INDEX

1. CHAPTER
INTRODUCTION
HISTORY OF STOCK
EXCHANGES
HISTORY OF INDIAN
STOCK EXCHANGES
MEANING OF STOCK
EXCHANGE
DEFINITION OF STOCK
EXCHANGE
CLASSIFICATION OF
STOCK MARKETS AND
SECURITIES
1
 2. CHAPTER
DATA ANAYLSIS AND
INTERPRETATION: -
Case study
a) Harshad Mehta’s Securities
scam
b) Ketan Parekh Scam – The
crash that shook the nation
c) Roopal Ben Panchal –
Benami Demat accounts scam
d) Satyam Computers – An
accounting scam
e) CRB Scam – Scam of
Dummy Companies

2
f) Dinesh Dalmia – Fake share
scam
g) Dinesh Singhania scam
h) Vanishing Companies
Scandal
SEBI’s role after scam
Some Fraudulent Methods
Used in the Stock Markets
Chapter 1 – Introduction

What are scams?

A fraudulent scheme performed by a dishonest individual, group, or company in an attempt obtain money or

something else of value. Scams traditionally resided in confidence tricks, where an individual would
misrepresent themselves as someone with skill or authority, i.e. a doctor, lawyer, investor. After
the internet became widely used, new forms of scams emerged such as lottery scams; scam
baiting, email spoofing, phishing, or request for helps. These are considered to be email fraud. Also see
phishing, scheme. A scam is a dishonest attempt to trap you into parting with your money. A 'scammer' may
make a personal approach, with an offer too good to be true. Someone may email you, phone, text-message
or post an offer that they press you to take up. Scams can reach their target audience in many ways, ranging
from a one-person door-stepping operation, through to multinational highly sophisticated telemarketing
scams. Advertisements, direct mail, text messaging, phone calls and e-mail are all widely used. However
SCAM means when a person tries to deceptively cheat you by first giving you a very good offer about
something but later on you would be shocked to know that the person was simply bluffing and you have lost
your money. An example of this can be the lottery scam. For example a person calls or emails you and tells

3
you that you have won a lottery prize but to get the money there is a small processing fee, you have to pay
that fee and then the money would be sent to you.

It is difficult to give one exhaustive definition of financial fraud. One may define financial fraud as an illegal
act intended to deprive you of your money for personal gains. Financial fraud means:
The intentional act of deception involving financial transactions for personal gains.
Taking money/other assets from someone through deception.
Illegal and unethical management of financial resources.
Manipulation, falsification alteration of accounting records.
Misrepresentation or intentional omission of amounts, misapplication of accounting principles, and marking
misleading or false disclosures.
Typically, there exists an element of deceit, subterfuge, or abuse of a position of trust in cases of financial
fraud. 
Common types of financial frauds
Ponzi schemes
A Ponzi scheme is an investment fraud that generates returns for earlier investors with money taken from
later investors. In this type of fraud, the clients are promised huge profits with little to no risk. The focus of
the fraudster companies is on attracting new clients whose investments are then used to pay off earlier
investors. Once the flow of money by way of investments from new clients stops, the whole scheme falls
apart.
For instance, in 1920, Charles Ponzi made approximately $15 million in about 8 months by convincing
lenders that he could make them rich with investments in international postal reply coupons. 
Pyramid schemes
Also known as a chain referral scheme, a pyramid scheme is a fraudulent business model wherein members
are recruited with their payments tied to their ability to enrol new members. As the membership expands,
there comes a point where further recruitment becomes impossible which consequently makes the whole
thing unsustainable. A pyramid scheme might appear as legitimate multi-level marketing (MLM) practice.
But the scheme involves no legitimate sales as the earlier investors are paid from the funds received from
new investors. There is no product sold and there are no true profits.
The SpeakAsia Scam is one example of the fraud committed through a pyramid scheme. A Singapore based
company SpeakAsia Online Ltd. asked investors to pay Rs. 11,000 and fill up online surveys to earn Rs.
52,000 a year. The company promised additional rewards for those who enrolled other people into the
scheme. The fraudsters made away with Rs. 2,276 crores from 24 lakh investors.
Identity theft and identity fraud
In simple terms, identity theft is the use of someone’s identifying information without their permission.
Identity theft occurs when someone steals your personal financial information such as your bank account
number by way of deception and uses that information for economic gain. This can happen in a number of
ways, say in a public place via shoulder-surfing wherein a fraudster catches you typing your CVV code into
your phone, etc., or when you opt to reply to a spam email that promises you a reward but first asks for
identifying information and personal details. Identity theft can be committed simply by guessing your
passwords or accessing your details from your social media or it might involve complex methods such as
installing malware, etc. Your personal data such as bank account number or credit card number is then used
to make fraudulent withdrawals from your account. Fraudsters might use your information to open a credit

4
account in your name leaving you liable for the charges. Identity theft leads to identity fraud when the
fraudster impersonates you using your stolen information in order to access accounts and obtain financial
services. 
Examples of identity theft include theft of ATM card, stealing your bank information and example of
identity fraud includes making fake ID, passport, false credit card etc. and using it for personal unlawful
gains.
Embezzlement
Embezzlement refers to the act of stealing, misappropriation, or retention of funds by a person who has been
entrusted with those funds by an employer or an organisation. Typically, the person who embezzles money
is the one who has legal access to another person’s money or funds such as an employee. This white-collar
crime is seen as a form of property theft. Examples of embezzlement can be overbilling of customers,
forging of cheques, refusal of the conductor to issue tickets to customers after collecting the fare etc. 
Tax fraud
Tax fraud refers to the falsification of tax returns in order to evade the payment of tax to the government. For
example, claiming false deductions by classifying personal expenditure as business expenditure or non-
disclosure of income. When you pay less tax than what is due by hiding or understating or false reporting of
your income, you are committing tax fraud.
Credit card fraud
Credit card fraud is the unauthorised use of someone’s credit card. Credit card numbers can be obtained
through credit card theft or unsecured internet connections or by hacking into your system etc. It is advised
that in case you lose your credit card or debit card, you should get your card cancelled immediately.
Examples of credit card fraud include counterfeit and skimming frauds, card not received frauds, lost and
stolen credit card fraud and incorrect card application fraud etc.
Insurance fraud
Insurance fraud occurs when a claimant wrongfully tries to obtain a claim from the insurance company that
he is not entitled to or when the insurance company deliberately denies the claim legally due to the claimant.
Insurance fraud can also occur in other forms such as selling policies from fake insurance companies,
falsifying the medical history, impersonating other people for claims, cause of death being changed for
accidental claims, etc.
KYC fraud
In this type of fraud, fraudsters usually send you an unsolicited SMS saying that your card or account will be
blocked. The customer in a state of panic ends up responding to the message without considering its
legitimacy. Now when you/customer calls that number given in the message, the fraudster pretends to be
speaking from your bank and entices you to give your personal details such as debit card information, bank
account details, OTP, etc. under the pretext of KYC verification. Sometimes, the fraudster might ask you to
install some app on your phone which will give him full access to your phone. Before you know,
withdrawals are made from your account and you will get a message that such and such amount has been
debited from your account.
Phishing
This is an online scam wherein the users/customers receive tricky emails or pop-ups that appear to be from a
legitimate source, say a bank or an insurance company or an internet service provider, etc. The fraudster will
ask for your personal information through these emails and thereafter use that information for their unlawful
gains. Phishing attacks include phishing emails, link manipulation, session hijacking, smishing, vishing,
installing malware etc. 
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Advance fee scams
In advance fee scams, the fraudster will ask you to make an advance payment or upfront payment for goods
and services that do not materialise. This includes career opportunity fraud, loan scams, lottery scams, work-
from-home opportunity scams, etc.
Mortgage fraud
Mortgage fraud is any sort of material misstatement, misrepresentation, or omission relating to the property
or potential mortgage relied on by an underwriter or lender to fund, purchase, or insure a loan. For example,
intentionally falsifying the particulars on mortgage applications.
Mass marketing fraud
In this, mass mailing, calls, spam emails are resorted to for stealing the personal financial information of the
target. This type of fraud targets multiple victims from different jurisdictions. Mass marketing fraud schemes
typically fall into two classes, schemes that defraud numerous victims out of comparatively small amounts,
and schemes that defraud comparatively less numerous victims out of large amounts. One example of mass
marketing fraud can be ‘too good to be true payment schemes’.
Bank fraud
Banking fraud is an attempt to syphon or take funds or other assets from a financial institution. RBI defines
fraud as, “A deliberate act of omission or commission by any person, carried out in the course of a banking
transaction or the books of accounts maintained manually or under computer system in banks, resulting into
wrongful gain to any person for a temporary period or otherwise, with or without any monetary loss to the
bank”. Some of the famous bank fraud cases are the PNB-Nirav Modi Scam, ABG Shipyard Fraud, Vijay
Mallya scam etc.
UPI-related frauds
About 80,000 UPI frauds occur in India, every month. Fraudsters send you a ‘request money’ link and once
you click on it and authorise the transaction, money gets deducted from your account. Also, sometimes the
fraudsters will send you a fake URL and once you click on it, it infects your phone with malware designed to
steal all your financial information. UPI-related frauds can occur in forms of phishing attacks, screen
mirroring tools and through deceptive UPI handles.
SIM swap fraud
Sim swapping is when you make a request to your service provider to swap your sim, who deactivates your
old sim and gives you a new one. For example, when you want to upgrade your 3G sim card to a 4G one.
This is a legitimate sim swap transaction.
However, in the case of sim swap frauds, the fraudster makes a sim swap request to the service provider
using fake papers and pretends to be a genuine cardholder. The service provider deactivates your old sim and
the fraudster gets a new sim card. He is then able to access all your financial information such as OTPS, card
alerts, etc., and can manipulate the same in innumerable ways. For instance, in August 2021, a man lost Rs.
84 lakhs due to SIM swap fraud committed by some unidentified cyber criminals who cloned the victim’s
sim card to get his bank details.
Corporate fraud
Corporate fraud involves falsification or misrepresentation or hiding of a company’s financial information
and accounts to make profits illegally and to mislead the public. For example, insider trading, falsification of
accounts to show a healthy picture in order to attract lenders and investors, misappropriation of assets, etc.
1990

6
1992: Indian stock market scam

The 1992 Indian stock market scam was a market manipulation carried out by Harshad Shantilal Mehta with
other bankers and politicians on the Bombay Stock Exchange. The scam caused significant
disruption to the stock market of India, defrauding investors of over ten million USD.Techniques used by
Mehta involved having corrupt officials signing fake cheques, misusing market loopholes, and fabrication to
drive the prices of stocks up to 40 times their original price. Stock traders making good returns as a result of
the scam were able to fraudulently obtain unsecured loans from banks. When the scam was discovered in
April 1992, the Indian stock market collapsed, and the same banks.

The scam

The scam was the biggest money market scam ever committed in India, amounting to approximately ₹ 5000
crores. The main perpetrator of the scam was a stock and money market broker Harshad Mehta. It was a
systematic stock scam using bank receipts and stamp paper that caused the Indian stock market to crash. The
scam exposed the inherent loopholes of the Indian financial systems and resulted in a completely reformed
system of stock transactions, including an introduction of online security systems. Security frauds refer to
the idea of diversion of funds from the banking system to various stockholders or brokers. The 1992 scam
was a systematic fraud committed by Mehta in the Indian stock market which led to the complete collapse of
security systems. He committed a scam of over 1 billion from the banking system to buy stocks on
the Bombay Stock Exchange. This impacted the entire exchange system as the security system collapsed and
investors lost hundreds of thousands of rupees in the exchange system. The scope of the scam was so large
that the net value of the stocks was higher than the combined health and education budget of India. The scam
was orchestrated in such a way that Mehta secured securities from the State Bank of India against forged
cheques signed by corrupt officials and failed to deliver the securities. Mehta made the prices of the stocks
soar high through fictitious practices and sold the stocks that he owned in these companies. The impact of
the scam had many consequences, which included the losses incurred by lakhs of families and the immediate
crash of the stock market. The index fell from 4500 to 2500 representing a loss of ₹ 1000 billion in market
capitalization. The 1992 scam raised many questions involving bank officials responsible for being in
collusion with Mehta. An interview with Montek Singh Ahluwalia (Secretary, economic affairs at
the Ministry of Finance) revealed that many top bank officials were involved.

Bank funds scam

In the early 70 s, banks in India were not allowed to invest in the equity markets. However, they were
expected to post profits and to retain a certain ratio (threshold) of their assets in government fixed interest
bonds. Mehta squeezed capital out of the banking system to address this requirement of banks and pumped
this money into the share market. He promised the banks higher rates of interest, while asking them to
transfer the money into his personal account, under the guise of buying securities for them from other banks.

7
At that time, a bank had to go through a broker to buy securities and forward bonds from other banks. Mehta
used this money temporarily in his account to buy shares, hike up demand of certain shares (such as that
of ACC, Sterlite Industries, and Videocon) dramatically, sell them off, pass on a part of the proceeds to the
bank and keep the rest for himself. This resulted in stocks like ACC, which was trading in 1991 for
₹200/share, catapult to nearly ₹9,000 in just 3 months.

Bank receipt scam

Another major instrument was the bank receipt (BR). In a ready forward deal, securities were not moved
back and forth in actuality. Instead, the borrower, i.e. the seller of securities, gave the buyer of the securities
a BR. The BR serves as a receipt from the selling bank, and also promises that the buyer will receive the
securities they have paid for at the end of the term. Having figured this out, Mehta needed banks, which
could issue fake BRs, or BRs not backed by any government securities.

Once these fake BRs were issued, they were passed on to other banks and the banks in turn gave money to
Mehta, plainly assuming that they were lending against government securities when this was not really the
case.[7] He took the price of ACC from ₹200 to ₹9,000. That was an increase of 4,400%. Since he had to
book profits in the end, the day he sold was the day when the markets crashed.

Ready forward deal scam

The ready forward deal is a way where a single broker liaisons between two banks. When one bank wants to
sell securities, it approaches the broker. This broker goes to another bank and tries to sell the securities and
vice versa for buying. Since Mehta was a renowned broker, he got cheques issued in his name instead of the
bank. When the bank wanted money for the securities, he approached another bank and repeated the same
process, and invested the bank money in the stock market. Mehta used the ready forward deal and applied it
to the Bank Receipts system of the Indian financial systems. This system was the most flawed system as
the Janakiraman Committee restructured the entire Bank Receipts system after the 1992 scam.

Mehta used forged BR's to gain unsecured loans, and used several small banks to issue BRs on demand.
Since these banks were small, Mehta held on to the receipts as long as he wanted. The cheques in favour of
both the banks were credited into the brokers' accounts which was the account of Mehta. As a result, banks
made heavy investments in BOK and MCB as they showed positive signs of growth. Using the BR scam,
Mehta took the price of ACC from ₹200 to ₹9000 in a short span of time. This 4400% percent increase was
seen in several other stocks and as he sold the stocks, the market crashed.

This went on as long as the stock prices kept going up, and no one had a clue about Mehta's operations. Once
the scam was exposed, though, a lot of banks were left holding BRs which did not have any value – the
banking system had been swindled of a whopping ₹4,000 crore (equivalent to ₹260 billion or US$3.3 billion
in 2020). They knew that they would be accused if their involvement in issuing cheques to Mehta was
discovered. Subsequently, it transpired that Citibank, brokers like Pallav Sheth and Ajay Kayan,
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industrialists like Aditya Birla, Hemendra Kothari, a number of politicians, and the RBI
Governor S.Venkitaramanan all had played a role in allowing or facilitating Mehta's rigging of the share
market.

TABLE: 1

The graph shows the rise in the Sensex during the period when Harshad Mehta was operational and putting
in loads of money in the stock exchange increasing the liquidity and thus arbitrary increase in the prices of
some shares.:

Realization of scam and market crash

The scam first became apparent in late April 1992, when it became clear that Mehta was a disproportionately
large investor in government securities. At the time, Mehta was doing more than a third of the total securities
business in India. When the public realized that Mehta's investments were illegitimate and that his stocks
were likely worthless, it set off a selling frenzy of Mehta's stocks. The banks that had loaned money to
Mehta were suddenly holding hundreds of millions in unsecured loans. The combination of the selling
frenzy and the fact that numerous banks been defrauded crashed the Indian stock market, with prices
dropping 40% immediately. Stocks eventually dropped 72%, and a bear market lasted for about 2 years.

This table illustrates the extent of money certain banks lost.

₹ in
Name of Bank
crores

National Housing Bank (NHB) 1199.39

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 State Bank Of Saurashtra 175.04

SBI Capital Markets Ltd (SBI 121.23

Caps)

Standard Chartered Bank 300.00

Total 1795.66

Exposure, trial and conviction

Exploiting several loopholes in the banking system, Mehta and his associates siphoned off funds from inter-
bank transactions and bought shares at a premium across many segments, triggering a rise in the BSE
SENSEX. When the scheme was exposed, banks started demanding their money back, causing the collapse.
He was later charged with 72 criminal offences, and more than 600 civil action suits were filed against him.

He was arrested and banished from the stock market with investors holding him responsible for causing
losses to various entities. Mehta and his brothers were arrested by the CBI on 9 November 1992 for allegedly
misappropriating more than 2.8 million shares of about 90 companies through forged share transfer forms.
The total value of the shares misappropriation was placed at ₹250crore.

Mehta made a brief comeback as a stock market guru, giving tips on his own website as well as a weekly
newspaper column. However, in September 1999, Bombay High Court convicted and sentenced him to five
years rigorous imprisonment and a fine of ₹25,000. On 14 January 2003, The Supreme Court of
India confirmed High Court's judgement in a 2–1 decision. While Justice B.N. Agrawal and Justice Arijit
Pasayat upheld his conviction, Justice M.B. Shah voted to acquit him.[18]

Allegations of payment of bribe to India's prime minister

Mehta raised a furore on announcing that he had paid ₹10 million to the then Congress President and Prime
Minister, P.V. Narasimha Rao, as a donation to the party, for getting him off the scandal case.

Impacts

The immediate impact was a drastic fall in share prices and market index, causing a breakdown of the
securities control system operation with the commercial banks and the RBI. Around ₹35 billion from the
₹2,500 billion market was withdrawn, causing the share market collapse. The Bombay Stock shares resorted
to records tampering in the trading system. It caused panic with the public and banks were severely
impacted. Banks like Standard Chartered and ANZ Grindlays were implicated in the scam for bank receipt
forgery and transfer of money into Mehta's personal account. The government realized that the fundamental
problem with the financial structure of the stock markets was the lack of computerized systems which
impacted the whole stock market.
10
Various bank officers were investigated and implicated in fraudulent charges. The five main accused
officials were related to the Financial Fairgrowth Services Limited (FFSL) and Andhra Bank Financial
Services Ltd (ABFSL). The chairman of Vijaya Bank committed suicide following the news about the bank
receipt scam. The scam led to the resignation of P. Chidambaram who was accused of owning shell
companies connected to Mehta. Mehta was convicted by the Bombay High Court and the Supreme Court of
India for his part in the financial scandal valued at ₹49.99 billion. Various bank officials were arrested,
leading to a complete breakdown of banking systems.

Subsequent reforms

The first reform was the formation of the National Stock Exchange of India (NSE). It was followed by the
development of the CII Code for Desirable Corporate Governance by Rahul Bajaj. The CII Code
commanded the formation of two major committees headed by Kumar Mangalam Birla and N. R. Narayana
Murthy, and overseen by the Securities and Exchange Board of India (SEBI). The objective was to monitor
corporate governance and prevent future scams. The SEBI were to monitor the NSE and the National
Securities Depository. For the equity market, the government introduced ten acts of parliament and one
constitutional amendment based upon the principles of economic reform and legislative changes. The
introduction of online trading by NSE changed the dynamics of stock buying and selling. The financial
market opened up nationally rather than being confined to Bombay (now, Mumbai).

Changes in the financial structure of India

The 1992 scam collapsed the Indian stock market; around 40% of the market value or ₹1,000 billion was
wiped out. It led the authorities to reconsider existing financial systems and restructure it. The first structural
change was to record payments made for purchasing investments in reconciled bank receipts and subsidiary
general ledgers to prevent fraudulent transactions. On the advice of the Janakiraman Committee, a
committee was established to oversee the Securities and Exchange Board of India. The primary
recommendation of the committee was to limit ready forward and double ready forward deals to government
securities only. All banks were made custodians rather than principals in transactions. Banks were to have a
separate audit system for portfolios, and it were to be monitored by the Reserve Bank of India (RBI).

1995

SNC-Lavalin Kerala hydroelectric scandal 

The SNC-Lavalin Kerala hydroelectric scandal is a financial scandal related to a hydroelectric infrastructure

contract between the Kerala Government and the Canadian company SNC-Lavalin in 1995 which resulted in
an alleged net loss to the Indian exchequer of 3,745,000,000 rupees.

11
The contract outlined the renovation and modernization of the hydroelectric power stations at Pallivasal,
Sengulam, and Panniar that were originally installed between 1940 and 1964 in the Idukki district of Kerala,
India.

Several politicians were involved and eventually charged in the case, including present chief
minister Pinarayi Vijayan, the first ever corruption-related prosecution of a Politburo member of
the Communist Party of India (Marxist). However, on 5 November 2013, Pinarayi Vijayan and 6 other
accused were temporarily cleared of charges by a Central Bureau of Investigation (CBI) Special Court
because "the CBI could not prove any of its charges". The CBI then went on with an appeal in Kerala High
Court. On 23 August 2017, The Kerala High Court ruled on the case, and Pinarayi Vijayan was acquitted
again. As of 2020 July, CBI's petition against acquittal of Pinarayi Vijayan is pending in the Supreme Court.

History

In 1992, the Central Electricity Authority (CEA) of India rejected a proposal of Kerala State Electricity
Board (KSEB) to renovate the three hydro-electric power projects at Pallivasal, Sengulam and Panniar
instead the CEA recommended a capacity upgradation of the generators in these three power projects, after
they found that these projects were in good condition. KSEB disregarded this recommendation and went
forward with the decision to renovate these projects.

Initial negotiations

The initial negotiations with the Canadian company SNC-Lavalin – a company which had been present in
the state's power sector for several decades – began during the tenure of United Democratic Front
government, under the leadership of the then power minister C. V. Padmarajan and later, the Kerala State
Electricity Board (KSEB) signed a memorandum of understanding (MoU) with SNC-Lavalin on 10 August
1995, when G. Karthikeyan of the Congress Party was the power minister, after the resignation of C.V.
Padmarajan. Under the provisions of the MoU, the funds for the renovation were to be arranged by SNC-
Lavalin from the Export Development Canada (EDC), Canada, and the Canadian International Development
Agency (CIDA). Later, it was also found out in a probe by CBI, that G. Karthikeyan also wanted a quid-pro-
quo assistance from the Canadian government for the setting up a hospital for granting a project for
refurbishment of Pallivasal, Shengulam and Panniyar Hydroelectric stations in Kerala, after the revelation of
a letter by G Karthikeyan to the then vice-president of Lavalin business operations, Klaus Triendl, who is
also an accused in the Lavalin scandal. It was only in September 1995, that the KSEB undertook a feasibility
study on the proposal, by a retired Chief Engineer of the KSEB, who later became a consultant to SNC-
Lavalin.

Consultant's report

Based on the consultant's report and further discussions, the KSEB under the leadership of G. Karthikeyan,
signed the contracts with SNC-Lavalin to provide technical services for management, engineering,
12
procurement and construction supervision on 24 February 1996, to ensure completion of the projects within
three years. The consultancy agreement did actually include the rates for various equipments to be purchased
as part of the project. Consultancy agreements were converted into fixed price contracts for the supply of
machinery and technical services as part of the renovation at a cost of 67.94 million Canadian dollars (Rs
1690.3 million). The final follow-up agreement with SNC-Lavalin regarding the renovation of PSP project
was signed by Pinarayi Vijayan of Left Democratic Front – after they took office winning the majority in
legislative assembly in 1996 – in February 1997. Technically, the Left Democratic Front (Kerala) led
government could not retreat from the agreements, even if they wanted to, according to the provisions of the
MoU which was already signed by their predecessors, that is the ministers of United Democratic Front
government.

Contract signed

After the final contract was signed, the entrusted the National Hydroelectric Power Corporation
Limited (NHEPCL) a study to justify the prices quoted by Lavalin, and they concluded in that study that in
view of the grant to the proposed Malabar Cancer Centre (MCC), the purchase of Canadian equipment and
accessories could be considered favorably.

CAG findings

The CAG found that Lavalin was only a consultant intermediary and not the original equipment
manufacturer and that the supply of goods and services was made by other firms at a much higher cost
leading to excess expenditure. According to the CAG, the absence of due professional care in negotiating the
foreign loan proved to be detrimental to the financial interests of the Board. The Board also could not ensure
the quality of renovation work in the absence of technology transfer and training of its engineers. Owing to
various technical defects in the equipment, the generation of power could not be maintained even at the pre-
renovation level and the Board had to spend on repairs.

According to the CAG, failure to exclude the fee for technical consultancy from fixed price contracts
resulted in an avoidable payment of Rs 203.1 million, and failure to negotiate and exclude the exposure fee
from the loan agreement resulted in avoidable payment of Rs 94.8 million and future liability of Rs
22.1 million. In the opinion of the CAG, there was also an avoidable payment of Rs 12.0 million as
commitment fee despite there being committed but unavailed advance.

The CAG found that the Government did not receive Rs 893.2 million out of the grant of Rs 983.0 million
that was promised for the Malabar Cancer Centre as the MoU was not renewed in time during the tenure of
United Democratic Front when Kadavoor Sivadasan was the minister in charge of power.

Inquiry

On 16 January 2007,[citation needed] Kerala High Court ordered a CBI enquiry into the scandal.

13
On 18 February 2008, the CBI informed High court of Kerala that the investigation was progressing and said
that former Electricity Ministers Pinarayi Vijayan and G. Karthikeyan would be examined at the appropriate
time.

On 21 January 2009, the CBI filed a progress report on the investigation in the Kerala High Court. Pinarayi
Vijayan had been named as the 9th accused in the case.

Sanctions

On 2 February 2009, the CBI wrote a letter to the Governor of Kerala, seeking sanction for the prosecution
of Pinarayi Vijayan under section 197 of the CrPC, who later referred it to the cabinet .

On 6 May 2009, the Cabinet opined that it was not necessary to grant permission to prosecute Pinarayi
Vijayan.

On 31 August 2011, the Supreme Court of India issued notices to Government of Kerala and the CBI, on a
petition filed by Pinarayi Vjayan, challenging the then Kerala Governor, R.S. Gavai's nod to prosecute the
former, over-riding the decision of the council of ministers, after he wrongly assumed that he had
jurisdiction and power to grant sanction on his own. The proceedings against Pinarayi Vijayan initiated in
the special court was stayed by this order.

On a petition seeking discharge from the case before the CBI Special Court Thiruvananthapuram, Pinarayi
Vijayan and the other accused were discharged from the case on 5 November 2013. The court said that the
CBI had failed to prove the charges of conspiracy and cheating against the seven petitioners who had sought
the discharge and that it had no hesitation in holding that the allegations against them were "groundless".
The prosecution had failed to establish any dishonest and fraudulent intention, abuse of official position, or
element of cheating, which the accused were charged with, Special Judge R. Raghu said in a much-awaited
judgment.

The Special Court judge said that the prosecution had not made case that any of the accused gained undue
pecuniary advantage by awarding the contract to SNC-Lavalin. It had, on the other hand, attempted to pose
two "contradictory and mutually destructive" allegations: one, that the act of awarding the contract to the
company was "dishonest" and "fraudulent"; and two, that the consideration for awarding the contract was the
offer of a grant to establish the cancer hospital, which was, in fact, a laudable objective involving the public
interest. The court said the only question that remained for H consideration in the case was whether there
was any "administrative failure or blunder" that took place "without understanding the ramifications of the
offer of grant" from various Canadian agencies in return for the award of the supply contract to SNC-
Lavalin.

Appeal

14
An Appeal Petition has been filed by journalist T. P. Nandakumar in Kerala High Court against the
exoneration of Vijayan by the CBI court.

1997

Chain roop bhansali scam

Bhansali had his roots in Sujangarh, Rajasthan and later moved to Kolkata and was raised there. He
belonged to a middle class jute trader family. He completed his Bachelors in Commerce and in the year 1980
he completed his Chartered Accountancy. During this time of his career he opened his own financial
consultancy firm named CRB Consultancy. He was quick in getting business opportunities through his
contacts he had with people in different fields. He used to provide issue management services to companies
in Kolkata.Over the years, Bhansali acquired other degrees as well including ACS, Ph.D., MIIA (US) and a
Diploma in Journalism. Though he made a lot of money, Bhansali found it difficult to find recognition in
Kolkata. So he moved to New Delhi to join one of the country’s leading registrars of companies. However,
when Bhansali was caught short-charging the registrar’s clients, he had to leave.

The Scam 

Bhansali established ‘CRB Consultants,’ a private limited company in New Delhi in 1985 and in 1992, the
name of the company was changed to CRB Capital Markets (CRB Caps) and it was converted into a public
limited company. He then established CRB Mutual Fund (Mutual Fund) in 1994 and CRB Share Custodial
services in 1995. He also established 133 unlisted companies and subsidiaries, and most of his transactions
were made using these dummy companies which never existed. 

Since there was a boom in the Non-Banking Finance Company (NBFC) sector in the 90s, it acted as a
catalyst for the Ponzi schemes, and Bhansali took good advantage of such schemes to execute his fraud. The
Ponzi schemes were the fraud schemes that lured investors and paid profits to earlier investors with funds
collected from the recent investors. The scheme leads victims to believe that profits are coming from
genuine business activity, and they remain unaware that other investors are the source of funds for these
schemes. And the CR Bhansali Scam became the first ever Indian scam based on this type of scheme.

The CRB Capital Markets offered various services including merchant banking, leasing, hire and purchase,
bill discounting and corporate funds management, fixed deposit and resources mobilization, mutual funds
and asset management, international finance and forex operations. CRB Caps was also very active in stock-
broking, having a card both on the BSE and the NSE. Chain Roop Bhansali was in his best phase of business
during the period between1992 to 1996 where he collected money from the public through fixed deposits,
bonds and debentures. Most of the money was transferred to the dummy companies and subsidiaries which
he created for executing the fraud. His flagship company, CRB Capital Markets, raised a record Rs 176 crore
in three years. In 1994 the CRB Mutual Funds launched a closed ended scheme, Arihant Mangal Growth
Scheme, which was planned to mature in 1999 and raised Rs 230 crore from thousands of investors. Another
15
Rs 180 crore came through fixed deposits. The CRB Corporation Ltd raised Rs 84 core through three public
issues between May 1993 and December 1995. And the CRB Share Custodial Services raised a further Rs
100 crore in January 1995 to set up operations.

Between 1992 and 1995, when the market was in the post Harshad Mehta bear phase, Bhansali managed to
raise close to Rs 900 crore and transferred it to his non-existing companies. No one ever understood his
intentions as he always had a good reputation. He was ruling as a financial expert during these years and was
collecting huge money from the public through fixed deposits, bonds and debentures. His companies were
rated AAA by CARE and an upfront cash of 7 – 10% attracted investors as holders to Bhansali’s scheme. He
always maintained a good relationship with religious leaders and political party leaders, who favored him
bringing investors and customers. Bhansali used his own money to rig share prices in order to raise more
money from the markets. He did that by buying his own stock through private finance companies owned by
him. And he also used his other public companies to buy into each other as cross-holdings. Both the CRB
Capital Markets and CRB Share Custodian Services featured in the list of top 10 companies in which CRB
Mutual Funds invested in 1994-95.

To elaborate, the CRB Share Custodian invested Rs 15 crore into CRB Capital Markets, which in turn
invested Rs 17 crore in CRB Mutual Funds. The latter held 24 lakh shares of CRB Corporation, which again
had a Rs16 crore investment in CRB Capital Markets. By such activities, Bhansali managed to keep the
share prices of CRB companies artificially inflated and raised and he was able to post profits for group
companies. It was revealed and believed that Bhansali invested in three classes of companies, his own
privately owned companies, private companies owned by his friends and the board members of his
companies, and many small companies whose issues were managed by CRB Capital. Many of these
companies were the ones Bhansali invested in to generate paper profits for the group. Generally, Bhansali
bought IPOs of companies at a much lower price than the issue price and hence entered a deal with the
company. As per the deals, Bhansali sold the holdings at a higher price, promising to buy it back after a
year’s time at higher price. The money generated thus was shown as profits in the books of CRB Caps or
CRB Corporation as profits from sale of investment.

This procedure was repeated over and over again, keeping the books of the companies artificially inflated.
The huge profits always helped him keeping his share price high and also helped him get more money from
the public. Since the company  managed to get higher credit ratings, it ensured a steady fixed deposit and
bank credit inflow. These actions and deeds were made possible with the help of Bhansali’s trusted firms of
auditors. During these three years, Bhansali’s net worth of CRB Capital Markets moved from Rs 2 crore in
1992 to Rs 430 crore in 1996. Surely, this was the signal for the RBI, but it did not read it correctly. The RBI
also considered his application for a bank licence. It was during that time, when Bhansali was borrowing in
business, raising deposits at between 24% and 32% a year, the rates which no legitimate business can
sustain.

16
It was very clear and obvious from his deeds that Bhansali wanted a bank licence. To be issued a licence,
Bhansali needed a capital of Rs 100 crore, and the exercise was aimed at raising that amount, whatever it
took, including the SBI fraud. The State Bank of India incident included that between March 1 and April 9,
he duped SBI Mumbai branch of Rs 59 crore by issuing fraudulent dividend warrants and encashing them.
He managed this by using fake accounts in Chennai, Kolkata and Rajasthan branch. SBI later accused him of
printing 1800 fake dividend warrants and encashing them. 

Table: 2 CRB CAPITAL MARKETS –KEY FINANCIALS:

The Scam Expose and Aftermath

Since Bhansali was in constant pressure to pay the returns (on the investor’s investment) which were not
possible with the high rates, he simply started raising more money to pay interest on investment and, in some
cases, the principle by borrowing from the market. It took a toll on all his financial institutions when there
was a stock market crash in 1995, and he swindled nearly an amount of 1200 crores.

In 1995, it was found that only Rs 6 Cr came from retail investors and the rest amount of 224 Cr was
collected from his dummy companies and reinvested in the same companies’ shares. Since he was
completely trapped financially and thus in a hurry-burry, he tried borrowing money from the market, to
repay the interest rate on the amounts he borrowed. He was later forced to borrow once again and this went
on and on, and he got stuck in a financial quicksand.

17
He was so determined to get out of the trap that he even tried out investing in some high risk ventures.
Bhansali was then so devastated and disturbed that he even tried financing a Hindi movie, but the gamble
failed.

The trapped Bhansali, even tried out borrowing funds from the banks through all questionable means. All
was going well till December 1996, when the Reserve Bank of India (RBI) refused banking status to CRB
and contemplated action for the irregularities in his business.

Pradip Bhavnani, President of National Association of Small Investors, said: ‘‘There was a lot of confusion
about how to act against CRB, considering its NBFC status. When he started defaulting, public sector banks
like the State Bank of India were the first to be hit. Had the SEBI and RBI acted fast, investors wouldn’t
have lost money.’’ 

Bhansali was courageous enough to escape SEBI’s eye and claim RBI clearance for the bank even after it
was rejected by SEBI. RBI had no explanation as to how it could have even considered issuing an in-
principle licence for a bank to an unregistered finance company like CRB, when even applications by
Reliance, Essar and the AV Birla Group were being rejected. The collapse of the CRB group seemed to be a
fraud allowed by supervisors despite the regulations in place. The lack of clear communication channels
between the banks, RBI and the government seemed to have worked to Bhansali’s advantage to a great
extent.

But things could not hide longer from the media and it came to light in 1996 where CRB group was
highlighted for committing fraudulent activities, cheating and siphoning off funds from SBI and others.
Hence an FIR was filed against Bhansali as per section 420 of the Indian Penal Court and section 13(1)D and
13(2) of the Corruption Act. During this time he cleverly transferred investor’s money and raised it to 1200
crores by his fraudulent schemes.

He was then banned from launching new schemes. CRB Mutual Fund was suspended from doing business.
Plus, an already given in-principle approval from RBI to set up a bank in Bhubaneswar was also withdrawn
after the inspections revealed the group was misusing funds. CRB Group failed and C R Bhansali spent a
few months in jail in 1997.

RBI gave Bhansali 72 hours to come up with a plan to repay his liabilities following over 400 complaints
from depositors in his company’s financial schemes. Most top officials of Bhansali were untraceable. The
Central Bureau of Investigation (CBI) locked and sealed the offices of the CRB Group and arrested six
persons, including four directors (two from Bikaner and two from Mumbai) of the satellite companies of the
group, a financial controller in Mumbai and a relative and close associate of Bhansali in Delhi. The CBI also
conducted simultaneous searches at 16 places in Mumbai, three in New Delhi, one each in Chennai and
Ahmedabad and two places each in Calcutta, Jhunjunu, Sujangarh and Bikaner.

18
The CBI froze all the bank accounts of the group companies and seized incriminating files and other
documents from the residence of the vice-president of the CRB group in Mumbai. Later rumours were that
Bhansali flew to Hong Kong with wife, children, parents and sister.

He was arrested at the Delhi Airport but his family and wife were allowed to go. . RBI then filed a winding-
up petition claiming that the continuance of the CRB Group was not in the interest of the public and
depositors. The order prohibited CRB from selling, transferring, mortgaging or dealing in any manner with
its assets and from accepting public deposits.

The government later asked the RBI to prepare a panel of auditors asking to explore the possibility of
making auditing of NBFCs a prerequisite to registration. The CBI also registered a case against few of the
officials of the SBI who cheated the bank with Bhansali.

This scam shattered thousands of investors’ dreams, and led to a loss of hard earned investors’ money.
Around 20,000 investors finally hoped to get back some of their money when the Delhi high court set up a 3-
member special committee to ensure termination of the scheme & repayment to unit holders. Unit holders of
CRB Mutual Fund – Arihant Mangal Scheme were invited to contact the Registrar & Transfer Agency with
necessary documents for redemption of their units. The investors were paid back at a provisional NAV of
Rs. 6.48 per unit almost 20 years after they bought units of the doomed Arihant Mangal Scheme.

In his later years he shifted to Ghaziabad, and became the Chairman of Vidya Bharti School, where again he
was exposed by the RTI of dominance and torture to the teachers and management of the school. These
kinds of scams opened the eyes of the investors and the regulatory authorities. As once mentioned by Vinod
Baid, promoter, Prudential Capital Markets, “Few people realize it but the CRB collapse has done a great
deal of good to the country. It has stopped investors from seeing ads and feeding money into the fixed
deposit whirlpool”.

2000

2001: ketan parekh

Ketan Parekh is a former stockbroker from Mumbai, who was convicted in 2008 for involvement in
the Indian stock market manipulation scam that occurred from late 1998 to 2001. During this period, Parekh
artificially rigged prices of certain chosen securities (informally referred to as K-10 stocks), using large sums
of money borrowed from banks including the Madhavpura Mercantile Co-operative Bank, of which he
himself was a director.

After so many investigations by Securities and Exchange Board of India, Parekh and his front entities were
found guilty of rigging share prices of ten companies called K-10 and SEBI had banned Parekh and
associated firms from trading in the market for 14 years.

History of Ketan Parikh:

19
Ketan Parikh is a former stock broker from Mumbai, India. He was convicted in 2008, for involvement in
the Indian stock market manipulation scam in late 1999-2001. Currently he has been debarred from trading
in the Indian stock exchanges till 2017. He was trainee of Harshad Mehta. Ketan Parikh can be best
described as the pied piper of Dalal Street. Parekh came from a family of brokers which helped him to create
a trading ring of his own. A Mumbai based stock broker chartered accountant by profession. Ketan Parikh
took advantage in certain stocks which later came to be known as ‘K-10’ STOCKS. He held significant
stakes in the K-10 companies the buoyant stock markets from January 1999 helped the K-10 stocks increase
in value substantially, as a result other brokers and fund managers started investing heavily in these stocks.

The K-10 Stocks:

Aftek Infosys

DSQ Software

Global Telesystems

Himachal Futuristic communications

Pentamedia Graphics

Satyam computers

Silver line technology

SSI

ZEE Telefilms

Pritish Nandy communications

Development leading to Ketan Parekh scam:

On March 1st, 2001 a fall about 176 points was seen in the sensex. Prior day union budget tabled prompted
177 sensex points increase. SEBI launched immediate investigation on the notice of the current situations in
the market. SEBI inspected the books of several brokers suspected of triggering the crash. RBI ordered some
banks to furnish data of capital market exposure. BSE President Anand Rathi’s resignation added to
continued downfall of sensex. The situations opened debate over banks financial capital markets operations,
lending f funds against collateral security, dual control of co-operative banks. Ketan parekh was arrested by
CBI on 30th march 2001. He was charged defrauding Bank of India by almost 20$ million. Then there was
another sensex fall of 147 points.

Factors that helped Ketan Parekh:

Though Ketan Parekh was a successful broker, he did not have money to buy large stakes as he held the
stakes of more than RS.750 million in july1999, according to a report. Analyst claimed that he had borrowed
from various companies and banks for this purpose. His financing method was fairly simple. He bought
20
shares when they were trading at low prices and saw the rise in the bull market while continuously trading.
When the prices were high enough he pledged the shares with banks as collateral for funds, and also
borrowed from the companies like HFCL.

It could not have been possible without the involvement of banks. A small Ahmadabad based bank,
Madhavapura Mercantile Cooperative Bank (MMCB) Was KP’s main ally in the scam. KP and his
associates started tapping the MMCB for funds in early 2000. In December 2000, when Ketan Parikh faced
liquidity problem in settlement he used MMCB in two different ways:

First was the pay order route, where Ketan Parikh issued cheques drawn on bank of India (BOI) TO MMCB,
again which MMCB issued pay orders, the pay order discounted at BOI.

The second route was borrowing from MMCB branch at Mandvi (Mumbai) where different companies
owned by Ketan Parikh and his associates had accounts. Ketan Parikh used 16 such accounts, either directly
or indirectly through other broker firms and obtains funds.

Impact on Calcutta Stock Exchange:

Lack of regulations and surveillance on the bourse allowed a highly illegal and volatile Badla business.
Calcutta Stock Exchange had the third largest volumes in the country after NSE & BSE. Calcutta stock
exchange helped Ketan Parikh to cover his operations from his rivals in Mumbai. Brokers at CSE used to
buy shares at Ketan Parikh behest. These brokers had to keep shares in their name and they were paid 2.5%
weekly interest.

By February 2001, CSE were reduced to estimated Rs. 6-7 billion from their initial worth of Rs.12 billion.
Ketan Parikh’s Badla payments were not honored on time for the settlement and about 70 CSE brokers
defaulted on their payments. By mid-march, the value of stocks went down further to around rs.2.5 -3
billion.

Impact of the scam on financial institutions:

Ketan Parikh was threatening to sue the bank of India for defamation because it complained of bouncing of
1.3 billion pay orders issued to the broker by Madhavpura mercantile cooperative bank. Investigations by
SEBI & CBI reveal that sheer magnitude of money by Parikh was a staggering 64 billion.

Working of Badla System:

The stock exchange acts as an intermediary between you and the actual lender. You will be changed on
interest rate for borrowing, which will be determined by the demand for that stock under badla trading. Thus,
higher the demand for Wipro under badla trading higher will be the interest rate. You can keep your
borrowing unpaid for a maximum of 70 days, after which you will have to repay the badla financer through
the exchange.

21
SEBI’s role after scam:

An additional 10% deposit margin was imposed on outstanding net sales in the stock markets. The limit of
application of the additional volatility margins was lowered from 80% to 60%. To revive the markets SEBI
imposed restriction on short sales and ordered. It suspended all the broker member directors of BSE’s
governing board. SEBI also banned trading by all stock exchange presidents, vice presidents and treasures.
SEBI allowed banks for collateralized lending only through BSE & NSE.

2002

Abdul Karim Telgi (1961-2017) was a convicted Indian counterfeiter. He earned money by printing

counterfeit stamp paper in India.
Early life
Telgi's mother was Shariefabee Ladsaab Telgi, and his father was an employee of Indian Railways. His
father died while he was young. Telgi paid for his education at Sarvodaya Vidyalaya Khanapur, an English
medium school, by selling fruits and vegetables on trains. Eventually, he moved to Saudi Arabia. Seven
years later, he returned to India, when he began a counterfeiting career, originally focusing on fake
passports. He started a business to export manpower to Saudi Arabia and opened a company, Arabian Metro
Travels at New Marine Lines. He used to create several fake documents that would facilitate laborers’
smooth passage at the airport even if their passport had an ECR (emigration check required) stamp or other
issues that could raise red flags for immigration officials. This practice was called “pushing” in the parlance
of manpower exporters.
Counterfeiting career
Telgi moved to more complex counterfeiting when he began to counterfeit stamp paper. He appointed 300
people as agents who sold the fakes to bulk purchasers, including banks, insurance companies, and stock
brokerage firms. The size of the scam was estimated to be more than ₹100 billion (US$1.3 billion) One
aspect of the scandal that caused much concern was that it required the involvement of many police officers
and other government employees including Nikhil Kothari. An Assistant Police Investigator was found to
have a net worth of over ₹1 billion (US$13 million), despite making a salary of only ₹9,000 (US$110) per
month. Several police officers were implicated in the case. Pradip Sawant, then Deputy Commissioner of
Police, Special Branch, Mumbai, was discharged but subsequently reinstated after being found innocent.
Then police officer S M Mushrif, known for the book Who killed Karkare took decisive measures in this
case.
On 17 January 2006, Telgi and several associates were sentenced to 30 years rigorous imprisonment. On 28
June 2007, Telgi was sentenced to rigorous imprisonment for 13 years for another aspect of the scandal. He
was also fined ₹10 billion (US$130 million). The Income Tax Department requested that Telgi's property be
confiscated to pay the fine. He had been in jail for 13 years.
Telgi used to go to dance bars and once showered Rs 90 lakh on one bar dancer in Topaz Bar at Grant Road,
Mumbai.He was said to be in love with a bar dancer, Tarannumn Khan.
Death
Telgi was suffering from meningitis and died on 23 October 2017 at Victoria Hospital, Bengaluru. He was
suffering from diabetes and hypertension for over 20 years, besides other ailments.

22
2009

Satyam computer scam

The Satyam Computer Services scandal was India's largest corporate fraud until 2010. The founder and
directors of India-based outsourcing company Satyam Computer Services, falsified the accounts, inflated the
share price, and stole large sums from the company. Much of this was invested in property. The swindle was
discovered in late 2008 when the Hyderabad property market collapsed, leaving a trail back to Satyam. The
scandal was brought to light in 2009 when chairman Byrraju Ramalinga Raju confessed that the company's
accounts had been falsified.

History

For many years Satyam accounts showed profits that had never existed, cash at the bank that did not exist,
which inflated the share price. Raju and friends then sold shares. The accounts also showed $3m of "salary
payments" to people who did not exist. These in fact went to board members. The falsified accounts were
used to obtain cheap loans in the USA which were stolen by Raju and never entered into the accounts. Much
of the money was squandered in real estate deals in Hyderabad. When the property market collapsed in
2008, the money vanished and whistle-blowers began to be heard. A failed attempt by Raju to use Satyam to
buy a property company led to the scandal being uncovered.

Initial confession and investigation

On 7 January 2009, the chairman of Satyam, Byrraju Ramalinga Raju, resigned, confessing that he had
manipulated the accounts of Rs 7,000 crore in several forms. The global corporate community was said to be
shocked and scandalised.

In February 2009, the CBI took over the case and filed three partial charge sheets (dated 7 April 2009, 24
November 2009, and 7 January 2010), over the course of the year. All charges arising from the discovery
phase were later merged into a single charge sheet.

On 10 April 2015, Byrraju Ramalinga Raju was convicted with 10 other members.

Role of Auditors

PricewaterhouseCoopers affiliates served as independent auditors of Satyam Computer Services when the

report of scandal in the account books of Satyam Computer Services broke. The Indian arm of PwC was
fined $6 million by the SEC (US Securities and Exchange Commission) for not following the code of
conduct and auditing standards in the performance of its duties related to the auditing of the accounts of
Satyam Computer Services. In 2018, SEBI (Securities and Exchange Board of India) barred Price
Waterhouse from auditing any listed company in India for 2 years, saying that the firm was complicit with
the main perpetrators of the Satyam fraud and did not comply with auditing standards. SEBI also ordered

23
disgorgement of over Rs 13 crore wrongful gains from the firm and 2 partners. PwC announced their intent
to get a stay order.

Aftermath

"We are obviously shocked by the contents of the letter. The senior leaders of Satyam stand united in their
commitment to customers, associates, suppliers and all shareholders. We have gathered together at
Hyderabad to strategize the way forward in light of this startling revelation."

On 10 January 2009, the Company Law Board decided to bar the current board of Satyam from functioning
and appoint 10 nominal directors. "The current board has failed to do what they are supposed to do. The
credibility of the IT industry should not be allowed to suffer." said Corporate Affairs Minister Prem Chand
Gupta. Chartered accountants regulator ICAI issued show-cause notice to Satyam's
auditor PricewaterhouseCoopers (PwC) on the accounts fudging. ICAI President Ved Jain said: "We have
asked PwC to reply within 21 days.” Also on 10 January 2009, the same day, the Crime Investigation
Department (CID) team picked up Vadlamani Srinivas, Satyam's then-CFO, for questioning. He was arrested
later and kept in judicial custody.

On 11 January 2009, the government nominated noted banker Deepak Parekh,

former NASSCOM chief Kiran Karnik, and former SEBI member C Achuthan to Satyam's board.

Analysts in India have termed the Satyam scandal India's own Enron scandal. Some social commentators see
it more as a part of a broader problem relating to India's family-owned corporate environment.

Immediately following the news, Merrill Lynch (now a part of Bank of America) and State Farm
Insurance terminated its engagement with the company. Also, Credit Suisse suspended its coverage of
Satyam. It was also reported that Satyam's auditing firm PricewaterhouseCoopers will be scrutinised for
complicity in this scandal. SEBI, the stock market regulator, also said that, if found guilty, its license to work
in India may be revoked. Satyam was the 2008 winner of the coveted Golden Peacock Award for Corporate
Governance under Risk Management and Compliance Issues, which was stripped from them in the aftermath
of the scandal.  India's National Stock Exchange has announced that it will remove Satyam from its S&P
CNX Nifty 50-share index on 12 January. The founder of Satyam was arrested two days after he admitted to
falsifying the firm's accounts. Ramalinga Raju was charged with several offences, including criminal
conspiracy, breach of trust, and forgery.

Satyam's shares fell to 11.50 rupees on 10 January 2009, their lowest level since March 1998, compared to a
high of 544 rupees in 2008. On the New York Stock Exchange, Satyam shares peaked in 2008 at US$29.10.
By March 2009, they were trading around US$1.80.

The Indian Government has stated that it may provide temporary direct or indirect liquidity support to the
company. However, whether employment will continue at pre-crisis levels, particularly for new recruits, is
questionable.
24
On 14 January 2009, Price Waterhouse, the Indian division of PricewaterhouseCoopers, announced that its
reliance on potentially false information provided by the management of Satyam may have rendered its audit
reports "inaccurate and unreliable".

On 22 January 2009, CID told in court that the actual number of employees is only 40,000 and not 53,000 as
reported earlier and that Mr. Raju had been allegedly withdrawing ₹200 million (US$3 million) every month
for paying these 13,000 non-existent employees.

The Indian government designated A. S. Murthy to become the new CEO of Satyam effective 5 February
2009. Special advisors were also appointed, Homi Khusrokhan of Tata Chemicals and Chartered
Accountant T. N. Manoharan.

On 4 November 2011, the Supreme Court granted bail to Ramalinga Raju, as well as two others accused in
the scandal, since the investigation agency CBI had failed to file a charge sheet, despite having already had
33 months (from the time of Raju's arrest) to do so.

On 15 September 2014, the special CBI court hearing the case asked the concerned parties to appear before
the court on 27 October 2014. Date of judgement was to have been indicated later on that day.

On 9 April 2015, Raju and nine others were found guilty of collaborating to inflate the company's revenue,
falsifying accounts and income tax returns, and fabricating invoices, among other findings, and sentenced to
seven years imprisonment by Hyderabad court. Kunjumani and his brother were also fined by the court 55
million rupees each.

Acquisition of Satyam by Mahindra Group

On 13 April 2009, via a formal public auction process, a 31% stake in Satyam was purchased by Mahindra
& Mahindra owned company Tech Mahindra, as part of its diversification strategy. Effective July 2009,
Satyam rebranded its services under the new Mahindra management as "Mahindra Satyam". After a delay
due to tax issues Tech Mahindra announced its merger with Mahindra Satyam on 21 March 2012, after the
board of two companies gave the approval.The companies are merged legally on 25 June 2013.

2010

The 2010 fake housing loan in India was uncovered by the Central Bureau of Investigation (CBI) in India.
CBI arrested eight top-ranking officials of public sector banks and financial institutions, including the LIC
Housing Finance CEO Ramchandran Nair, in connection with the scam.
CBI investigations
CBI alleged that the officers of various public sector banks and financial institutions received bribes from a
private financial services company, which acted as a mediator for corporate loans and other facilities from
financial institutions. The bank officials sanctioned large-scale corporate loans to realty developers,
overriding mandatory conditions for such approvals along with other irregularities.

25
The Central Bureau of investigation arrested number of high official from the several financial institutes in
India in connection with the housing scam in 24 November 2010. Smith (2010) stated that findings are
shocking where the head officers of several banks and financial institutes are involved in corporate
corruption. Precisely, the banks and financial officials were from the public sectors including LIC, Bank of
India, Central Bank of India and Punjab National Bank. However, stated that since the matter was related to
the erosion of funds from the LIC housing and Finance Limited, event was named as the LIC housing and
Finance Scandal. Lamont (2010) cited that the officers from the high rank including the secretary of LIC
Investment, general managers, directors and deputy managers of banks were involved in taking out the funds
from LIC in appropriate and unethical way. Smith (2010) said that these officials were acting as the
middleman to provide the funds to the main parties and in return they were having hefty amount of funds
from the real investors, insurers and other consumers. Smith (2010) regarded this as the distortion of the
corporate governance system where the business ethics were neglected to sustain the core business activities
of the public sector banking firm. Meanwhile, Economic Times stated that the officials were charged with
the exploiting of funds, looting, corrupting corporate loan process and manipulating and overriding with the
regulations of the LIC Housing and Finance Limited in regard to the approvals and other rules and
regulations.
Nonetheless, The loans provided through this manner were estimated to be worth of 85 Billion Dollars,
comes as the biggest scandal in the Housing Finance in Asia However, the stock price took a sharp dip soon
after the event. Apparently, LICHF had a good run till September 2010 when it reached Rs.299 and the
growth rate undoubtedly, received the appreciation by the investors and other shareholders. The stock
recorded no significant changes thereafter but the appearance of corporate scandal shook the stock price
chart and the price dip to Rupees 150 by the end of year 2010. At present the stock price is stands at around
rupees 190 and gaining its momentum over a period of time but however, Lamont (2010) felt that the
combination of factors that happened in the last quarter of FY10 were accountable for the sharp decline in
the LIC Housing and Finance Share price. Reuters stated that LIC Housing and Finance is looking forward
to raise the capital to the tune of Rupees 25000 Crores in 2011-12 through debt. Eventually, the technical
experts believed that company is developing its core competencies and capabilities and undoubtedly,
investors would revive the stock price and current Market changes and company’s development will be seen
through the price momentum.
However, experts believed that the Housing and Finance Scandals by the top officials in LIC and other
banking institutes will always stand to harm the future potential of such companies but however, the future
and the endless opportunities lies in the hand of ultimate investors. Eventually, Online newspaper, Rediff
quoted as saying that most of the brokers are taking up the stock of LICHF after the scam as related to the
current project being performed by the company. Namely, IIFL, Aditya Birla, IL&FS are impressed by the
current progress by the company and building up the stock ay higher rate. However, Reuters stated that the
Financial Budget introduced by the Indian Planning Commission had slightly adverse effects on the stock of
banking, insurance, mortgages and other related sector in the industries. However, the company has been
quoted as saying that they would include the margin between 2.8 and 3% in relation to the rising interest
rates and their effects on the share price. However, In response the scam, the Reserve Bank of India and
other regulatory and financial bodies attempted to reform the housing finance sector by making several
supervision and security measures in this regard. Eventually, the corporate scam destroyed the interest and
confidence of investors and thus, the monetary and regulatory authorities must execute their task in relation
to safeguarding the interests of investors. Apparently, Smith (2010) stated that the Central Bureau of
Investigation exposed the stock price dip to 18% of the prevailing market rate after the scam and other banks
who were involved saw a decline between 5 and 15% during the time. Hence, it was anticipated that
investors believed in the core values and company’s relation with the investors and the stock changes occur
in the short span of time however, the stock is futuristic for the long term.

26
CBI's Economic Offences Wing (EOW) raided offices of the public sector banks and LIC Housing Finance
in six cities (Mumbai, Delhi, Chennai, Jaipur, Kolkata and Jalandhar), to recover incriminating documents.
According to CBI, the companies to which the loans in question were given include:
Lavasa Corp., a unit of Hindustan Construction Co.
Ashapura Minechem Ltd.
Suzlon Energy Ltd.
DB Realty Ltd., a part of the Dynamix Balwas Group
Emaar MGF Land Ltd.
Mantri Realty
Kumar Developers Ltd.
The CBI EOW also suspected that the companies may have inflated their assets value and balance sheets in
order to make themselves eligible for the loans.
According to CBI, an employee of the financial services firm had expressed his willingness to turn witness
in the case.
Reactions
Most firms, including BGR Energy and Oberoi Realty denied any role in the scam.
The scam was discovered shortly after the 2010 Commonwealth Games corruption controversy and
the Adarsh Housing Society Mumbai scam. The investors were rattled as news of the arrests broke in
Mumbai. The share of the LIC Housing Finance, Central Bank of India, Punjab National Bank, Bank of
India as well as other banking and real-estate stock declined.
The Union finance ministry initially claimed that the case was a bribery incident, and not a large-scale scam.
The CBI officials had indicated that the size of the scandal could be worth over Rs 1,000 crore, but the
finance ministry officials claimed that the magnitude of the scandal was too insignificant to affect the Indian
financial sector.
The income-tax (IT) department decided to investigate the books of those involved in the scam, after
receiving primary reports from CBI. However, many political analysts believe innocent bankers were
implicated in this falsely created scam to defuse attention of the common man against the much larger and
serious scams done by the ruling Indian government, notably of corrupt politicians like CWG minister
Suresh Kalmadi and ex-telecom minister A Raja.
2010
NSE co-location scam
The NSE co-location scam relates to the market manipulation at the National Stock Exchange of India,
India's leading stock exchange. Allegedly select players obtained market price information ahead of the rest
of the market, enabling them to front run the rest of the market, possibly breaching the NSE's purpose
of demutualisation exchange governance and its robust transparency-based mechanism. The alleged
connivance of insiders by rigging NSE's algo-trading and use of co-located servers ensured substantial
profits to a set of brokers. This widespread market fraud came to light when markets' regulator,
the Securities and Exchange Board of India (SEBI), received the first anonymous complaint through
a whistle-blower's letter in January 2015. The whistle-blower alleged that trading members were able to
capitalise on advance knowledge by colluding with some exchange officials. The overall default amount
through NSE's high-frequency trading (HFT) is estimated to be ₹500 billion over five years.

27
The NSE co-location case is under investigation by the Central Bureau of Investigation (CBI), the Securities
and Exchange Board of India (SEBI) and the Income Tax Department who are probing the involvement of
NSE and SEBI officials, as well as NSE's former and current executives and brokerages.
In a recent verdict, the Madras High Court issued a notice to SEBI, MCA, ED in response to a Public
Interest Litigation (PIL) filed by the Chennai Financial Markets and Accountability (CFMA).
Background
In January 2010, the NSE began offering a co-location facility to members. Members could place their
servers in the Exchange's premises in return for a fee. This allowed them faster access to the buy and sell
orders being disseminated by the exchange's trading engine. The term 'co-location' means 'a setup wherein
the broker's computer is located in the same area as the stock exchange's server. In addition, High-frequency
trading (HFT) or algorithmic trading refers to the use of electronic systems, which can potentially execute
thousands of orders on the stock exchange in less than a second. Also, retail investors monitoring prices are
subject to a delay as compared to the tick-by-tick data broadcast a user receives in a co-location facility.
Unusually, the SEBI did not put out a discussion paper to collect market feedback before giving permission
to proceed with the facility. There are no public records on HFT executed on the NSE.  SEBI needs to
consult with Technical Advisory Committee (TAC) for such market developments.  However, no notification
was received from SEBI in regard to it approving for all exchanges. During that time, the managing director
of the NSE was Ravi Narain and C. B. Bhave was the chairman of SEBI. It is mentioned in passing in the
NSE's 2009-10 annual report statement: "In keeping with global trends, the exchange has provided members
a co-location facility for low latency high frequency trading. The Co-location data center is an international
standard, state of the art, highly robust, resilient and secure infrastructure."
The whistle-blower's letter that was addressed to SEBI and copied to the leading financial
magazine, Moneylife clearly stated that:
When the co-location was started by NSE it took some time for the more enterprising to figure out what was
happening in the system. By the end of the year, smart people had all figured out the way to game the system
lay in being the first one to connect to the server and preferably the server, which was fastest.
The co-location case was initiated when certain members associated with HFT allegedly teamed up and
worked in coalition for about four years, i.e. 2010- 2014 overriding rules and regulations set in place by
SEBI, the market regulator. According to an unnamed individual familiar with SEBI's investigation: "Access
to co-location facilities and HFT trading gave the select brokers differential advantage such as display of
market data, viewing order book prior to order execution."
Resignations at NSE
The Economic Times first reported that on 22 May 2017, SEBI issued show cause notices to the exchange
and fourteen individuals, including former managing directors Chitra Ramakrishna and Ravi Narain.  Notices
have been sent to Ravi Narain, vice-chairman of NSE, who was serving as chief executive officer (CEO) and
managing director (MD) at the exchange during the period when the alleged violations took place. Other
officials include Ravi Varanasi, who was the chief of NSE's business development vertical and was heading
the surveillance department of the exchange during this period, and Suprabhat Lala, chief of regulation and
head of the trading division during 2010–13. Among other officials who received show cause notices were
former technology heads — Ravi Apte, and Umesh Jain, and former chief operating officer Subramanian
Anand. NSE vice-chairman Ravi Narain had put in his papers on 2 June 2017, amid regulators intensifying
their probe into the alleged lapses in high frequency trading.  Chitra Ramakrishna, MD and CEO resigned
from the exchange in December 2016. The media reported that Chitra's resignation the result of two
governance-related issues at NSE. One was the loss of confidence in the NSE top management due to the
colocation controversy. The second was the controversy surrounding a high-ranking official at NSE, Anand
Subramanian, who was re-designated on 1 April 2015 as Group Operating Officer and Advisor to the MD.
28
This appointment happened after communication from the NSE, MD and the CEO's office bypassing the
Human Resources department.  Complaints regarding this appointment, and Subramanian's high salary,
reached the board prompting it to examine the appointment process. This led to Subramanian leaving the
exchange in October 2016.  Both Mr. Narain and Ms. Ramakrishna were part of the NSE's founding team,
having joined the bourse in 1994.
After receiving show cause notices from SEBI, 12 out of 14 high-profile current and former top executives
of NSE including Ravi Narain and Chitra Ramakrishna filed an application with SEBI to settle the co-
location issue under consent mechanism in July 2017. The consent process is an alternative dispute
resolution mechanism, allows an alleged wrongdoer to settle a pending issue by accepting a penal action
without admitting or denying the guilt. During this period, in July 2017, Vikram Limaye took charge as MD
and CEO of the NSE. He gave assurances that he would approach SEBI for a settlement of the co-location
issue and would find the underlying cause of this issue. However, a consent application filed by the
exchange was later returned in March 2018 after the CBI investigation gathered momentum.
SEBI Action
In November 2015, the whistle-blower's letter referred to SEBI's technical advisory committee (TAC) report
that concluded in March 2016, that NSE systems were prone to 'manipulation' and thus recommended an
investigation. This was when SEBI directed the new NSE board to conduct a forensic audit of its systems
and deposit revenue from co-location trading in an escrow account. This was a blow to NSE's plans of going
public as the co-location server facility stream accounted for nearly 35–40 per cent of the NSE's core
revenues. On April 30, 2019, SEBI passed its orders against the entities involved with the co-location scam.
SEBI directed NSE to pay ₹6.25 billion with an interest rate of 12% worth over ₹10 billion and also barred
the NSE from raising money on the securities market directly or indirectly for six months.
On 1 February 2022, the dean of the SEBI-managed National Institute of Securities Markets (NISM), V R
Narasimhan, is said to resign soon. Narasimhan is the former chief regulatory officer of the NSE, and his
employment at NISM has sparked controversy as SEBI found him guilty of failures in duty while at the NSE
and penalised him Rs. 6 lakh in a recent order involving Chitra Ramkrishna.  On June 29, 2022, Chitra
Ramkrishna was fined 5 crore by SEBI for her part in disregarding the unauthorised installation of black
fibre connections to the exchange's co-location trading engines.
On June 22, 2022, OPG Securities MD Sanjay Gupta was arrested in NSE co-location case.
On July 18, 2022, the appointment of Ashishkumar Chauhan as the new Managing Director and CEO of the
National Stock Market (NSE), the nation's main stock exchange, has been accepted by the Securities and
Exchange Board of India (SEBI).
On 18 July 2022, the Delhi Court prolonged Chitra Ramakrishna's remand by four days in a money
laundering case involving suspected phone tapping and spying of stock exchange staff.
On August 30, 2022, former NSE CEO Chitra Ramkrishna's bail application in a money laundering case was
denied.  The Enforcement Directorate (ED) in Delhi has detained Ravi Narain, the former CEO of the
National Stock Exchange (NSE), in a phone tapping case, on August 30, 2022.
On September 28, 2022, in the phone tapping case, the Delhi High Court granted statutory bail to former
NSE CEO and MD Chitra Ramkrishna and Anand Subramanian.
On November 1, 2022, the ED argued against Chitra Ramkrishna's bail in the Delhi High Court, saying that
she was the "mastermind" behind the criminal conspiracy involving the alleged illegal phone tapping of NSE
employees and that the money laundering case was related to this.

2011
29
ICICI videocon scam
The ICICI-Videocon loan scam is about a criminal conspiracy by Chanda Kochhar as Managing Director
of ICICI Bank who abused her position by sanctioning a ₹3,250 crore (US$410 million) loan to Venugopal
Dhoot's Videocon International Electronics Limited (VIEL) between June 2009 and October 2011 to cheat
the bank in lieu of illegal gratification and undue benefit received in NuPower Renewables Private Limited
(NRPL), a company owned by Kocchar's husband, Deepak Kochhar.
Investigation
In the course of its preliminary investigation, the Central Bureau of Investigation (CBI) discovered that
between June 2009 and October 2011, ICICI Bank allegedly broke its own policies by authorising six loans
totaling ₹1,875 crore to be given to companies affiliated with the Videocon Group. According to the
investigation agency, the loans were declared to be non-performing assets in 2012, which resulted in a loss
of ₹1,730 crore for the bank.
1. The CBI alleged that the ICICI Bank granted rupee term loans worth ₹1,875 crore to six Videocon Group
companies between 2009 and 2011 soon after Chanda Kochhar took over as the managing director and chief
executive officer.
2. On September 7, 2009, a loan worth ₹300 crore was allegedly approved to Videocon International
Electronics Limited with Kochhar as the head of the sanctions committee.

3. Out of this, the Videocon Group allegedly transferred ₹64 crore to NuPower Renewables, the company
which was managed by Deepak Kochhar.
4. In its FIR registered in 2019, the CBI had named Chanda Kochhar, Deepak Kochhar, Videocon Group
founder Venugopal Dhoot, Nupower Renewables (managed by Deepak Kochhar), Supreme Energy,
Videocon International Electronics Ltd and Videocon Industries Ltd as accused.

2. The central agency claimed ICICI Bank sanctioned loans worth ₹3,250 crore to these companies. Dhoot is
said to have invested ₹64 crore in Deepak Kochhar-managed Nupower through Supreme Energy Private
Limited, and transferred the company to Pinnacle Energy Trust which was again managed by Chanda
Kochhar's husband.

3. As per the probe agency, the ICICI Bank granted loans worth ₹1,875 crore to six firms of the Videocon
Group between June 2009 and October 2011 after Kochhar took over as MD and CEO.

4. A loan worth ₹300 crore was allegedly sanctioned to Videocon International Electronics Limited when
Kochhar was heading the sanctions committee.

5. After the loan was disbursed on September 7, 2009, the Videocon Group through its firm Supreme Energy
transferred ₹64 crore to Deepak Kochhar's NuPower Renewables.

Arrests
On 23 December 2022, the CBI has taken into custody Chanda Kochhar as well as her husband, Deepak
Kochhar. And by 26 December 2022, Venugopal Dhoot had also been arrested by the investigation
agency.Dhoot reportedly made an offer to turn himself in as an approver in the case, as reported by local
media sources.
Chanda Kochhar, the beleaguered former chief executive officer of ICICI Bank and her husband Deepak,
have been granted bail by the Bombay high court in the mulit-crore bank loan fraud case. The court said the
30
couple's arrest was not in accordance with law.

Kochhar and her husband were arrested on December 23 by the Central Bureau Investigation (CBI) over
alleged quid pro quo also involving Videocon Group founder Venugopal Dhoot.

2013
Saradha group scam
The collapse of the Ponzi scheme operated by Saradha Group led to a significant financial and political
crisis. The Saradha Group was established in year 2006. Due to the outrageous profits and reliable
investments that Saradha Group offered, investors were drawn to these Ponzi scams. Along with incentive
payments of up to 30% on deposits, agents also received commendation gifts that helped them climb the
large agent pyramid. This fraud is the outcome of the Group's use of gaming to swindle money. To get
around authorities, Saradha Group sought to entice several businesses. The origins of this fraud may be
traced back to the Group's front-line enterprises, which raised funds from the public by issuing bonds and
debentures such secured bonds and preferential debentures.
Background
West Bengal, the centre of the Naxalite movement and also known as India's "Ponzi Capital," is a prime area
for such schemes, in part because of the state's extreme poverty and lack of financial inclusion. The Saradha
group was attempting to capitalise on the wave of these investments and gain market share. Businessman
Sudipto Sen introduced the programme in the beginning of the 2000s. It is operated by Saradha Group, an
umbrella organisation with 200 private participants. The strategy, which was designed for modest investors,
quickly gained popularity since it offered significant profits. A large network of agents who received
commissions of more than 25% were used to collect the money. In a few years, the Saradha Group raised
roughly Rs 2,500 crore. The business developed its brand through a variety of marketing techniques. In
addition to well-known marketing strategies like celebrity endorsements, the business used to support
traditional celebrations like Durga Puja and make investments in well-known football clubs to draw in new
investors. The initiative quickly spread to Odisha, Assam, and Tripura, and close to 1.7 million people
invested. The CBI has questioned more than a dozen TMC ministers and MLAs in relation to the scandal.
Many of these leaders actively participated in running the organisation. Satabdi Roy, an actor and TMC
leader, served as Saradha's brand ambassador. The CEO of the media firm, in which Saradha had invested
Rs 988 crore, was later named TMC MP Kunal Ghosh. Srinjoy Bose, a different party leader, also took part
in the group's media initiatives. The group's labour union was led by Madan Mitra, the West Bengal
Transport Minister at the time. Along with the TMC, the organisation allegedly had ties to Himanta Biswa
Sarma, the head of the Assam BJP at the time, and Matang Sinh, a Congressman at the time.
When SEBI ordered the organisation to halt taking money from investors and get approval from the
regulator to conduct its schemes, issues in the company started to arise. By January 2013, the firm had
entered a crisis as it was discovered that Saradha Group's cash inflows were lower than its outflows for the
first time. By April, the scam had fallen through, and agents and investors had reported it to the authorities.
In order to look into the case, the West Bengal government first established a Special Investigation Team
(SIT), which was led by Rajeev Kumar, the former Kolkata Police Commissioner. 2014 saw the case moved
to the CBI at the Supreme Court's request. Kumar is being held as a prospective defendant in the case by the
CBI, which has accused him of withholding important papers from the organisation. The first time Kumar
made news was in February 2019, when the Kolkata police prevented the CBI from interviewing him.
Mamata Banerjee, the chief minister of Bengal, hurried to the scene and began a three-day sit-in protest
against the CBI's action.
They divided this into 2 phases:
31
PHASE 1.
 They went with Sarada Maa, who is highly revered in rural West Bengal and is the wife of the well-
known religious leader Ramakrishna.
 The paid the agents substantial incentives that might reach 40% of the entire amount of money gathered
from the locals.
 This made it easier to quickly build a network of investors, agents, and word-of-mouth recipient

PHASE 2 This phase's genius may be seen in the flawless marketing ploy that deceives people by using
politicians and celebrities. Saradha Group served as the principal sponsor in a network that included
participants from other groups, and their advertisements were shown practically continuously on all Bengali
channels. The subsequent action was a masterclass unto itself. More than 250 corporations were formed (or
not registered) by The Saradha Group, which aided them in money laundering. Mr. SEBI (Securities
Exchange Board of India), the regulator and watchdog, became active and sent them notifications. Saradha
launched a forceful push to increase the number of investors. They invested in real estate, resorts for tourists,
food processing, and other ventures to build their reputation. Additionally, they developed strong
relationships with famous people like Mithoon Chakraborty and Shatabdi Majumder, who later served as
their brand ambassadors. The Companies Act of 1956 prohibits raising capital from more than 50 investors,
and SEBI should give them the go-ahead. Since neither of the two occurred, SEBI has continuously warned
the State government of the possibility of a "Ponzi Scheme" since at least 2010. In their first three years of
operation, they virtually tripled the amount of money they collected. A phenomena that had never been
carried out on such an unprecedented scale was the alliance of celebrities, politicians, and the government
that was busy stealing the hard-earned money of the people.
Calcutta high court
After taking these arguments into account, the court ordered that the issue be handled by a oneman
committee led by Mr. Justice S.P. Talukdar (retired). The aforementioned authorities must deposit all
corporate funds with the one-man council or in any institution according to their instructions after deducting
all costs and fees, etc. The SEBI will follow its standard procedure to undertake the sale of the company's
properties that are the subject of the applications. Additionally, the candidates in these applications are free
to submit their own offers. The SEBI will be free to accept the best price after receiving all of the bids or to
hold an auction to get a greater offer. The authority will then create a report and provide it to the one-man
committee. The transaction will need this committee's approval, the bench said in dismissing the petition. If
the situation calls for it, the committee may instruct SEBI or any other institution to conduct a new
advertising or auction. The offer that was approved by the council will be presented to this court for approval
before becoming final.
Supreme court
PILs calling for a CBI inquiry against the Saradha Group as well as other chit fund businesses were filed by
Akhil Gogoi, an RTI activist, in the Guwahati High Court and by Adv. Basabi Roy in the Calcutta High
Court. A division bench of the Calcutta High Court stated that "a central authority would also do justice to
the probe" since "the implications of the fraud included other states." In order to determine if the inquiry was
being handled fairly, the Hon'ble Court ordered the state legislature a week to deliver its investigative report.
Petitioners challenged the decision to the Supreme Court via a Special Leave Petition after being unhappy
with it (SLP). The state and local governments of Orissa, Jharkhand, and Tripura, who are the case's
respondents, asked the SC to order a CBI investigation into all money collection organisations in India. On
May 9, 2014, the Supreme Court's divisional bench ordered the CBI to look into all Ponzi schemes in
Eastern India, including Saradha. The court also ordered the Electronic copy available at:
https://ssrn.com/abstract=4268352 suspicious Ponzi companies to pay back depositors after the conclusion
32
of any judicial proceedings started by the Enforcement Directorate, which is permitted to do so under federal
law, and various state agencies, which are permitted to do so under state law. All that we need to bring out is
that examination into the fraud is not limited to those closely involved in the operation of enterprises but
may extend to numerous others who must be questioned regarding their involvement in the series and
developing, the Supreme Court said in the Subrata Chattaraj appeal1. all incidents that have had an impact
on several fronts. The Supreme Court said that uncovering the truth also requires looking into the bigger
conspiracy theory. In the current instance, three different petitions were submitted. The Honourable Supreme
Court has ruled that clubbing petitions must go before the Lower Court as a "Specially Assigned Matter" and
be temporarily removed off the list. Debabrata Sarkar, among the defendants in the aforementioned fraud,
recently submitted a bail application under Section 439 of the Criminal Procedure Code, which was denied
by the Honourable SC for reasons of public interest.

2013

ABG SHIPYARD SCAM

History of ABG Shipyard

Founded in ABG Shipyard Ltd. is the flagship company of the ABG Group. Or in the current context, it at
least was. The company was incorporated by Rishi Kamlesh Agarwal with the aim of building ships and
repairing them. The company has shipyards in Dahesh and Surat in Gujarat. 
The company’s huge capital requirement needs were provided by a consortium of 28 banks. This consortium
was led by ICICI Bank.
Post the opening up of the Indian economy in 1991 thanks to globalization the Indian shipping industry
experienced exponential growth. This resulted in huge demand for transportation via sea routes.
One may wonder why transportation through the sea was preferred over the air. This is because
transportation by sea is up to five times cheaper than that by air.
This resulted in over 90% of trade occurring through the sea. This resulted in huge business opportunities for
companies like ABG shipyard. This worked in ABG’s favor.
Apart from this ABG is present in a developing countries like India with booming globalization. This
resulted in huge benefits for companies that were into ports.
This resulted in banks providing ABG Shipyard with loans and lower interest rates. This however made
sense thanks to the potential that ABG had during the 2000s. 
Another important aspect we have to make note of is the time and investment that goes into building a ship.
Depending on the size a ship may take up to 3 years to build with an investment of up to Rs. 200 crores.
Considering the huge demand for ships to transport goods, the ABG shipyard received a lot of orders. For 16
years ending in 2008 ABG shipyard built 165 ships. The company even called itself India’s biggest
shipbuilding and repair the company. 
These included special vessels like newsprint carriers, self-discharging and loading bulk cement carriers, and
even offshore rigs. Almost 80% of ABGs orders came from abroad.
The remaining was made up of important names like the Indian Navy and the Indian coast guard.  
The scam

33
Despite having reputation and success in the ship building industry, in 2012 the finances of ABG started
dwindling which was later discovered by a forensic audit by E&Y initiated by SBI. During the audit it was
alleged that the top management of the company was involved in diversion of funds causing criminal breach
of trust with an intent to use the banks funds for personal gains possibly to tax havens. SBI stated that funds
were used to pay other lenders and get letters of credit. Earlier in October 2016, Standard Chartered bank
filed a criminal complaint with Economic Offences Wing in Maharashtra for cheating them of Rs 200 crore
loan as they failed to repay the short-term loan they sought from the bank in April 2012.Ships that were
ordered months or even years ago were canceled. This resulted in ABG having an inventory during a period
when no one wanted more ships.
The company still had the option to compete for local tenders from the Indian Navy or the Indian Coast
Guard. But one must keep in mind that generally, these government defense companies prioritize other
government entities for their tenders. 
Despite this, the company managed to rebound and earn its highest revenues ever in 2011-12. Everything
was downhill from here.
This is where the trouble began brewing for ABG Shipyard. The company began making losses just 2 years
after this. This was when the company opted in for capital restructuring.
However, despite these efforts, the company failed to turn around and was declared an NPA by the banks in
2016. 
Consequences
The promoters of the company instead of putting the funds to work resorted to diverting them for personal
use.
They opened shell companies abroad through which the funds raised for reviving the company were diverted
to 98 sister companies.
These payouts ran into 100s of crores made to related parties which were also used to buy properties.
It was only in 2019 when EY conducted a forensic audit on the company that they found evidence of fraud.
Funds were diverted.
The accused members in the EY report included Rishi Kamlesh Agarwal (who was the Chairman and MD),
Santhanam Muthaswamy (Executive Director), Ashwini Kumar (Director), and Sushil Kumar Agarwal
(Director), and Ravi Vimal Nevetia (Director). 
 This resulted in SBI filing a complaint once in 2019. Despite no official action being taken banks already
began reporting the account as a fraud.
A more comprehensive complaint was once again filed in 2020 once again. Finally, the scam broke out in
2022. The CBI registered a case against ABG Shipyard in 2022. 
The Banks Affected In The ABG Shipyard Scam
The banks were that were affected are as follows with the amount due to them:
ICICI – Rs 7,089 crore
SBI Rs 2,925 crore
IDBI Bank Rs 3,639 crore
Bank of Baroda Rs 1,614 crore
Punjab National Bank Rs 1,244 crore
Exim Bank Rs 1,327
34
Indian Overseas Bank Rs 1,244 crore
Bank of India Rs 719 crore
The ABG Shipyard scam resulted in a spat between Congress and the BJP. The Congress general secretary
Randeep Singh Surjewala questioned why an FIR wasn’t lodged earlier.
Finance Minister Nirmala Sitharaman replied to this stating that it takes 52 to 54 months to scrutinize and
account in general. She went on to credit the banks for identifying the fraud sooner than usual. 
The CBI booked Rishi Agarwal the chairman and MD, former executive director Santhanam Muthuswamy,
and directors Ashwini Kumar Sushil Kumar Agarwal, and Ravi Vimal Nevatia.
2017
Vijay Mallya Money Laundering Scam
Vijay Vittal Mallya (born 18 December 1955) is an Indian businessman, former politician and fugitive. He
is the subject of an extradition effort by the Indian Government to return him from the UK to face charges of
financial crimes in India.
The son of a businessman who was also in the alcoholic beverages business, Mallya is the ex-chairman
of United Spirits, the largest spirits company in India, and continues to serve as chairman of United
Breweries Group, an Indian conglomerate with interests including beverage alcohol, aviation
infrastructure, real estate, and fertilizer. He has been the chairman of Sanofi India (previously known
as Hoechst AG and Aventis) and the chairman of Bayer CropScience in India for over 20 years, and the
chairman of several other companies. Mallya was also the founder and former owner of defunct Kingfisher
Airlines and former co-owner of the Force India Formula One team before it went into administration. He is
also a former owner of the Royal Challengers Bangalore cricket team.
He is the ex-chairman of United Spirits, the largest spirits company in India, and continues to serve as
chairman of United Breweries Group, an Indian conglomerate with interests including beverage alcohol,
aviation infrastructure, real estate and fertilizer. He has been the chairman of Sanofi India (previously known
as Hoechst AG and Aventis) and the chairman of Bayer CropScience in India for over 20 years, and the
chairman of several other companies.
Controversies
Once called the "King of Good Times" due to his extravagant lifestyle, Mallya and his companies have been
embroiled in financial scandals, and controversies since 2012. Mallya left India on 2 March 2016 after
saying he wanted to move to Britain to be closer to his children.  A group of 17 Indian banks are trying to
collect approximately ₹90 billion (US$1.1 billion) in loans which Mallya has allegedly routed to gain 100%
or a partial stake in about 40 companies across the world. Several agencies including the Income Tax
Department and the Central Bureau of Investigation are investigating Mallya for charges including financial
fraud and money laundering, and the Attorney General said that Mallya's assets abroad are "far in excess to
loans taken by him". The 17 banks added a joint petition at the Supreme Court of India in March 2016 to try
to prevent Mallya from leaving the country, but the Indian government indicated that he had already left.
The Enforcement Directorate of India also filed a money laundering case against him in March 2016 for
allegedly sending abroad some ₹9 billion (US$110 million) that had been loaned to his airline.
On 24 April 2016, the Ministry of External Affairs (India) revoked Mallya's passport,and he resigned from
the Rajya Sabha on 2 May 2016, the day before their Ethics Committee was prepared to recommend his
expulsion. Currently the Enforcement Directorate is seeking Interpol to raise an international arrest warrant
against Mallya.  Also, the High Court of Judicature at Hyderabad issued a non-bailable warrant against
Mallya on 13 March 2016 for his failure to appear in the court regarding an allegation of cheating the GMR
Hyderabad International Airport Ltd by issuing them a dishonoured cheque for ₹5 million (US$63,000).
35
On 13 June 2016, the Prevention of Money Laundering Act (PMLA) court declared Mallya a "proclaimed
offender" on a request by the Enforcement Directorate (ED) in connection with its money laundering probe
against him in an alleged ₹90 billion (US$1.1 billion) loan default case.
Mallya co-owned the Formula One team Force India from 2007 to 2018. In the middle of the 2018 Formula
One season, Sahara Force India went into administration due to financial trouble. In August 2018 the team's
assets were purchased by Racing Point F1 Team, and continued to race under the Force India name for the
remainder of the 2018 season.
Accusations
On 18 April 2017, Mallya was arrested by the UK Metropolitan Police extradition unit "on behalf of the
Indian authorities in relation to accusations of fraud", and was released on bail pending further consideration
of the case. On 9 May 2017, the Supreme Court of India found Mallya guilty of contempt of court and
summoned him to appear on 10 July. When he failed to appear, the Supreme Court said the contempt case
would only proceed further after he is produced before the court. Mallya dismissed the proceedings against
him – calling the situation a "witch hunt". He said "I have done absolutely nothing wrong. In fact I am glad
that it is finally before a UK court and an impartial court. So we wait and see how it plays out." In the
meantime, he is not allowed to leave Britain, but he said that is no hardship for him.  He said "There's
nothing to miss" for him about India, since his immediate family has all moved to England or the United
States.
On 3 October 2017, Mallya was arrested as part of a money-laundering case in London and was released on
bail.
An appeal to extradite him from Britain was filed on charges of bank fraud estimated at ₹90
billion (US$1.1 billion). The final hearing on extradition will be held at the Westminster Magistrate's Court
on July 31.
Mallya is on bail since his arrest on an extradition warrant in April 2017. Mallya is fighting an extradition
case in the UK. On 16 June 2018 Vijay Mallya was ordered to pay £200,000 (₹18.1 million) to Indian banks
by a United Kingdom court. He was also asked to pay money towards registration of worldwide freezing
order and of Karnataka's Debt Recovery Tribunal (DRT). Vijay Mallya has to pay dues to 13 banks namely-
SBI, BOB, Corporation Bank, Federal Bank Ltd, IDBI Bank, Indian Overseas Bank, J&K Bank, Punjab and
Sind Bank, PNB, State Bank of Mysore, UCO Bank, UBI and JM Financial Asset Reconstruction Co. Pvt
Ltd. The consortium attempted to gain possession of Mallya's £20 million property on Cornwall Terrace in
London, but Mallya claimed it was owned by his mother.
UBS went to court in 2018, seeking to evict Mallya, his son Sidhartha and his mother Lalith from Cornwall
Terrace. A trial was set for May 2019. The trial did not go ahead since Mallya drew up a settlement with
UBS. According to the terms of the agreement, Mallya can remain in the property and if the mortgage is not
repaid by April 2020, UBS has a right to immediate possession. Mallya must also pay the interest of
£820,333 accrued up to April 2019 plus any further amount accrued up to 1 May 2020. He was also
instructed to pay legal costs of £1,047,081 and receivers' costs of £223,863.  In December 2018, the court
ruled that he can be extradited to India to face fraud investigations. In July 2019, Mallya was granted
permission to appeal to London's High Court against his extradition. In April 2020, the plea file by Vijay
Mallya against his extradition to India was rejected by London High court.
Vijay Mallya lost his final appeal against extradition. Mallya had filed an appeal in the UK Supreme Court
earlier in month of May 2020 in the wake of losing an appeal in the London High Court against an
extradition order to India on alleged charges of fraud and money laundering related to unrecovered loans to
Kingfisher Airlines. It was said that he could be extradited in next 28 days. However, in October 2020 the
Indian government was notified that Mallya could not be currently extradited due to an unspecified
"confidential legal matter".
36
He took loans from 17 banks in the country (total Rs. 9000 crores) and refused to repay the principal amount
as a result of which they filed a court case against him. The details of major loans and the amount taken by
him is given below:
S. no.  Name of Bank  Loan amount
1 Axis bank  50 crores
2 Punjab and Sind bank 60 crores
3 Federal bank  90 crores 
4 Indian overseas bank  140 crores
5 United bank of India  430 crores
6 Bank of baroda  550 crores
7 IDBI 800 crores
8 PNB 800 crores
9 SBI 1600 crores
Failure to repay the loan and to avoid criminal liability, he ran to another country with all the money he took
as loan in 2016 and has not returned yet.
There have been allegations that the loans taken by Vijay Mallya were only to further his personal agenda.
These allegations claim that the loans taken by Vijay Mallya were laundered overseas to various tax havens.
This was done with the help of shell companies. Mallya would have the loan received from banks transferred
to these shell companies where dummy directors were placed for this purpose.
These companies were not active and did not even have an independent source of income. The directors
placed here would act as per the directions received from the UB group at the command of Mallya. These
companies were located in seven countries including the United Kingdom, the USA, Ireland, and France.
Furthermore, it is also alleged that Vijay Mallya also diverted these loans in order to fund his IPL cricket
team The Royal Challengers Bangalore, and his F1 racing team Force India. This was all in the midst of a
period when the employees of Kingfisher were not paid their salaries. As of October 2013, the salaries had
not been paid for a period of 15 months. 
While awarding him a jail term, the top court also asked Mallya to deposit the $40 million with 8 percent
interest within four weeks to the Supreme Court legal services authority. A failure to do so would lead to
attachment of properties and a further sentence of two months.
Mallya was named in the Panama Papers and Paradise Papers, leaked confidential documents relating
to offshore investment.
On 11 July 2022, the Supreme Court sentenced Mallya to four months in jail and imposed a Rs 2,000 fine on
him in a 2017 contempt of court case. He was convicted of contempt in 2017 over transferring $40 million to
his children in violation of court orders.

2018
Punjab National Bank Scam
The Punjab National Bank Fraud Case relates to fraudulent letter of undertaking worth ₹11,356.84
crore (US$1.4 billion) issued by the Punjab National Bank at its Brady House branch in Fort, Mumbai;
making Punjab National Bank liable for the amount. The fraud was allegedly organized by jeweller and
designer Nirav Modi. Nirav, his wife Ami Modi, brother Nishal Modi and uncle Mehul Choksi, all partners
of the firms, M/s Diamond R US, M/s Solar Exports and M/s Stellar Diamonds; along with PNB officials
37
and employees, and directors of Nirav Modi and Mehul Choksi's firms have all been named in a charge sheet
by the CBI  Nirav Modi and his family absconded in early 2018, days before the news of the scam broke
in India.
India's Enforcement Directorate has begun attaching assets of the accused and is seeking to immediate
confiscation under the Fugitive Economic Offenders Ordinance. Nirav is on the Interpol's wanted list
for criminal conspiracy, criminal breach of trust, cheating and dishonesty including delivery of
property, corruption, money laundering since February 2018. In March 2019, Nirav was arrested in central
London by UK authorities.
The bank initially said that two of its employees at the branch were involved in the scam, as the bank's core
banking system was bypassed when the corrupt employees issued LOUs to overseas branches of other Indian
banks, including Allahabad Bank, Axis Bank, and Union Bank of India, using the international financial
communication system, SWIFT. The transactions were noticed by a new employee of the bank. The bank
then complained to the CBI, who is currently investigating the scam apart from ED and Reserve Bank of
India. On a later date, CBI named key officials Usha Ananthasubramanian, former CEO of PNB, executive
directors KV Brahmaji Rao and Sanjiv Sharan in a chargesheet holding them responsible for failure to
implement several circular and caution notices issued by the RBI regarding the reconciliation of SWIFT
messages and core banking systems.
Investigation
Punjab National Bank (PNB) alleges associates of three firms - Diamond R US, M/s Solar Exports and M/s
Stellar Diamonds- approached PNB on 16 January 2018, with a request for LoUs to make payment to its
overseas suppliers. The bank demanded at least a 100 percent cash margin for issuing LoUs, but the firms
contested that they had received LoUs without any such guarantee in the past. Branch records did not show
any such facility having been granted to the firms, PNB suspected fraud and began digging into transaction
history. On 29 January 2018, PNB filed a complaint with the CBI, wherein it was alleged that Nirav, Ami
Modi, Nishal Modi and Mehul Choksi, all partners of M/s Diamond R US, M/s Solar Exports and M/s
Stellar Diamonds, in collusion with two bank officials committed the offence of cheating against PNB and
caused a wrongful loss. The PNB official in his complaint informed the agency that at the Bank's branch
office at Brady House in Fort, Mumbai, two of its employees, Gokulnath Shetty, retired Deputy Manager of
PNB and another bank official, issued fraudulent LoUs to Hong Kong based creditors on behalf of three
firms associated with Nirav Modi and the Gitanjali Group. “The public servants committed abuse of official
position to cause pecuniary advantage to Diamonds R US, Solar Exports and Stellar Diamonds and wrongful
loss of Rs 280.70 crore to PNB during 2017,” said the first information report (FIR) filed by CBI.
As of 18 May 2018, the scam has ballooned ₹14,356.84 crore (US$2.1 billion) and Nirav Modi is said to be
hiding in London, allegedly travelling on a fake passport.
On 13 June 2018, the CBI approached the Interpol to issue a red corner notice (RCN) against Nirav Modi's
brother Nishal and one of his executives in connection with its probe into the Punjab National Bank (PNB)
fraud. The CBI sent a request to the Interpol to issue a RCN against Nirav Modi and his uncle Mehul Choksi
of the Gitanjali Group.
On 20 August 2018, former MD and CEO of Allahabad Bank, Usha Ananthasubramanian was granted bail
on a surety bond of Rs 1 lakhs by Special CBI court in Mumbai. A week earlier, the government had
dismissed Usha on the last day of her work. Ananthasubramanian was MD of Punjab National Bank between
August 2015 and May 2017 and had also served as its executive director. She was dismissed with immediate
effect. 
The CBI registered a disproportionate assets case against a retired deputy manager of Punjab National Bank,
Gokulnath Shetty, a key accused, for allegedly amassing wealth 200 per cent more than his known sources
of income.
Nirav Modi, who disappeared in February 2018, was in the British capital since June 2018. He was arrested
in central London on 19 March 2019 after an Indian-origin clerk at a bank in central London recognized him
and alerted the police. UK police arrested Modi, on behalf of the Indian authorities, who asked for his
38
extradition. Modi appeared in court on 20 March 2019. In the same month, the UK court refused twice to
grant him bail on the ground that he was a flight risk and could flee the country if given a chance. For the
third time again, Modi was denied bail and to remain in prison till May 24, 2019. The court had also noted
that Modi could tamper with evidence if left free. It has revealed in earlier hearings that Modi had threatened
to kill a prime witness and bribe another to escape justice. In June 2019, Four Swiss bank accounts of Nirav
Modi and his sister Purvi Mehta's had been "frozen" by authorities in Switzerland as part of the Scam, The
total amount of Rs 283.16 crore has been frozen on the request of the Enforcement Directorate. After Swiss
bank, a few days later, on 2 July 2019, the Singapore High Court ordered to freeze four bank accounts in the
name of Modi, Purvi, and her husband, Mayank Mehta. These accounts have Rs 44 crore between them.
Interpol has issued Red Corner Notice against both Purvi and Mayank.
In August 2019, The Central Bureau of Investigation (CBI) has moved an application in the special CBI
court, seeking to declare fugitive businessman Nirav Modi, his brother Neeshal Modi and a close associate
Subhash Parab proclaimed offenders and to attach their properties. All three declared 'wanted' by the CBI in
its charge sheet in the Rs 13,700 crore PNB scam. Though the agency last year obtained warrants against
them, they couldn't execute as the accused fled India before the case registered in February.
Nirav Modi's legal team has made four bail applications, which have been rejected each time due to Modi
deemed a flight risk. Modi, who is prisoned at Wandsworth prison in south-west London since March 2019
which extended till September 19 and later further remanded to judicial custody until October 17 by a UK
court which said it was working towards his Five-day extradition trial hearing for May 11–15, 2020 and he
must appear via video link before a court every 28 days.
In September 2019, Antigua and Barbuda Prime Minister Gaston Browne said Fugitive diamantaire Mehul
Choksi of the Gitanjali Group is a "crook" and repatriated to India after he exhausts all legal options. Mehul
Choksi, who is currently in the Caribbean nation of Antigua, told the high court that he left India for medical
treatment and not to avoid prosecution in the case. He said he would return to India as soon as he is
medically fit to travel.
In December 2019, Nirav Modi, his step-brother Nehal Modi and two of their business associates tried to
threaten witnesses and destroy evidence, said the Central Bureau of Investigation (CBI) in the additional
charge sheet submitted before the CBI court in Mumbai. According to CBI's charge-sheet, the evidence
came after nine of Nirav's employees submitted details to CBI of how Nirav and Nehal, along with
associates, took them to Egypt against their will and coerced them into signing documents that would
establish the nine as owners of dummy companies Nirav had floated.
In March 2020, Enforcement Directorate (ED) auctioned 72 luxury items seized from Nirav Modi for Rs
2.29 crore.
In May 2020, Based on the request from Indian agencies, Interpol had put Nehal Modi back again on the
Red Corner Notice for assisting his step-brother Nirav Modi in defrauding the PNB months. Last year his
name was removed from the Interpol website when Nehal Modi and Neeshal Modi had challenged the
RCN.CBI reported, Nehal purportedly managed two companies for Nirav Modi, which received $50 million
from dummy entities. After the scam got exposed, he took away diamonds worth $6 million, 3.5 million in
UAE dirham, and 50 kg of gold. In Dubai, he destroyed digital evidence in the form of mobile phones and a
server, and also threatened the key witnesses.
On 8 June 2020, The Prevention of Money Laundering Act (PMLA) Court has ordered a confiscated of
nearly Rs 1,400 crores worth property of Nirav Modi."PMLA court orders seizure of Nirav Modi's assets
worth Rs 1,400 crore". Retrieved 4 March 2022.
In May 2020, the UK court adjourned the Nirav Modi trial until September 2020, on the Five-day extradition
trial hearing. Modi has applied for political asylum after his bail was denied five times in the UK.
In July 2020, Enforcement Directorate (ED) has filed a charge sheet against Mehul Choksi alleging how he
ran an organized racket to cheat customers and lenders in India, Dubai and the United States.
Reforms

39
On 1 March 2018, the government approved the Fugitive Economic Offenders Bill to deter economic
offenders from evading the process of Indian law by giving powers to the government to confiscate assets of
a fugitive, including Benami assets of absconding loan defaulters The bill covers a wide range of economic
offenders which include: loan defaulters, fraudsters, individuals who violate laws governing taxes, black
money, Benami properties, financial sector, and corruption. On 12 March 2018, the government introduced
the bill in the Lok Sabha.
In March 2018, the Reserve Bank of India scrapped banking instruments such as the Letter of
understanding (Lou) and Letter of Comfort (LoC) that in an attempt to plug a loophole and improve banks’
due diligence in trade credit. Some bankers said that Lou's and LoCs led to receiving banks depending
completely on the issuing bank on creditworthiness.
2019
PMC bank scam
Punjab and Maharashtra Cooperative Bank (PMC Bank) has been facing regulatory actions and
investigation over alleged irregularities in certain loan accounts. Loans given to financially stressed real
estate player Housing Development & Infrastructure (HDIL) are at the centre of the investigation.
 
The crisis at PMC Bank first came to light on September 24, 2019, the day the Reserve Bank of India (RBI)
placed curbs on the activities of the Mumbai-based bank for six months. The central bank also limited the
amount a customer could withdraw from their account during the next six months — to Rs 1,000 at first, and
later to Rs 25,000. The Enforcement Directorate has filed a money laundering case in the PMC Bank scam.
 
Founded in 1984, PMC Bank has 137 branches across seven states, 81 of these in Mumbai, Navi Mumbai,
Thane and Palghar regions, 10 in Pune and 12 in the rest of Maharashtra. Its customers include small
businesses, housing societies and institutions.

This bank was established on February 13, 1984 as a single branch cooperative Bank. Punjab & Maharashtra
Cooperative (PMC) Bank is a Scheduled Urban Co-operative Bank with its area of operation in the States of
Maharashtra, Gujarat, Delhi,Goa, Karnataka, Madhya Pradesh and Andhra Pradesh.
The commencement of the banking business of PMC taken place on February 13,1984. It operated nicely
and within a time of 35 years, the Bank has a wide network of 137 branches across six states.
PMC has 1814 number of employees and now this bank stands among top 10 co-operative banks of the
country.
At the time of its establishment PMC was a cooperative bank but in 2000 it got the status of Schedule
Commercial Bank by the the Reserve Bank of India. PMC is the youngest bank to achieve the ‘Scheduled
Bank’ status.
According to an FIR filed in the case, HDIL promoters allegedly colluded with the bank management to
draw loans from the bank's Bhandup branch. The bank officials did not classify these loans as non-
performing advances, despite non-payment.
 
Reports estimate the bank’s overall exposure to the HDIL group at around Rs 6,500 crore, or over 73 per
cent of all of the bank’s advances — and all of this is not being serviced.
 
The bank also allegedly created fictitious accounts of companies which borrowed small sums of money, and
created fake reports to hide from regulatory supervision.
 
In 2018-19, the bank had reported a net profit of Rs 99.69 crore in its annual report. The bank showed 3.76
per cent (or Rs 315 crore) of advances (Rs 8,383 crore) as gross non-performing assets (NPAs), which was
good performance as compared to public-sector banks.
 
40
However, it is now clear that the bank presented false financial reports to hide the bad loan mess and the
alleged collusion with HDIL and other companies.
The crux of this bank fraud is that the higher management of the PMC bank has given huge loan to the
Housing Development and Infrastructure Ltd (HDIL) and its group entities. This fraud case is related to
transfer of 70% of the total credit facilities of the PMC bank to HDIL and its associated companies. If i talk
about the total amount of the bank fraud then it was Rs 4,355 cr. Now the total NPA of the bank has grown
to 73%.
The PMC bank allegedly favoured to the promoters of Housing Development and Infrastructure Ltd (HDIL)
and allowed them to operate password protected ‘masked accounts’.
It is found that around 21,049 bank accounts were opened by bogus names to conceal 44 loan accounts. The
bank's software was also tampered to conceal these loan accounts.
This bank fraud case is busted by a bunch of women employees of the credit department of the PMC bank.
These employees told to the RBI that they were aware of the ghost accounts. When this case came in the
light; then customers of the PMC bank rushed to the PMC bank to withdraw their hard earned money but
they were refused to give their deposited money and withdrawal limit is set by the bank.
Now the Enforcement Directorate (ED) has sealed the assets of Rs 3,500 cr of the HDIL group and the
HDIL chief Rakesh Wadhawan and his son Sarang Wadhawan have been arrested by the Mumbai Police.
Now it the need of the hour that the central government need to make some strict policies to prevent such
banking frauds in the country. The most important measure I would suggest is to restrict the political
intervention in the functioning of the Indian banks.
Investigation
 
A special investigation team of the Mumbai Police is probing the case. The police's Economic Offences
Wing registered a case against the former bank management and promoters of HDIL on September 30, 2019.
The case for forgery, cheating and criminal conspiracy was filed on the basis of a complaint by RBI-
appointed administrator.
 
The bank's former chairman Waryam Singh, managing director Joy Thomas and other senior officials, along
with HDIL’s executive chairman Rakesh Kumar Wadhawan and his son Sarang, have been named in the
FIR.
 
Most people named in the FIR have been arrested. The bank's former MD Joy Thomas and HDIL’s
Wadhawans were arrested before him.

2019
DHFL
Background of DHFL
Headquartered in Mumbai in the year 1984, the multinational housing corporation DHFL was founded with
the idea to allow economical housing loans to lower and middle-income families in semi-urban and rural
areas of India.
The DHFL stands for Dewan Housing Financial Limited, a well-known non-banking financial service
provider in India and also the biggest in the sector it operates.
The Scam
Earlier in 2019, Investigative platform Cobrapost alleged the primary promoters of DHFL and their associate
companies had committed a “systemic fraud” to siphon off public money. 
41
Cobrapost alleged that the “scam” was committed by giving out funds in secured and unsecured loans to
“dubious” shell or pass-through entities, purportedly related to DHFL’s own primary stakeholders through
their proxies and associates. The funds, as alleged, were re-routed to the firms allegedly controlled by them. 
Responding to the charges, DHFL issued a statement saying: “This mischievous misadventure by Cobrapost
appears to have been done with a mala fide intent to cause damage to the goodwill and reputation of DHFL
and resulting in erosion in shareholder value. DHFL today (Tuesday) received an email at 8.44 a.m., with a
follow-up reminder one hour later, seeking answers to 64 questions from Cobrapost, many of which were
laced with political innuendos.” 
Following this, the lender banks in February 2019 appointed KPMG to conduct a "special review audit" of
DHFL from April 1, 2015, to December 31, 2018. 
KPMG found diversion of funds in the guise of loans and advances to related and interconnected entities and
individuals of DHFL and its directors. 
A forensic audit conducted by the KPMG observed that “large amounts were disbursed as loans & advances
by the borrower company to a number of interconnected entities and individuals with commonalities to
DHFL Promoter Entities, which were used for the purchase of shares/debentures.” 
The account books showed that 66 entities having commonalities with DHFL promoters were disbursed Rs
29,100 crore against which Rs 29,849 crore remained outstanding. Another major outstanding in DHFL
accounts was Rs 11,909 crore due to loans and advances worth Rs 24,595 crore given to 65 entities. DHFL
and its promoters also disbursed Rs 14,000 crore as project finance but showed the same as retail loans in
their books. 
The arbitrary loan advancement led to the creation of an inflated retail loans portfolio of 1,81,664 false and
non-existent retail loans aggregating Rs 14,095 crore outstanding, UBI said. 
The loans referred to as 'Bandra Books' were maintained in a separate database and subsequently merged
with other large project loans or OLPL. 
The Central Bureau of Investigation unearthed on Wednesday said DHFL had over 1,81,660 ghost retail loan
accounts which had a liability of over Rs 14,000 crores. 
These were kept in a 'separate database' called 'Bandra Books’. 
“The aforesaid retail loans, referred to as ‘Bandra Books’, were maintained in a separate database in Foxpro
Software, against which loans were shown as disbursed by DHFL and were subsequently merged with
OLPL (Other Large Project Loans),” the bank has alleged. 
The OLPL category loans were largely carved out of the non-existing retail loans amounting to Rs 14,000
crore, out of which Rs 11,000 crore was transferred to OLPL loans and Rs 3,018 crore was retained under
the retail portfolio as unsecured retail loans. 
All the tension started to begin for DHFL when the Central Bureau of Investigation (CBI) charged them and
others for duping a sum of Rs 34,615 crores. There are about 17 banks that have been tricked by home loan
provider DHFL. Former CMD Kapil Wadhawan and director Dheeraj Wadhawan are among 13 others who
have been booked in connection with the case.
The not-so-famous media house, 'Cobrapost' were the first one to reveal such shocking evidence against the
DHFL company. They published an article citing the fraudulent activities carried out by the renowned
housing finance company.
They revealed that DHFL has been using the loan money for its benefit by buying personal assets like
properties and lands. However, to gain confidence in the eyes of the public, DHFL filed a response with the
Bombay Stock Exchange stating there is no proper weightage to the allegations raised by the journalist
group and that it was an act of causing damage to the reputation of the company.
42
To make the most out of these 'false claims' DHFL hosted conferences by inviting several investors/analysts
to clarify that the Rs 31,000 crore loan is taken for an upcoming project.
The matters got off-hand when recently the CBI booked former promoters of the DHFL group for
defrauding 17 banks in an amount of Rs 34,615 crore.
DHFL has borrowed a total of Rs 42,000 crore loans from banks like State Bank of India, and Bank of
Baroda and the highest being borrowed from Union Bank of India (UBI), out of which DHFL has not paid a
sum of Rs 36,000 crore. The UBI (Union Bank of India) has asked one of the leading providers of risk,
financial, and corporate governance, KPMG to look into this matter.
They have been accused of syphoning off the money to their other companies or Shell companies to buy
assets at a cost of public sector lenders.
The rating agencies downgraded the rating score on commercial paper after the company defaulted on debt
payments. It was during this time when rating agencies involving ICRA and Crisil demoted DHFL's worth of
Rs 850 crore on commercial paper to 'default' from 'A4' because it had a mortgage lender's deteriorating
liquidity condition.
The Union Bank of India in its complaint has alleged that DHFL had taken Rs 42,871 crore as loans from a
consortium of 17 banks between 2010 and 2018. 
It said the company started defaulting in loan payments from 2019. 
The bank alleged that the promoters along with others siphoned off and misappropriated a significant portion
of the funds by falsifying the books of DHFL and dishonestly defaulted on repayment of the legitimate dues
of the said consortium banks. 
This caused a loss of Rs 34,615 crore to the 17 banks in the consortium. 
The Resolution Plan
DHFL tried to make an impression in front of the investors that they would be repaying them the full
amount. They devised a resolution plan that transformed its debt into equity and moved to the court in the
hopes that it would influence their plan.
Raid by ED
Following the court case, DHFL couldn't remain safe as they were raided by none other than the
Enforcement Directorate itself. The ED made claims that they found several linkages to money laundering.
This money has been used for their advantage, which was intimately associated with the company's
promoters, especially Dheeraj Wadhawan. They also found that this loan money was also linked to the
criminal organisation, Dawood Ibrahim.
Removal of Board of Directors
By this time, DHFL had no longer had power and control and was bankrupted due to which the Central Bank
of India decided to remove its board of supervisors and managers. The decision took place under Section 45-
IE (I) of the Reserve Bank of India Act, 1934.
This created sensational news when the promoter of the DHFL, Kapil Wadhawan was arrested under the
Prevention of Money Laundering Act (PMLA). The ED had found out that his firm was allegedly involved
in providing loans to the criminal association of Dawood Ibrahim.
Recently, the CBI finally booked DHFL and 13 others related to this case for swindling 17 banks of Rs
34,615 crore. They are undergoing investigation by both the CBI and the ED. The ED has stated that Yes
Bank is also involved in this scam.

43
2019
Ipo demat scam
In 2005, Sebi's surveillance system started picking up unusual off-market transfers of shares in huge
quantities. These were shares of companies about to be listed on the stock exchanges.
This evoked the curiosity of the sleuths in Sebi. Usually, an initial public offering (IPO) of equity provides
an opportunity for allottees to make a decent profit and exit. Therefore, someone who gets an allotment in an
IPO either exits on the listing day itself or holds on for the long term.
But, why were these shares changing hands before the price could be discovered? When investigated, a
pattern emerged wherein shares from several hundred demat accounts moved to a handful of accounts, from
where these were offloaded on listing day.
Some market sources said the tip-off actually came from the income tax department, which had randomly
picked up the income tax returns of one of the operators. "Once a return is picked up for scrutiny, it is almost
compulsory for the tax official to find something wrong with it. In this case, it was not very difficult," said a
person familiar with the scam.
The tax official allegedly found capital gains tax being paid on a huge amount of shares. When he looked
into the allotment details of IPOs, the official found that the entity had applied in the retail (individual)
category and had not received any shares in the allotment or received much less than what it paid the capital
gains taxes for. Then, he wrote to Sebi about something fishy he smelt, triggering detailed investigations.
In all, Sebi had investigated and found irregularities in 21 IPOs between 2003 and 2005.
The scam
Roopalben Panchal, who along with her associates operated thousands of bank and demat accounts and
cornered shares meant for retail investors in several IPOs, became the name by which the entire scam came
to be identified. In those days, a photograph was needed to open a savings account, pre-requisite for a demat
account. The Ahmedabad-based operator, who some officials said was the wife of a sub-broker, ran a photo
studio and advertised in local dailies, saying people who got their photographs clicked would get two copies
free of cost. Unsuspecting subjects queued in. Investigators later found that copies of these photographs were
used for opening fictitious bank and demat accounts.
Another mode of sourcing photographs was found in the Parag Jhaveri case, where the photographs were
lifted from a matrimonial site. "It is noted that the font and style of the impression as contained in the photos
attached to the letter and as appearing on Shaadi.com appear to be the same. This indicates the possible
source of the photographs attached to Parag Jhaveri's letter and shows the dubious design of the Jhaveri
group in opening bank accounts in fictitious/benami names, probably without even the knowledge of the
persons whose photographs were abused in such manner," a 2007 order by Sebi's whole-time member G
Anantharaman said.
The first interim order against Panchal and others was passed in the case of YES Bank IPO, which hit the
Street in December 2005. As many as 6,315 fictitious demat accounts were opened for subscribing to YES
Bank shares, of which 6,221 had the same address - "402-403, Shashwat Building, Opposite Gujarat
College, Ahmedabad”. Subsequently, the investigation expanded to 21 IPOs. In 18 cases, Panchal and
associates were involved.
This is how they did it: Panchal and her relatives opened bank accounts in their own names with Bharat
Overseas Bank (BhOB). Using these bank accounts, they manufactured bank introduction letters for
thousands of fictitious names and based on such introduction letters as proof of identity and address,
thousands of demat accounts were opened.
For example, Arjav (Panchal) opened a bank account number 9550 with BhOB in December 2004. They
prepared a list of 1,000 fictitious names, starting with Kunal and ending with Ritu, each having surname
44
'Zala'. They created 15 such lists with the same set of first names but with a different surname and thereby
created 15,000 fictitious identities. They manufactured bank introduction letters, purportedly issued by
BhOB, in favour of each of the 15,000 fictitious names by assigning the bank account number 9550 as a
suffix to every name.
Thus, they opened thousands of accounts with the same address, known as afferent accounts. They paid to
each Depositary Participant (DP) the account maintenance charges (AMC) and transaction charges for many
of these accounts. Separately, they prepared several lists, each with 50 fictitious identities with same
surname in the same order as were in the lists used for opening afferent accounts. Many such lists of 50
persons were purportedly certified by Karvy DP. They opened several bank accounts, each jointly with 50
fictitious persons in a list.
These bank accounts enabled the Panchals to avail finance for IPOs from banks. They also obtained finance
from many other financiers. With the funds procured from various sources, the Panchals engineered
thousands of applications in the retail category over 18 IPOs, according to Sebi orders.
For example, the scamsters were able to corner an allotment of 7.3 million retail category shares through
applications from 27,444 afferent accounts in the IDFC IPO.
In those days, applications up to Rs 50,000 did not require a PAN. "Beyond Rs 50,000, a PAN was required.
But, no registrar would refuse an application for want of PAN. Sometimes, applications would just have the
stapler pins, with no attachment, to give the impression that the PAN copy was originally attached and was
missed in transit," said a registrar employee. This meant there was no way of cross-checking duplicate
applications by frontline staff at the intermediaries.
After the allotment, they also received the consolidated refunds from issuers through the bank and returned
the same to the financiers. They repeated this modus operandi over 18 IPOs.
In the process, they cornered the shares meant for retail in 18 IPOs and made unlawful gains, Sebi found.
The operators did not do it all by themselves. Multiple entities of the Hyderabad-based Karvy group,
including Karvy Stock Broking (broking and depositary participant), Karvy Consultants (financiers) and
Karvy Computershare (registrar and transfer agents) were found to have played a key role in the scam.
"It was also prima facie found that the Karvy group had linkages with the key operators such as Roopal
Panchal, Purushottam Budhwani, Dharmesh Mehta, etc. They have admitted in their written submissions that
certain of them were their IPO sub-brokers. It was prima facie found that KSBL had introduced the bank
accounts of these groups, and facilitated the entire process, starting from making IPO applications for them
after collecting pay orders from the bank, arranging finance for them till collecting and distributing their
refund orders," a Sebi order of 2006 had said.
"Subsequent investigations which covered 21 IPOs that Karvy seemed to be involved in manipulations of
most of them. The subsequent findings, even though they related to transactions which took place prior in
time to the two IPOs covered by earlier orders, showed that Karvy's involvement seemed to be much more
serious than it was originally known," the Sebi order added. An e-mail sent to Karvy through its public
relations agency did not elicit any response.
Penal action and settlement
Action was taken by Sebi against several intermediaries such as the depositories, depositary participants,
registrars and brokers. "The systems of NSDL and CDSL were strengthened to eliminate multiple demat
accounts. The proper Know Your Customer (KYC) framework was put in place. The scam also helped
regulator equip itself better internally in terms of surveillance and investigation capacities," said a former
Sebi official. Some Karvy entities were debarred from operating in the market.
In addition, the Reserve Bank of India passed orders against errant banks. Fines of Rs 5 lakh to Rs 20 lakh
were imposed on BhOB, Citibank, HDFC Bank, ICICI Bank, Indian Overseas Bank, Standard Chartered
45
Bank and Vijaya Bank for violation of anti-money laundering norms. BhOB was eventually merged with
Indian Overseas Bank.
After deciding on the disgorgement, the next big question for Sebi was who would get the compensation. It
was not easy. A formula was worked out by a committee under the chairmanship of ex-judge D P Wadhwa.
It recommended the procedure of identification of persons who were deprived in the said IPOs and the
manner in which reallocation of shares to such persons should take place.
An administrator was appointed to look into the refund process to the eligible investors. The administrator
identified 1,275,000 lakh investors as eligible ones for distribution of a total amount of Rs 92 crore, the
regulator said.
After initial rounds of recovery of amounts from some of the persons directed to be disgorged, in April 2010,
Sebi distributed Rs 23.3 crore. Of these, 799,000 investors were paid the full eligible amount and 476,000
investors who were eligible for a reallocation amount of more than Rs 300 were paid a sum of Rs 300 each,
according to Sebi.
The regulator added the newly conferred recovery powers under the Securities Laws (Amendment) Act,
2014 helped in recovery from more operators. The sums so recovered went into the Tranche-II distribution
initiated by Sebi in December 2015. About Rs 18.06 crore was distributed to 463,000 investors in this phase.
"Keeping in view the cost involved, no distribution was made to 12,000 investors eligible for a reallocation
amount of Rs 30 or less. Of 463,000 investors, 203,000 investors were paid the full eligible amounts and
remaining 260,000 investors, who are eligible for a reallocation amount of more than Rs 500, were paid a
sum of Rs 500 each," the Sebi spokesperson added.

Chapter 2 research methodology

An attempt is made to examine and analyze in-depth the “creative-accounting” scandals, which brings the
limelight to the importance of ‘ethics’ and corporate ‘governance’. The fraud committed is a testament to the
fact that “the science of conduct is swayed in large by human greed, ambition, and hunger for power, money,
fame and glory.” Scandals from India have, time and again proved, that “there is an urgent need for good
conduct based on strong corporate governance, ethics and accounting & auditing standards.” Unlike Enron,
which sank due to ‘agency’ problem, Satyam was brought to its knee due to ‘tunneling’ effect. The Satyam
scandal highlights the importance of securities laws and CG in emerging markets. Indeed, Satyam fraud
“spurred the government of India to tighten the CG norms to prevent recurrence of similar frauds in future.”
Thus, major financial reporting frauds need to be studied for ‘lessons-learned’ and ‘strategies-to-follow’ to
reduce the incidents of such frauds in the future.

Objectives
 The object of this research is to attempt a comprehensive study and systematic analysis of the Indian
Financial Scam.
 To trace the history of financial scams in India
 To understand the definition of scams
 To identify the reasons and impact of scams
 To identify who has involved in scams
 To understand the mind of scammers
 To briefly understand how enquiries and investigations in scams are conducted

46
 To briefly examine the suitability of law to deal with the scams
 To find out the reasons behind the scams
 This study is to focus attention on the underlying economic and administrative factors.
 This is an area which is relatively unexplored. After constructing the profile of the 'scam', an attempt has
been made to analyse the consequences and draw lessons for the future based on the experience.
 To examine some of the major misdemeanours which perpetuated in the financial system from 1950 to
2023 in India.
 Understand the government measures and role of corporate governance.
 To examine the various cases of scams in india and its consequences.
 To understand the definition of bank scams
Scope of the study
The scope of this study is to attempt an objective analysis of the economic and administrative causes for the
irregularities in transactions in securities and discuss how and why these irregularities continued for nearly
seven years (1985 to 1992) without being detected.
In doing so, we have sought to focus our attention on the peak-period of the scam (1950 to 2023). It is
because we have complete details regarding the transactions in finances during the peak period only. For the
rest of the scam period we have only year-wise total value of transactions.
In the light of these facts, our study is focused on the specific causes for the sudden spurt in transactions as
well as the casual connection, if any, between the scam and the economic reforms.
Secondly, we have attempted an analysis of the way in which the scam was handled and what effect it had
on the credibility of the banking system and the capital market.
This study attempts to examine how the scam was handled before and after 1950 and to what extent the
Ministers, Ministries and higher echelons of regulatory authorities were accountable.
Limitation of study
This researcher has undertaken this project with the sole objective of analytically studying the problem of
scams in the Indian scenario.
Focusing upon only on selected case studies of scams in india
The study can also be undertaken on financial scams among public sector, private sector, and foreign banks
in all over the world and a detailed study can be carried out to identify the adoption of technology to prevent
all these issues in scams.

Significance of the study

Research methodology and tools used

There are some of the tools, which are relevant for the study of scams in india
Secondary data: secondary data were collected through magazines, journal articles, government
publications, books, websites and internal records etc.

47
Historical Samples included the study of material from various books, documents, journals, paper
publications, newspaper clippings and other relevant study material, etc. A review of relevant articles
appearing in various books/magazines/documents has also been made.

48
 Chapter 3 literature review

1.
Pathak, Subhadra. (2022). A study on evolution of Corporate Governance in Indian context and its
challenges. International Journal of Management and Development Studies. 11. 16-21. The aim of this
article is to take stock of India's progress in corporate governance. In the age of globalisation and
liberalisation, new technologies have completely altered the character of economic interactions. The
complexity of business transactions and the difficulty of controlling risk grew as a result of the growth of
corporate life cycles. It was partly due to the 1992 stock market scandal by Harshad Mehta that sparked
concerns about corporate governance in India, as well as the current sathyam scam, that the issue of
corporate governance became an issue in the country. Accounting scandals and concerns about the accuracy
of financial reporting necessitated a focus on corporate governance. In a nutshell, corporate governance is
concerned with fostering a culture of equality, openness, and responsibility inside organisations.

2.

Yeager, Matthew & Shelden, Randall & Holden, Alyssa. (2021). The Political Economy of Corporate
Bribery: In 2013, the World Bank suspended financing for the construction of the Padma Multi-Purpose
Bridge in Bangladesh following allegations of massive payoffs from SNC-Lavalin Group (Canada) to
several Bangladeshi officials and politicians. This resulted in the arrest of a major SNC-Lavalin employee in
Switzerland, who pled guilty and co-operated with the Royal Canadian Mounted Police (RCMP) in Canada.
This article examines the intricacies of the corruption allegations against SNC-Lavalin in Canada. There are
suggestions of a toxic corporate culture historically noted by Sutherland (1949, 1983). As well, a criminal
action was commenced against the corporation, which lead to extensive political fallout and a guilty plea.
Both the outcome of this prosecution and its theoretical implications raise important questions about on the
role of structural pressures and “holes” in global capital markets. Here, we invoke Quinney’s (2002) analysis
of capital, Chambliss’ (1994) notion of law and markets, and Merton’s (1957) theory of organizational
strain.

3. Corporate Frauds and Crimes are Stumbling Blocks to Investor's Protection in India: A Review
from Legal Perspective Dr. Pradip Kumar Das

Corporate frauds have posed a serious threat not only to India but to the entire world today. During the past
three decades or so, many giant companies have collapsed like nine pin due to corporate frauds and
corporate corruption all over the world. India is no exception to it. It leads to increase in unemployment,
reduction in the government revenue and economic instability in the national economy etc. Prevention of
corporate frauds and corruption is sine qua non to protect investors interests. Corporate frauds may take
place in various ways like misinformation, manipulation of financial records, concealment of debt,

49
employment of fake employees, fake financial records, and disclosure of price sensitive information etc.
Investors are the heart and the very soul of the security market. Investor's protection influences the real
economy through its effect on the financial market. Investors invest their heard earned money in the
corporate securities. If their confidence is shaken due to corporate frauds, that will have an adverse impact
upon the economy of the country. In India, SEBI is playing an important role to protect investors interests.
Several other regulatory bodies are there to prevent corporate frauds. Various laws and regulations are
playing an important role to protect investors interests. However, the paper will discuss the meaning, extent
and importance of investor's protection in India. It willanalyze the consequences of corporate frauds upon
investors' confidence. The researcherwill also examine the mechanisms to protect the investors' confidence
and preventcorporate frauds.
What is surfacing - as red-faced RBI officials, wrong-footed creditors and slow-moving investigators try and
patch together evidence - is a scam far murkier and larger than the public first imagined. It is quite clear now
that the hardest hit will be simple, small investors like Bhansali's credulous fans in Sujangarh.
Public deposits, debentures, shareholders and subscribers to a CRB mutual fund are the hardest hit, with over
Rs 1,000 crore that is unlikely to be ever recovered in full. This underscores what is wrong with India's
financial regulatory system. And this is just one case being caught out among many just waiting to happen in
a largely unregulated market where deposits worth a mind-boggling Rs 70,000 crore, according to RBI's own
estimates, are totally unsecured.

4.

Ray, Sreekumar. (2014). Insider Trading: A White-Collar Crime and its Impact on Share Market.
Think India. Since inception, the growth of the Indian stock market has been constrained through unethical,
illegal and self-actualized activities of swanky persons involved in different capacities in the market. The
stock market was trying to retrieve itself from the devastating effect of Harshad Mehta share market scam,
when within a gap of ten years it was once again pushed into the darkness of the dungeon by another demon-
child of the country- Ketan Parekh. Corporations have been looted by the insider traders, diversifying
internal information to an external in lieu of cash. Investigations in the majority cases have proved the
involvement of the high ranking officers of the companies in the crime, sophistically referred to as white-
collar crime. It has an adverse impact on the growth and sustainability of the share market. Under the light of
the above issue, this paper endeavors to study the impact of such crime on the share market. It focuses on the
mechanism behind the insider-trading, its impact on the share market and the regulators supervision on the
issue. Finally, suggestions have been provided which will contribute towards the dream of every Indian-a
fraud-free share market focusing towards the overall development of the country.

5. Frauds in Financial Institutions: A Study of Loan Frauds in Indian Banking Industry

Shukla, S. K.; Raghav, Komal ( Jul-Dec2022)
The occurrence of any type of fraud or scam in the financial sector slowdown the functioning of the financial
system, also makes the economy worse. In history of Indian economy, many major scams and frauds cases
can be seen in different sectors which are Jeep Scandal (1948) in import, Bofors Scam (1987) in arms
manufacturing, Harshad Mehta Scams (1992) and Karvy Stock Broking Limited (2019) in stock market, 2G

50
Spectrum Scam (2007) in telecom industry, Commonwealth Games Scam (2010) in sports, Satyam
Computers Scam (2010) in corporate industry, Vijaya Mallya Bank Fraud (2016), Nirav Modi PNB Bank
Fraud (2018) and ABG Shipyard Bank Fraud (2022) in banking sector. These frauds and scams in financial
institutions scupper the stakeholders and general public in India. The current scenario is worse than ever.
Only the financial institutions in India have reported 23.69% higher frauds at 9,103 in 2021-22 as against
7,359 frauds in 2020-21 out of which only advances constituted 42.2% which was almost 97% at Rs.58,328
crore in value terms. This rising trend in loan related frauds in the financial sector is a matter of serious
concern. The reason behind it is Non-Performing Assets (NPA) in banks which is the biggest problem faced
by the Indian banking industry, rising from 7.5% in 2021 to 11.2% in March 2022. Out of total NPAs, only
the corporate loans account for about 70% while retail loans account for only 4% which include home loans,
car loans and personal loans. Most of the frauds are white-collar crimes committed by rich and powerful
people whose loan accounts are declared as NPAs by banks. Many researchers have done work on problems
of the financial system from which Ben Bernanke, Douglas Diamond and Philip Dybvig are awarded by
Nobel Prize in Economics on 11th October, 2022 for doing research work on regulating financial markets
and dealing with financial crises. In this backdrop, a descriptive study is being done by the researcher to
analyse the loan frauds in the Indian banking industry for which data was collected from secondary sources.

6.

Kataria, Aarushi. (2020) the Satyam Accounting Scam: A Case Study of the Satyam Accounting Scam:
Satyam Computers were once the crown jewel of Indian IT industry, but were brought to the ground by its
founders in 2009 as a result of financial crime. The untimely demise of Satyam raised a debate about the role
of CEO in driving a company to the heights of success and its relation with the board members and core
committees. The scam brought to the light the role of corporate governance (CG) in shaping the protocols
related to the working of audit committees and duties of board members. The Satyam scam was a jolt to the
market, especially to Satyam stockholders, which tarnished the reputation of India. An attempt is made in
this paper to examine in-depth and analyze India"s Enron, Satyam Computer"s "accounting" scandal. Unlike
Enron, which sank due to agency problem, Satyam was brought to its knee due to tunneling effect. In public
companies, this type of accounting leading to fraud and investigations are, therefore, launched by the various
governmental oversight agencies. The accounting fraud committed by the founders of Satyam in 2009 is a
testament to the fact that "the science of conduct is swayed in large by human greed, ambition, and hunger
for power, money, fame and glory." Scandals have proved that "there is an urgent need for good conduct
based on strong corporate governance, ethics and accounting & auditing standards." The Satyam scandal
highlights the importance of securities laws and CG in emerging markets. Indeed, Satyam fraud "spurred the
government of India to tighten the CG norms to prevent recurrence of similar frauds in future." Thus, major
financial reporting frauds need to be studied for "lessons-learned" and "strategies-to-follow" to reduce the
incidents of such frauds in the future. The increasing rate of white-collar crimes "demands stiff penalties,
exemplary punishments, and effective enforcement of law with the right spirit."

7. Scam Compliance and the Psychology of Persuasion

David Modic Stephen E. G. Lea (June 21, 2013)

51
Social psychologists have established various psychological mechanisms that influence perception of risk
and compliance in general. The empirical investigation in this paper focused on how those mechanisms
apply to complying with scams. A scale of susceptibility to persuasion was developed, validated and then
applied to the phenomena of scam compliance in two studies. In the first study participants answered
questions on the susceptibility to persuasion scale and a series of questions about lifetime compliance with
14 fraudulent scenarios. The scale was factorised and tested for reliability. Four reliable factors contributed
to susceptibility to persuasion: influence of authority, social influence, self-control and the need for
consistency. The susceptibility to persuasion scale was then used to predict overall lifetime scam
compliance. Social influence, the need for consistency and self-control all had an impact on universal scam
compliance. In the second study an independent sample of participants filled out the susceptibility to
persuasion scale and answered questions measuring scam compliance for the past three years across nine
fraudulent scenarios. The susceptibility to persuasion scale was validated and confirmed. Scam compliance
over the past three years was measured and the results showed that authority, social influence, the need for
consistency and self-control all informed scam compliance over that period.

8. National Stock Exchange of India Sanjay Dhir & Sushil (17 April 2019)

After being part of the financial sector during the 2008 global crisis, Vikram Limaye is not new in handling
crisis and undertook the most challenging project of his career to take the top job at the National Stock
Exchange (NSE). The NSE is one of the leading stock exchanges in India and 11th largest stock exchange in
the world by market capitalization. NSE was founded in 1992 as a demutualized electronic exchange and is
classified as the largest stock exchange in India in terms of daily sales, total sales, and average equity on the
basis of annual reports by SEBI. Limaye took the position of CEO and MD Exchange in July 2017 when his
predecessor Chitra Ramakrishna left the organization a year before her term was to be completed, and
Limaye became the first person to head the exchange from outside the founding party.

9.
Governance at stake: a case of ICICI Bank, India Shilpa Parkhi (June 21, 2021)
Corporate governance determines the allocation of authority and responsibilities by which the business and
affairs of an organisation are carried out by its board and senior management. It plays a far more vital role in
the institutions which handle public funds. Banks perform a crucial role in the economy by intermediating
funds from savers and depositors. The framework of corporate governance deployed in the banks has to be
robust and contextually relevant. Present case of ICICI Bank has challenged the existing framework. The
MD and CEO of ICICI Bank, Ms. Chanda Kochhar, is alleged to be involved in the non-performing asset
deal of Videocon-Nupower without proper disclosure of interest, which resulted in an accusation of
nepotism against her. The paper will analyse in detail this case from the perspective of corporate governance
failure and suggest new dimensions which need to be incorporated.

10.
Pooja GN CMR University (August 26, 2022)
Another fraud has emerged as a result of limited access to the legitimate financial system. Moneylenders
have developed a network of informal banking due to their need for money and lack of banking
52
understanding. Failure to limit the influence of these moneylenders and reduce informal institutions, on the
other hand, gave birth to cunning financial operators who introduced alluring schemes like Ponzi. This is a
dishonest investment scheme that assures investors of great rates of return with no risk. Gaining more
investors is how this plan generates returns. One of these is the Saradha Scam. The collapse of the Ponzi
scheme operated by Saradha Group led to a significant financial and political crisis. The Saradha Group was
established in year 2006. Due to the outrageous profits and reliable investments that Saradha Group offered,
investors were drawn to these Ponzi scams. Along with incentive payments of up to 30% on deposits, agents
also received commendation gifts that helped them climb the large agent pyramid. This fraud is the outcome
of the Group's use of gaming to swindle money. To get around authorities, Saradha Group sought to entice
several businesses. The origins of this fraud may be traced back to the Group's front-line enterprises, which
raised funds from the public by issuing bonds and debentures such secured bonds and preferential
debentures.
11. CHALLENGES AND IRREGULARITIES IN INDIAN BANKING SYSTEM Shivendra Pandey,
Dr. Lakshmi Priya Vinjamuri
Since the liberalisation of the economy in 1991, the Indian banking sector has undergone a dramatic shift
from the primary dominance of public sector banks to the entry of private and foreign banks. Banking in
India has come a long way down the road. Despite the fact that the industry is heavily regulated and
supervised, it still faces a number of ethical and corporate governance issues. The paper is an attempt to
highlight the issues of rising banking frauds and NPAs, with a detailed analysis of the various decided cases
across the banking sector, the loopholes in the system of administration and the pertinent question on how
certain nations offer refuge and security to the fraudsters. The study finally proposes some strategic
suggestion for mitigation of occurrence of frauds in the Indian banking sector

12.
A Review on Kingfisher Airline ‘Prosperity Converted Into Bankruptcy
Gaurav Sharma (May 31, 2019)
The attempts to explore the loopholes in the system which allowed Vijay Malaya who lived a flamboyant
life, was a member of the Rajya Sabha and the chairman of a giant company, to flee from India even when
Kingfisher Airlines was grounded (Kingfisher Airlines founded in 2005 went bust in 2012 and Kingfisher
Red founded in 2009 went bust in 2014), staff was unpaid, and liabilities had mounted to around ` 9000
crore. Airlines was established in 2003 and owned by Bengaluru based United Breweries Group. The air
company started operations in 9 May 2005.It started its international operations on 3 September 2008 by
connecting Bengaluru with London. The case can be used in a business ethics class. It can also be used for
explaining the guidelines used by banks in order to advance loans to businesses, and the effects of not
following the guide lines. The airline had been fronting fiscal issues for many years and the reason cited is
the merger of Air Deccan airlines. Though due to a severe financial crisis faced by the airline at the
beginning of 2012, it has the lowest market share since April 2012.The airline had shut down its operations
when on October 20, 2012 its flying license was suspended by DGCA. This is due to failure to give a proper
response to notice given by DGCA. On 25 October 2012, the staffs decided to return to work. Kingfisher life
cycle span was short term business cycle witnessing various peaks and undersides. On 15 November 2011
the air company released poor financial results, indicating that it was "drowning in high-interest debt and
losing money". Now this study is propose to critically analyse the factors leading to the downfall of this
airlines and the glimpse of its various phases of bailout plans. The case can be used for explaining the
concepts of kingfisher failure.

53
13.
The Punjab National Bank scam: Ethics versus robust processes
Kaushik Dora ,Hanumantu  Vidula, Worlikar Sundaravalli ,Narayanaswami,(03 June 2019) 
With the rising incidents of corporate scams, it has become imperative to lift the corporate veil to unearth the
reasons behind them. As a result, it is of paramount importance to examine the formation of the companies
entering into the contract—the executives, directors, and top management. A large-scale scam hit the Punjab
National Bank (PNB) in India recently with huge implications on its financial position and credibility. It is
inferred through this work that violation of checks and balances led to the huge scam. Following this scam,
several banks have initiated measures to prevent and early detect such manipulative practices. Banks have
incorporated stringent verification of all stakeholders involved in any transaction and do not completely rely
anymore on the Society for Worldwide Interbank Financial Telecommunications system. The Reserve Bank
of India, as the apex governing body of all banking agencies in India, has also started taking measures to
ensure that monitoring and control mechanisms are strong and robust. Finally, we present the way forward to
prevent malpractices in the corporate world and the ethical implications in the society. Although any
organization, especially, a public service organization does not allow any perpetrators into its systems,
loopholes might exist that its internal or external stakeholders take advantage of. While emphasizing the
needs for robust monitoring and audit processes to prevent violation by perpetrators, it is interesting to note
that the same monitoring processes have brought out the scam to open for legal scrutiny, specifically at PNB.
14.
POLITICS OF ETHICS- POOR CORPORATE GOVERNANCE AT PMC BANK
Dr. Lakshmi Mohan (2021)
A bank of repute ran to shame! Banker -politician nexus, lack of corporate governance and slack watchdogs
brought the doom of Punjab and Maharashtra Co-operative Bank (PMC Bank). Rs.11,617 crores as on
31st March 2019 in deposits was no joke, which only showed the trust public had on the bank. Unfortunately,
it could be termed a multi crore loot where the bank lent Rs.6200 crores as loans to just one client, a real
estate firm named Housing Development and Infrastructure Limited (HDIL), which ironically was already
facing bankruptcy proceedings.

15.
DHFL Scam and the Entire Rigmarole
ADITI SHOBHA AND DIKSHA KUMARI
International Journal of Law Management & Humanities
Dewan Housing Finance Corporation Ltd. (DHFL) is a non-banking financial company (NBFC) which
grants house loans to the middle- lower income class families who wants to achieve home-ownership
aspirations in semi-urban and rural India. Unlike banks, NBFCs are the companies established under
Companies Act, 2013 having the primary and principal business of receiving deposits and with the use of
such deposits, the endowment of loans to the needy suits possible. DHFL was incorporated in the year 1984
in the state of Maharashtra by Rajesh Kumar Wadhwan. In the year 2019, Cobrapost popped up as a
whistleblower and alleged the financial company to be indulged in illegal activities which incorporates the
transferring of depositor's money to shell companies and further round tripping of those amounts for
company's own illicit and mala fide profits.
16. Dematerialization and the IPO Scam Sidhartha Mohapatra (April 15, 2009)

54
Gone are the traditional days when the share certificates which are kept in the physical form pose a threat to
the holders. In this era of globalisation, the process of dematerialisation has been used as a boon for those
who want to invest and earn money. With the simplicity of procedure, the people will now be able to access
the stock market and invest in shares at any place they want with the use of the DEMAT account.
But with this also the greedy investors always pose a threat to the emerging companies. The inefficiency of
the Bank in keeping consonance with the KYC norms have led to various scams in the country. Now it is the
role of SEBI in the capital market world which needs to be more strengthened as the capital market do
constitute an important element in affecting the Country's economy.
17. A Study on Corporate Governance Practices and Role of Board of Directors in Indian Firm’s 1 Ch.
Sudipta Kishore Nanda
Rajdhani Corporate Governance is the set of processes, customs, policies, laws and institutions affecting the
way a corporation is directed or controlled. Corporate Governance also includes the relationships among the
many participants involved and goal for which the corporation is governed. In this regard, corporate
governance has succeeded in attracting a good deal of public interest because of its importance for the
economic health of corporations and society in general. However the concept of corporate governance has
been considerable interest in the corporate governance practices of modern corporations, particularly the
high profile collapses of firms such as Satyam, Enron Corporation etc. The question of corporate governance
in India has come mainly in the wake of economic liberalization, deregulation of industry and business as
also the demand for a new corporate ethos and stricter compliance with the legislation. The new economic
policies adopted by the Government of India since 1991 has necessitated the demand for introduction and
implementation of a proper corporate governance policy in management of companies not only in the
interests of their stakeholders but also for the overall development of the country. India also experienced
some financial scandals during 1950s (LIC), eighties and nineties and post 2001 period such as the
Mundhras scam involving (LIC ‐ 1957), Raj Sethia’s scandal involving the Punjab National Bank ( PNB) in
early 1985, Harshad Mehta’s mega scandal involving UTI, SBI and other institutions in 1992. Unit Trust of
India’s two episodes during its then chairman Mr.Pherwani’s period and again in 2001, when Mr
Subramanium was chairman, Ketan Parekh’s fraud involving Bank of India and Gujarat Cooperation Bank
in 2001, Telgi’s Stamp Paper Scam, Global Trust Bank’s Scam in early 2004, Satyam Scam by Promoter
chairman Mr Ramalingam Raju in 2009. Now a day, the lack of trusteeship, transparency, empowerment,
accountability and control led to the ultimate corruption in the management and mismanagement in the
affairs of many Indian companies. Honesty, ethics, transparency, trust integrity, openness, performance
orientation, responsibility and accountability, mutual response and commitment to the organigations are the
key elements of good corporate governance. The objective of this paper is how directors, role of Independent
directors and management develop a model of good governance that aligns the value of the corporate
participants and evaluate the corporate governance model by taking performance periodically for its
effectiveness and value enhancement.  
18. An Analysis of Financial Fraud through PNB Bank Scam and its technical Implications
Gurinder Singh; Shalini Srivastav; Anubhuti Gupta; Vikas Garg
The government is looking forward for the betterment of banks and coming out with various new schemes,
the PNB scam came as a huge blow to the entire banking sector and brought almost everything on a stand
still. This 11,700-crore scam involved more than four banks which is a big question mark on the financial
safety of banks. This scam was almost five years old and was not detected by anyone. Therefore, there are
serious questions on the internal operations and auditing processes of the bank and also a the main regulatory
body RBI is also under serious mode of self-check. This case study aims to identify and analyze the major
factors that led to this huge scam and also tries to detect the involvement of various businessmen who has
created an impact on the economy as a whole.

55
19. Chandan Mitra (1999) , discussed the history of corruption in the subcontinent, from the times of
Kautilya to the Mughal era, the East India Company days and post-Independence India, discussing how
dissatisfaction has become institutionalized .He delves into detail, the alleged Bofors kickbacks, the fodder
and Bank securities scam and ‘hawala’ Money laundering. Connecting these to covert government practices
of using corruption as an instrument of State policy. And describing the proliferation and legitimization of
pretty corruption in everyday life, he presents an enthralling account of the blatant ‘hafta’, ‘chai-pani’, ‘cut’
and ‘black ‘system of bribery that are prevalent today.
20. M. Michelle Gallant (2005), discussed the upcoming assault on criminal finances, a dramatic
transformation is taking place. Increasingly states are choosing to implement their assault through civil
proceedings. Rather than rely on traditional criminal legal processes, states are relying on civil proceedings.
This revolution fuses crime control policy and civil legal processes. This work critically examines this
fusion. Some investigates this transformation from the prospective of criminal law. This work broadens the
inquiry.
21. Janet Ulph (2006), focused on the lack of liberty is no longer considered effective in preventing crime
and punishing offenders. The money laundering legislation can be seen as a wider initiative by the
Government to eliminate all incentives to commit unlawful activity.
22.Rajkumar S. Adukia (2007) ,analyzed the application of the prevention of money laundering and the
Indian Initiative in money laundering, Record Keeping and Reporting, Identity of Clients, Notification and
Guidelines issued by various authorities, International Organizations involved in the fight against Money
Laundering and Anti money laundering Authorities.

2. CHAPTER
DATA ANAYLSIS AND
INTERPRETATION: -
Case study
a) Harshad Mehta’s Securities
scam
b) Ketan Parekh Scam – The
crash that shook the nation
56
c) Roopal Ben Panchal –
Benami Demat accounts scam
d) Satyam Computers – An
accounting scam
e) CRB Scam – Scam of
Dummy Companies
f) Dinesh Dalmia – Fake share
scam
g) Dinesh Singhania scam
h) Vanishing Companies
Scandal
SEBI’s role after scam
Some Fraudulent Methods
Used in the Stock Market
2. CHAPTER
57
 DATA ANAYLSIS AND
INTERPRETATION: -
Case study
a) Harshad Mehta’s Securities
scam
b) Ketan Parekh Scam – The
crash that shook the nation
c) Roopal Ben Panchal –
Benami Demat accounts scam
d) Satyam Computers – An
accounting scam
e) CRB Scam – Scam of
Dummy Companies
f) Dinesh Dalmia – Fake share
scam
58
g) Dinesh Singhania scam
h) Vanishing Companies
Scandal
SEBI’s role after scam
Some Fraudulent Methods
Used in the Stock Market
INDEX
1. CHAPTER
INTRODUCTION
HISTORY OF STOCK
EXCHANGES
HISTORY OF INDIAN
STOCK EXCHANGES

59
MEANING OF STOCK
EXCHANGE
DEFINITION OF STOCK
EXCHANGE
CLASSIFICATION OF
STOCK MARKETS AND
SECURITIES
2. CHAPTER
DATA ANAYLSIS AND
INTERPRETATION: -
Case study
a) Harshad Mehta’s Securities
scam
b) Ketan Parekh Scam – The
crash that shook the nation
60
c) Roopal Ben Panchal –
Benami Demat accounts scam
d) Satyam Computers – An
accounting scam
e) CRB Scam – Scam of
Dummy Companies
f) Dinesh Dalmia – Fake share
scam
g) Dinesh Singhania scam
h) Vanishing Companies
Scandal
SEBI’s role after scam
Some Fraudulent Methods
Used in the Stock Markets

61
INDEX
1. CHAPTER
INTRODUCTION
HISTORY OF STOCK
EXCHANGES
HISTORY OF INDIAN
STOCK EXCHANGES
MEANING OF STOCK
EXCHANGE
DEFINITION OF STOCK
EXCHANGE
CLASSIFICATION OF
STOCK MARKETS AND
SECURITIES
62
 2. CHAPTER
DATA ANAYLSIS AND
INTERPRETATION: -
Case study
a) Harshad Mehta’s Securities
scam
b) Ketan Parekh Scam – The
crash that shook the nation
c) Roopal Ben Panchal –
Benami Demat accounts scam
d) Satyam Computers – An
accounting scam
e) CRB Scam – Scam of
Dummy Companies

63
f) Dinesh Dalmia – Fake share
scam
g) Dinesh Singhania scam
h) Vanishing Companies
Scandal
SEBI’s role after scam
Some Fraudulent Methods
Used in the Stock Markets

64
65