The scam came to light when a shortfall in government securities was reported by State Bank of India, and as a result, the markets crashed by 72 percent and it lasted for two years.
Five people, including senior bank officials, were convicted by a special court in connection to the 1992 securities scam on Thursday.
The convicted have been identified as R Lakshminarayanan and S Srinivasan of Financial Fairgrowth Services Limited (FFSL), and Tharian Chacko, Y Sundara Babu and R Kalyana Raman of Andhra Bank Financial Services Ltd (ABFSL), a subsidiary of Andhra Bank.
Stock prices were manipulated by using receipts of public sector banks by Harshad Mehta – a stockbroker, well known for his wealth.
Around Rs 1,000 crore was laundered from the banking system and pumped into the stock market, which achieved new highs.
The scam came to light when a shortfall in government securities was reported by State Bank of India. Following the investigation, the markets crashed by 72% and it lasted for two years.
Mehta again created headlines following his jail sentence, when he claimed that he gave the then prime minister PV Narasimha Rao a donation of Rs 1 crore to set him free.
Mehta later died in jail after a cardiac arrest on 31 December, 2001.
Lakshminarayanan and Srinivasan, executive director and senior vice-president respectively of FFSL at that time, were sentenced for up to three years, while the officials of ABFSL were sentenced to four years.
According to the prosecutor, FFSL, a private firm, was facing an acute cash crunch and was in need for additional funds and thus began to borrow from ABFSL and other banks.
The transactions were made against credible securities and stocks of the FFSL and illegal security receipts were issued by ABFSL officials.
The court, however, acquitted Gopal Shankar Iyer and P Chandrashekhar, two other officials of FFSL, and share broker Pallav Seth.
The plea for leniency pressed by the convicts were also rejected by the court. The appeal was made on the grounds of the long trial, their old age, and on the argument that there was no personal gain.
Justice Shalini Phansalkar Joshi said, as reported by PTI, “Considering the serious nature of the offence and the repercussions it had on the nation's economy, taking a lenient view can have a counter-effect. An appropriate message needs to be sent out to the society.”
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