Ahead of Budget 2019 which flags off of the 5 trillion-dollar economy promise, we look back at 7 scams in the last decade that hurt the economy of the country and every individual.
India is aiming towards achieving a 5 trillion-dollar economy by 2024. Investors around the world are showing great interest in the rapidly growing economy. Still, the country’s very own citizens are sometimes afraid of investing their money in the stock market.
The major reason is the news of frauds and scams they hear on a regular basis involving thousands of crores. In response to an RTI filing, Reserve Bank of India revealed over 50,000 frauds worth ₹ 2.05 trillion hit Indian banks in the last 11 years, and these numbers are the tip of the iceberg because a large number of frauds go unreported and the financial sector doesn’t consist of just banks.
For a better understanding of how these “alleged” real-life thugs fool the authority and people, let us look at the top 7 major corporate scams in the past 10 years that rattled the trust of Indian investors in the investment market.
Top 7 major corporate scams in the past 10 years that rattled the trust of Indian investors in the investment market.
Value: ₹ 91,000 crore
The scam came into limelight when Sucheta Dalal wrote about the IL&FS crisis in her news article. The Infrastructure Leasing & Financial Services Limited is currently under an unprecedented ₹ 91,000 crore debt. The government has sacked the top officials and appointed new directors led by Uday Kotak, Kotak Mahindra Bank’s MD and CEO.
The SFIO has decided to go to NCLT for banning the auditors accused of forging the statements and give false credit ratings and also demanded a 5-year ban on Deloitte Haskins & Sells and BSR Associates, the auditors of IL&FS.
The matter is currently under investigations. Ravi Parthasarathy, former chairman of IL&FS, Ramesh Bawa, former MD and CEO of IFIN, Udaya Sen, Former CEO of Deloitte, Hari Sankaran, former vice-chairman, Kapesh J Mehta, statutory auditor of IFIN and C Sivasankaran, Chennai-based entrepreneur are the main accused in the multi-billion scam.
NSE colocation scam
Value: ₹ 52,000 crore
The National Stock Exchange was involved in a huge scam over the allocation of colocation server. The top officials were involved in giving an unfair benefit to some brokers by giving them access to the backup server.
OPG Securities, GKN Securities and Way2Wealth were the brokerage firms found the culprit of gaining an unfair advantage and were served with a 6-month ban from the court.
NSE top officials including former CEO Chitra Ramakrishnan, MD Ravi Narain, Deviprasad Singh, the former head of colo department, Ravi Varanasi, one of the business developments head, Umesh Jain, CTO etc, were said to be involved in the scam.
Value: ₹ 40,000 crore
The Bengal’s famous Saradha Chit Fund scam came into limelight in 2013 when the founder Sudipto Sen fled writing a letter naming many politicians from Bengal. The Saradha Group used to take money from common people with a promise of 15-40% return. SEBI raised its flag in 2009 over violating its norms of taking investment from the public.
The Saradha Group than countered SEBI’s move by opening 239 companies with a complex structure and showing its main source of income from chit funds, which was regulated by the State government.
The SEBI ordered Saradha Group to return the money of investors in 2012 by proving the group’s function comes under SEBI guidelines. In 2013 when the cash inflow of the group was lower than its outflow, the Poonji scheme collapsed and investors and agents lodged hundreds of complaints with the Bidhannagar Police.
Sen was arrested along with his associate Debjani Mukherjee in Sonmarg on April 20, 2013. The case was handed over to CBI and currently under investigation. Many big names including the leaders of TMC and IPS officer Rajeev Kumar is under the scope of the investigation.
Adani & Reliance Coal invoice scam
Value: ₹ 29,000 crore
40 companies including Adani and Anil Dhirubhai Ambani’s Reliance are facing allegations of over-invoicing of imports of coal and power generating equipment through tax havens and siphoned thousands of crores.
The case has been accepted by Supreme Court of India and DRI is facing a number of challenges in this herculean scam. Such as despite substantial evidence, Central Board of Indirect Taxes and Customs, an adjudicating tribunal under the Department of Revenue of Finance Ministry, had ruled in favour of the companies halting the investigation of the DRI.
Several times in the last two years had ruled in favour of the companies halting the investigation of the DRI.
Value: ₹ 24,000 crore
Two subsidiary companies of Sahara, SHICL and SIRECL raised OFCD of ₹ 24000 crore from 2 to 2.5 crore investors, without taking permission from SEBI. Legally this process of issuing OFCD should be completed in 6 weeks, but SHICL and SIRECL kept on issuing OFCD for more than 2 years.
Supreme Court ordered Sahara to return the money of investors to SEBI, with their details. Sahara sent 127 trucks, out of which few were rejected by SEBI over deadline.
The details of investors sent by Sahara was again suspicious and incomplete which led to the Supreme Court ordering investigation of money laundering and freezing of Sahara’s assets. on 28th Feb 2014, Subroto Roy and two other directors of Sahara were arrested. In Nov 2017, ED that is Enforcement Directorate filed the case of Money Laundering on Sahara Group.
Tamil Nadu Granite Scam
Value: ₹ 16,000 crore
It was on the 19th of May 2012 when the former district collector of Madurai, U. Sagayam wrote a letter to The Principal Secretary of the State Industrial department informing him about how farmers and other rural people were deprived of their livelihood and also how the officials of the Departments of Revenue and Geology and Mining along with the granite companies continued their loot.
In the investigation, it was found that most of the granite quarries have affected agriculture and grazing areas for cattle by the means of encroachment upon water bodies.
Many government officials were suspended and according to NDTV’s report “A company that pays the government eighty lakhs literally transports eighty crore worth of granite totally unaccounted for or much more than what they have been permitted to mine”.
Gitanjali Gems Scam
Value: ₹ 13,400
The highlight for the year 2018 was ₹ 13,400 crore scam by fugitive diamond dealer Nirav Modi and his maternal uncle Mehul Choksi. They colluded with the top officials of PNB’s Brady House Branch, these officials provided LoU for buyer’s credit without any collateral from their company.
This process of mocking the banking system of PNB went on for 7 years and was finally unravelled by new assistant manager at Brady House. Currently, the government is trying to bring both the key players Nirav-Mehul back to India.
Nirav Modi is currently in London Jail waiting for extradition and Mehul Choksi is now a citizen of Antigua using the citizenship as a shield against the inevitable extradition.
How it impacts India?
You might be thinking these scams and frauds don’t affect you, but they do. In the case of The Saradha Group, its main investors were poor and lower-middle-class population. A huge number of people lost their life saving and were left with no hope of getting their money back.
For another corporate scam, like the IL&FS scam, the money invested in mutual funds are again invested in these companies to diversify their profile. And for such a heavyweight company to go bankrupt will make a huge dent in our economy which may take years to recover.
The majority of investors in The Saradha Chit Fund Scam were the poor and lower-middle class families.
Government and the concerned governing bodies are trying to book these culprits and force them to return the money to the investors. But again, the loopholes in the policies and laws have aided them always and they may complete their sentence behind the bars but the hope of recovering the full amount for investors is in itself a fallacy.