Grindlays Bank



2 Pay orders from Grindlays Bank
1 Pay order from Syndicate Bank



As per Page 5 & 6 of Ms. Sucheta Dalal’s book, Harshad was called by SBI on 11th Saturday and was asked to return the monies and on Pages 12, 13 & 14 of the book she has admitted the fact of above payments of Harshad to SBI and the relevant pages of the book are also enclosed.

  • In fact, Shri M.N. Goiporia, Chairman of SBI was asked by the Economic Times on 23rd April 1992 itself on the story of shortfall of securities carried by The Times of India to which he replied “that the reconciliation problem which had arisen regarding the purchase of Government securities by its investment department had been sorted out with the outstandings squared up.   As of today, there are no outstandings”.  The relevant media clipping is enclosed.

  • In Page 13 of her book she has admitted that on 22.04.1992 a former SBI employee picked up the gossip which he passed it on to the Times of India about problem of reconciliation. She has further admitted that only one cheque of Rs.6.35 Crores was pending which was delivered on 24.04.1992 by Harshad to SBI. On Page XV she has further admitted that “When on 22 April, the Times of India asked M.N. Goiporia, chairman of the State Bank, about Harshad’s problems in squaring up certain transactions, it denied it completely.”

  • That Pages 13 and 14 of the book is reproduced below:

“The 23rd of April was a day like any other.  Except that the Times of India carried a three column story innocuously headlined, “Broker asked to square up Rs.500 Crores”.  The broker was not named.  He was referred to as the Big Bull.  That was due to Goiporia’s stonewalling.  When he was asked whether it was true that Harshad Mehta had large outstandings with the SBI, he came with an obfuscatory answer.
“Was there a problem of reconciliation with Harshad?”  The Times of India asked Goiporia. “We deal in thousands of crores of securities.  We do have reconciliation problems from time to time.” 
“Is Harshad Mehta unable to pay Rs.500 Crores due to the SBI?” Goiporia responded “Harshad Mehta? The broker? I can’t comment” and he disconnected the phone.
Khemani was more categorical.  “There is no problem here.  It is completely false. A reconciliation gap of Rs.20 to Rs.30 Crore is always there” he said, reducing the sum considerably. 

  •  Thus, Ms. Sucheta Dalal wrote the story despite clear denial of both the Chairman and the General Manager of SBI as her real intention was to finish Harshad even by writing a completely false story backed by no evidence at all. There is also no mention anywhere in her book whether she verified the facts with Harshad as she was bound to and to my knowledge, she has not made any call on Harshad to take his version. She has violated every law and regulations governing journalism which code is enclosed.

  • The book starting from the title is full of falsehood and written in presumptive language as if Harshad was a proved criminal. In fact, she has sensationalized and completely blown out of proportion the issues involved and Harshad caused the losses and defaults which were put on to Harshad. She has admitted in the Preface written to the book that she proceeded to write the story without evidence and wrote a sanitized version of truth. The book contains completely baseless allegations against Harshad in which Ms. Sucheta Dalal has acted as “the Judge, jury and the executioner”. The subsequent facts establish that for 9 years despite Harshad offering himself for trial the CBI did not prove him guilty of siphoning off of monies and not a single bank or PSU has lost a penny for transactions undertaken by them with Harshad. It is significant to note that SBI did not file any FIR against Harshad since according to it he had not committed any criminal offence as falsely alleged.

  • It must be admitted that Ms. Sucheta Dalal is a superwoman as she received the information (gossip) on 22.04.1992, made 2 calls on SBI who denied her story and yet in great haste on 22.04.1992 itself wrote a story and the Times of India gave her the space on the headline of front page. She also succeeded in finishing Harshad.

  • ‘Pen is mightier than sword’ goes the adage and media the fourth estate is most powerful and can make or break anyone and Ms. Sucheta Dalal unleashed the power of media on Harshad and created hiatus in the entire financial market so much so that the money market came to a halt and the stock market melted down by more than 30%. A scenario was created that banks will suffer huge losses of thousands of crores and that all stock prices were in bubble zone and handiwork of one individual. She donned upon herself the role of a Messiah. Her opinions were presented as established facts and the issues were sensationalized to the extreme. Ms. Sucheta Dalal never abided by the code which governs journalists and I am happy to share the same for all of you to independently evaluate whether my above allegations on her are correct.

  • It has taken Mehta family almost 3 decades to make payments to banks even though Harshad had unconditionally offered to pay to banks in May 1992 itself to clear his name to prove that because of him no banks or PSUs will lose any money and a list is enclosed listing out our efforts making payments in past 30 years. Unfortunately, his offers were not responded to and to prevent him from making payments to bank the Income Tax department foisted upon our family illegal demands of about Rs.30,000 Crores. Thanks to Ms. Sucheta Dalal, the stock market languished for a few years in the after effect of her work and in money market all the banks and FIs locked up with each other for decades in prolonged litigation. Now even the web series was made giving a title “Scam 1992 The Harshad Mehta story” despite the fact that Harshad was not proved guilty and that no bank has lost even a penny and the real long term investors have made a fortune.

  • In support of above, I rely upon the judgment of Hon’ble Special Court dated 06.09.2013 in Special Case No.4 of 1998 (copy enclosed) as after examining the evidence of prosecution and defense the Hon’ble Court in Paras 28 and 36 held that not only the prosecution failed to establish its allegations but also held that taking into account the past track record of M/s. Harshad S. Mehta where all the contracts were fulfilled, the accused cannot be held guilty for failure to deliver securities to SBI Caps in respect of 4 outstanding transactions. Thus, non-delivery of security per se is not a criminal offence as Ms. Sucheta Dalal has presumed all along. Ms. Sucheta Dalal was a post-graduate in law having done LLM and would have known the law of the land that “Every person is innocent till proved guilty” whereas she has held Harshad guilty even before any trial.

  • Factually, a massive raid was carried out by Income Tax department on M/s. Harshad S. Mehta on 28.02.1992, in which a large part of his records, shares and securities and even computers were seized and sealed and the said raid continued till 02.06.1992. This raid paralyzed the business of M/s. Harshad S. Mehta and it became completely unsafe to keep the custody of clients’ securities in office premises to avoid their seizure since if they were seized they would not have been released for years by the IT department. Thus, during the period of IT raid no securities were either collected nor they were delivered by M/s Harshad S. Mehta particularly because there was no access to data. This was duly explained to SBI also.

  • It is not a job of a journalist to decide the correct levels of prices and indices of stock exchange and Ms. Sucheta Dalal had no expertise but only opinion. History has confirmed that 1991-92 was the best period to make investments and big bears of that era have turned into big bulls as markets have taught them its right side. Unfortunately, when small investors started coming in droves to make long term investments in 1992, they were driven away by Ms. Sucheta Dalal by creating panic and caused them huge losses. It is not Harshad who has caused any losses to them. The fame and awards showered on her needs to be critically reviewed as both investors and the country has heavily suffered because of her.

  • Thus, it was not any security scam but only a “Sucheta Dalal scam” which caused losses of lakhs of crores to investors whose hard-earned wealth melted away by the scare she single-handedly created in the market. The subsequent events have conclusively proved her wrong on each and every count as the banks and PSUs have not lost money, the investors suffered due to panic created by her, the Government and regulators went into overdrive being directly goaded by her and the so-called scam of the century has ended in a whimper.

  • Ms. Sucheta Dalal and Shri Debashis Basu had 3 decades to present the true facts which emerged later in their revised and updated edition of the book but they have deliberately failed to do so in order to further milk their falsehood and now sold the rights on the book for making the web series.  This fact also conclusively establishes their mala fide intent in which the truth is the real casualty and we remain the biggest victims. 



That because of Shri Harshad Mehta, lot of investors lost money in the stock market.


  • That Harshad Mehta had always believed in making long-term investments in stock market through proper research and for the purpose had set up a large research department by recruiting several bright Chartered Accountants and MBA’s who were on the field most of the time. 

  • That factually large quantity of blue-chip shares were purchased by him at extremely low prices when India pledged its gold abroad and most people thought that our country will not survive the crisis and took extremely bearish view on the market.  The BSE Sensex at the relevant time was only around 800.  These investments have generated exceptional returns during past 30 years and made monies for every investors irrespective of the fact when and at what price they made the investments.

  • In support of above, we rely upon returns generated on the investments made by our family members’ post their attachment by Custodian on 08.06.1992 because of which we could not reshuffle them. I am pleased to enclose charts of investments of our 2 family members’ viz. late Smt Rasila Mehta (mother) and Smt Rina Sudhir Mehta which investments were made up to May 1992. The investment of Smt Rasila Mehta as on 31.03.2003 of Rs.48.17 Crores appreciated to Rs.243.54 Crores as on 31.03.2007 (5.06 times) and further to Rs.413.42 Crores as on 30.06.2011 (8.58 times). Similarly in case of Smt Rina Mehta investment of Rs.42.17 Crores as on 31.03.2003 appreciated to Rs.197.26 Crores as on 31.03.2007 (4.68 times) and further to Rs.353.44 Crores as on 30.06.2011 (8.38 times). The above is excluding the dividends.

  • In the open outcry system what Harshad was buying was known to the whole world. It is only those investors who would have bought the shares in April 1992 when we were not buying shares due to Income Tax raid and who were made to sell the shares post 23.04.1992 under the panic created by Ms. Sucheta Dalal that they might have suffered losses in the melt down triggered by her false media reports. Harshad always advocated making long-term investments based on research as he saw a huge potential of growth and appreciation. He always advised investors to be very careful with their hard-earned savings and cautioned them against acting on rumors and tips and issued clarifications for any false rumors floated about his involvement.

  • Factually, Harshad and our family had built a very strong research organization to track corporate performance and based on their recommendations we acquired large quantities of shares at throw-away prices when BSE Sensex was only around 800. The buying was stopped by us because of Income Tax raid on 28.02.1992 when the BSE Sensex was around 2800 and within 45 days it perpendicularly rose by 1700 points to touch a high of 4500 in April 1992. This sharp rise was caused not by Harshad but attributable to two factors viz. bold, dynamic and reformist budget of Dr. Manmohan Singh presented on 29.02.1992 and heavy short covering by bears who had short sold before the budget. Post-budget the bears could not square up their positions because the BSE allowed only squaring up which made the market extremely illiquid and made it very difficult for the bears to square up their position. 

  • Harshad later presented the data of purchase of shares made by the 3 brokerage firms of M/s. Harshad S. Mehta, M/s. Ashwin Mehta and M/s. J.H. Mehta during April 1991 to April 1992 to Joint Parliamentary Committee (JPC) being a sum of Rs.154.16 Crores which by no means could have caused the bull-run by Harshad much less by diverting amounts from banks and PSUs as falsely alleged. It was another hype and hysteria created by Ms. Sucheta Dalal on source of investments. 

  • As already explained, our family made investments mostly before 28.02.1992, the day Income Tax department carried a raid when BSE Sensex was at 2800. After Dr. Manmohan Singh presented his Dream Budget on 29.02.1992 within a span of just 45 days the Index climbed from 2800 to about 4500 for which the Government would have taken credit but for the panic created by Ms. Sucheta Dalal. However, since then the Sensex has climbed to a level of about 57,000 and leading analysts has already forecasted that it may rise above 1,00,000 level. The entire rise in Index in 1992 can never be attributed to Harshad though foundation of the equity cult got laid down during his period because of historic and bold reforms introduced by the Government and subsequent opening up of the market to foreign investors. 

  • On 29.02.1992 the day of historic budget Harshad was interviewed in the trading hall of BSE by Doordarshan when he gave his view post budget that

“India is a turnaround scrip on the global stock exchange”.  This has truly played out in past 30 years but alas he could not participate and reap from it.”

  • Harshad always believed in vibrant capital market and spread of equity-cult as we had the highest savings rate but lowest supply of capital for industry since only 1.5% of the savings came into the market. He believed that there could be a win win situation for the savers, industry and the Government if the savings were converted into investments and the same is tapped by the industry for accelerating the growth of the companies as this would create a self-feeding virtuous cycle for creation of an environment of sustained growth resulting into all round prosperity.  Unfortunately, the domestic equity-cult was nipped in the bud and only FII’s have made huge investments and acquired ownership in all our leading companies instead of the domestic investors reaping the gains.  The modern-day Kohinoor’s of this country are now owned by FII’s at the cost of local investors.

  • For guiding the investors instead of bouquet’s Harshad got brickbats and he stands vilified and maligned only because he was early in spotting the opportunity of the century. Galileo was stoned and kept under house arrest for his life because he was amongst the first to state that the earth rotates around the sun. Harshad certainly died feeling unfulfilled with regret that the domestic investors could not participate adequately and got their due share in the prosperity which got created through the golden era of investing in 1991-92. 

  • That while he was alive, little was available by way of statistics to measure the effect of Harshad and equity-cult which got created during his time.  However, after his demise it is reported by RBI that during his time the flow of domestic savings into stock market climbed perpendicularly from about 1.5% to beyond 11%. Unfortunately, I do not possess that report now but know that our country remains starved of capital because only a miniscule percentage of savings get channelized into capital market. We are way below rest of the world in this regard. 

  • In the stock market for decades short selling was resorted to by bears through blank sales on which they were being rewarded every fortnight with badla (interest) without making any investments or possessing any shares which were short sold. In other countries the investors are protected by not permitting short sale on a down tick but in our country rampant short selling associated with fortnightly reward prevailed for decades. However, it never occurred to Ms. Sucheta Dalal the true friend of bears to protect the interest of investors who regularly suffered meltdown in their investments because of bear hammering and bear raids through creating panic by spreading false and unverifiable rumours so that the investors fall prey to the bears. Ever since then she has been frequently carrying out articles and reports in various mediums without naming her targets so that she can go scot-free. It is known world over that it is very easy to spread panic but extremely difficult to create positive environment.

  • Our family remains committed at all times to spreading of the equity-cult and we are extremely happy to see the sudden spurt and sharp rise in flows from domestic investors and opening of Demat accounts. We will be ever willing to serve the cause of investors and thereby of the country.


That Harshad Mehta had issued forged Bankers Receipts (BRs) to raise money to play the market.  Ms. Sucheta Dalal falsely alleged that blank bank documents (BRs) were stacked in broker’s offices.  There were also false allegations made that Harshad secured BRs from Bank of Karad and Bombay Mercantile Co-operative Bank.


  • That the BRs could be issued only by the banks and Harshad has not issued a single BR much less forged any BR. None of the BRs issued for and on his behalf by banks were found to be outstanding in Harshad’s case after detailed investigations carried out by CBI. Ms. Sucheta Dalal levelled false allegations against Harshad and in fact he had no dealings with the Bank of Karad or Bombay Mercantile Co-operative Bank but yet his name was falsely dragged.

  • The instrument of BRs was created by Indian Banking Association (IBA) who approved its format and also formulated rules governing issue of BRs which are enclosed with a sample BR. The BR was only an acknowledgement of receipt of money with a promise that securities are held on behalf of the buyer and the same would be delivered as and when they were ready.  The BRs had a validity of 3 months which was extendable by 3 months and they could be issued only by approved banks and institutions which were specified by IBA. 

  • The issue of BR was also regulated by RBI as it was found later when its Private & Confidential Circular dated 26.07.1991 addressed to banks was brought on record by CBI, a copy of which is enclosed. It can be seen from Para 3 of above Circular that it was permissible to sell any security through issue of a BR if the issuer is in a position to deliver the securities within a reasonable time and what constituted such reasonable time was not defined by RBI but the IBA guidelines had stipulated a period of 3 months.

  • Most of the transactions in money market were of short duration commonly known as Ready Forward (R/F) transactions required the return of securities on the forward leg within few days. In such temporary transactions it became absolutely necessary to use BRs. The R/F transactions were entered into by banks and PSUs under a bona fide belief that they were legal and highest number of transactions were such R/F transactions.

  • However, even when Hon’ble Supreme Court later held some such transactions to be illegal entered into with brokers in their judgment in the case of BOI Finance Ltd. Vs Custodian reported as (1997) 10 SCC 488 it clarified that any violations committed by banks of Private & Confidential Circulars issued to them by RBI would not invalidate the transactions as rights of third parties cannot get adversely affected because of any violation by the banks on the basis that such third parties are not aware of Private & Confidential Circulars.

  • Besides above, PSU Bonds and Units of UTI which commanded highest volume were bearer securities and moving them was therefore fraught with huge risk as whosoever possessed it could encash it. Thus, daily movement of such bearer securities was not feasible and therefore BRs were extensively used so that periodically they could be settled by cancelling and netting out the BRs. Orders passed by Hon’ble Special Court dated 26.07.1993 in MA 53 of 1993 and Order dated 21.07.1994 in MA 269 of 1993 are enclosed. Only before the interest/dividend payments date it was absolutely necessary to physically deliver the Bonds and Units. 

  • It was also possible to short sell securities without possessing them through issue of BRs as it was clearly stipulated in the BRs that “The securities would be delivered when they are ready.” This was permissible as per IBA Guidelines and it did not amount to any criminal offence as falsely propagated by the media. Issue of BR against other BR was also very common and periodically all market participants used to take steps for liquidation of BRs. Thus, BR was only a receipt for money.

  • That several banks had offered routing facilities to M/s. Harshad S. Mehta to enable him to execute the transactions of his brokerage firm entered into on a principal-to-principal basis. Under this facility, the banks were receiving and tendering securities and exchanging payments and almost all the brokerage firms in the market enjoyed such a facility with one or another bank. The routing banks were even keeping custody of the securities.  The banks were earning commissions and/or enjoying interest free balances for offering such routing facility. Orders passed by Hon’ble Special Court dated 21.07.1994 in MA 269 of 1993 and Order dated 24.10.1996 in MA 185 of 1993 are enclosed.

  • That almost 70% of transaction volume was in the nature of Ready Forward (R/F) transactions which entailed lending of monies for short periods with a commitment to return the security upon repayment and therefore in such short term temporary transactions BRs were used and physical securities were not delivered since the transactions were bound to be reversed.

  • That several banks were extensively trading in securities where the positions were squared up sooner or later and even these transactions were undertaken through BRs to minimise movement of physical securities.


That Harshad Mehta had used the loopholes in the banking system to divert monies from banks for self-use.


  • There existed no loopholes in the banking system and it is denied that any loopholes were exploited by Harshad. Whatever systems that were prevailing were not invented by Harshad and they were prevalent for several years and within the knowledge, supervision and regulation of RBI. The only market practice which had developed several years prior to Harshad’s entry was relating to depositing of cheques drawn in the name of banks and thereafter the banks giving corresponding credit into the accounts of its clients under the routing facility and even this market practice was within the knowledge, supervisions and regulation of RBI. In support of above, RBI’s Private & Confidential Circular dated 26.07.1991 is enclosed and List of orders passed by Hon’ble Special Court with Copies thereof is enclosed. It can be seen from it that all the observations are made by RBI against the conduct of the banks and it was permissible to sell the securities by issue of BRs if the bank is in a position to deliver the securities within a reasonable time.

  • That during the relevant period there was compulsion on banks to make money and therefore they started trading in securities to generate more profit which they successfully did. The volumes of transactions went up very sharply as many dormant players became very active.

  • Harshad entered the money market just around the time when banks wanted to take to trading and therefore Harshad on the basis of his past experience and expertise adopted the role of a market maker to impart liquidity to the market and therefore became the largest firm.

  • Based on computerization, better communication and execution and other service, Harshad got major breakthroughs from several banks and started commanding largest volume of business of about Rs.2,000 Crores per day. This resulted into continuous inflow and outflow of monies into his bank account and until the delivery of securities was made, the amounts received from banks constituted his liabilities. This was fully explained by him even to the Income Tax department under his letter dated 21.01.1991, a copy of which is enclosed.

  • That M/s. Harshad S. Mehta and his associate entities had built an institution and had the necessary networth as also a huge asset base of several offices in all the major cities and also vast investments in blue-chip companies. Harshad’s brokerage firm had an excellent track record of offering competitive quotes, quick service and completion of all contracts. There was a vast research organization to support which was made up of bright MBAs and Chartered Accountants.

  • During the relevant period all banks and PSUs had a sharp increase in their profits on account of their treasury activities and in any case they were under immense pressure to perform by earning more profits because of which trading in securities was resorted to heavily and therefore volume of transactions exploded. The market participants were not prepared for the opportunities that were presented in terms of systems and manpower and there was very high degree of trust because of zero defaults.

  • There was no need, necessity or motive to exploit any loopholes as Harshad and his family had done very well in business and reputation and a strong networth already existed.

  • That all the clients of the brokerage firm of M/s. Harshad S. Mehta made huge profits and all the transactions were reduced to written contracts and concluded on the most competitive terms.


Harshad Mehta did not deliver the securities to the banks and caused losses to them and thereby he committed several criminal offences.


  • The Hon’ble Supreme Court in one of such case of S. Mohan vs. CBI reported as (2008) 7 SCC 1 (Para 21) has also laid down the law that if the affected bank or institution had no grievance and had not filed any complaint, then charges of criminal breach of trust and conspiracy cannot lie. Thus, if CBI has suo motu registered a criminal case without a complaint from the bank or institution the charges of conspiracy and criminal breach of trust cannot sustain.

  • It is well-settled law that crime is said to be committed only if there was a criminal intent or motive i.e. mens rea. Harshad had no such criminal intent or motive as in the past all contracts were performed and due to Income Tax raid if performance of some contracts was affected Harshad returned the money or unconditionally offered to meet all his obligations. At all points in time, Harshad and his family’s networth was several times of the amount alleged to be diverted and therefore no motive for crime could be attributed to Harshad and it was only a racket run by Ms. Sucheta Dalal to finish Harshad by giving a colour of criminality to otherwise legal transactions entered into by M/s. Harshad S. Mehta.

  • The BSE Rules, Regulations and Bye-laws also provide for remedies for non-performance of any contract entered into by its members with their clients and even under the same non-performance of contract did not amount to any criminal offence. That even if any security remained undelivered under a Contract, in terms of BSE Bye-law 168, the banks had an option to close out (square up) such outstanding transactions but none of the banks exercised this option reposing faith in M/s. Harshad S. Mehta.

  • Ms. Sucheta Dalal a person who had already done Post-Graduation in Law by earning a degree of LLM is bound to have known the above elementary requirement of mens rea required to prove a criminal offence. She only indulged in sensationalizing and gave a colour of criminality to the transactions which at the highest could have amounted to a civil dispute. In fact SBI itself did not file any FIR with CBI in respect of the headline story written by Ms. Sucheta Dalal in Times of India on 23.04.1992 and made wild and baseless allegations firstly in her story and thereafter in the book written with her husband. 

  • Even in early days when he ran into some losses Harshad offered his residence and mangalsutra of his wife to the broker to whom he owed the monies despite the broker not asking for any security but Harshad wanted to prove his bona fides and integrity and these facts are very easily verifiable.

  • It is subsequently already established that vast number of money market assets of Harshad was found to be lying with several banks, including NHB and SBI and even RBI confirmed it to the Custodian by addressing 3 letters. Securities of Rs.250 Crores was already delivered by Harshad to NHB credit for which was not given and Rs.403.88 Crores was subsequently realised by the Custodian on account of above and paid to SBI. That SBI, SBI Caps, NHB, SCB and Syndicate Bank acted dishonestly to usurp the attached assets of Harshad some of which have been recovered subsequently.  The details regarding several such cases of pending recovery and letters addressed by Harshad in several cases are enclosed.

  • Smt Jyoti Mehta has already discovered that the above decrees are obtained by SBI, SCB, NHB by playing a fraud on Hon’ble Special Court and by acting in collusion with the Custodian and therefore the same are nonest and void ab initio and under challenge before Hon’ble Supreme Court. In fact in the year 2011 SBI after getting exposed has filed MA 36 of 2011 before Hon’ble Special Court and retrospectively offered credit to Harshad of Rs.592.49 Crores without giving any explanation why the said credit was granted 8 years after obtaining the decree in 2011. 

  • Thus, the figures of problem exposure towards banks as provided by the Janakiraman Committee in 1992 were completely false and exaggerated as alleged by Harshad while seeking the appointment of the Committee which was refused and banks and PSUs have not lost a penny due to Harshad. Since large amounts of securities of money markets belonging to Harshad were found and discovered, the same also demolishes the allegations that monies belonging to banks and PSUs were used by Harshad to boost the stock market and in any case with the amounts that are finally crystallized the market cannot be boosted even for half a day and therefore even these allegations of Ms. Sucheta Dalal are completely baseless. Yet substantial amounts remain pending to be recovered from banks.