10 Biggest Scams in India – Largest Financial Frauds

Since its independence, India has seen many scams to date. These scams have damaged the economic roots of our country and we have lost more money than we could ever imagine.

The money we have lost in these scams if used for the development of our country could really make our country better. The money lost is still unrecovered and the con men are unrestrained.

The number of exposed scams is much less than the number of scams happening in the nation. The authorities are busy playing a blame game rather than taking action.

Unfortunately, India ranks in the top 5 on the global fraud list. And if the scams continue to happen then India will be in the first position.

Here are the Top 10 Biggest Scams in India ever happened:

10. Harshad Mehta Scam:

Harshad Mehta scam, biggest scams in India

Amount: ₹ 5,000 Crore

Happened in: 1992

Involved person: Harshad Mehta

Background: Harshad Mehta Scam also known as the 1992 Stock Market Scam is one of the biggest and highlighted scams in Indian history. BSE is one of the oldest stock exchanges in the world.

Harshad Mehta was an intelligent broker in BSE (Bombay Stock Exchange). He was a fast learner and grew drastically in that field. He then became aware of the loopholes in the banking system and took advantage of them.

He became famous by the name ‘Big Bull’ of the BSE and was a well-known personality. He was enjoying a lavish life. He was the biggest tax-payer of that time, paying Rs. 26 crores in advance.

Decoding the scam in simple words. Back then Banks were not allowed to trade in equity markets. Mehta promised banks higher returns and asked banks to transfer money to his personal account. He then used that money to manipulate stock prices and return the principal amount to the banks keeping the profits.

During his time the stock market experienced four-times growth. He took ACC cement stock price from Rs. 200 to Rs. 9000 in just three months. He also urged big investors to invest in his stocks. He became the X-factor of BSE.

How it got exposed: In the second quarter of 1992, SBI reported the shortfall of government securities, and thus the investigation began. After investigation RBI told that Mehta has manipulated Rs. 3,500 core in the system. Reporter Sucheta Dalal had written a column in the Times of India exposing the scandal on 23 April 1992.

After the exposure of the scam, the stock market crashed by 72% and the bearish phase lasted for 2 years.

Action Taken: Harshad Mehta was arrested by Mumbai Police on 9th November 1992. He was charged with 72 criminal offenses and 600 civil actions. The committee has collected Rs. 2,195 crore by selling Mehta’s assets and properties. It still remains one of the biggest scams in India.

9. Vijay Mallya Scam:

Vijay Mallya Scam, largest financial frauds

Amount: ₹ 9,000 Crore

Happened in: 2013 – 2016

Involved person: Vijay Mallya

Background: Famously known as ‘King of Good Times’ Vijay Mallya is a businessman and former Parliament member. He was the chairman of United Sprites which is the biggest spirits company in India founded by his father.

He is chairman of United Breweries Holdings Limited (UBHL) which is in the market of beer, aviation, real estate, etc. UB Group was mainly marketing its highest-selling beer under the brand name ‘Kingfisher’. They also had other ventures but were not as successful as beer.

After the death of his father in 1983 Vijay became the chairman of UBHL and expanded this business to a new level. Only in 1 year, he showed 64% growth in the turnover. His advertising and marketing campaigns helped him to grow his business rapidly.

During his chairmanship, he acquired many other companies like Berger Paints. He is also a former owner of Royal Challengers Bangalore an IPL team. In order to expand his business, he started Kingfisher Airlines in 2003.

What went wrong: Back then aviation business in India was not profitable, then also Mallya started Kingfisher Airlines. His advisors tried to stop him but he did not listen.

Initially, Kingfisher Airlines was operating smoothly and soon became the No.1 domestic airline. But, as promised Kingfisher was providing more value and services to customers than their pocket could handle. It hired many air hostesses and tried to provide luxury to its customers.

Due to some reasons, the Government banned Kingfisher Airlines from taking international flights. So, Mallya acquired already in loss airline named Deccan Air. To fund this business Mallya sold other ventures of UBHL.

But, the increasing fuel prices, high operational costs, and close to no profits hampered the growth of airlines. So, in order to keep running this business, he took a loan of Rs. 9000 Crore from 17 banks.

The business was in huge debt and Kingfisher Airline was not able to even pay the salaries of workers. Hence, it was shut down in 2012.

Action taken: Vijay Mallya left India on March 2, 2016, committing one of the biggest frauds in India. He offered banks a settlement of Rs. 4000 Crore as a principal amount. But, banks demanded Rs. 4,900 Crores with interest.

Mallya faces charges of cheating, criminal conspiracy, money laundering, and diversion of loan funds.

The Debt Recovery Tribunal (DRT) has recovered Rs. 5,800 Crores by selling UB Group shares holdings of Mallya.

8. Punjab National Bank Scam:

Nirav Modi scam, 10 largest scams in India

Amount: ₹ 11,356.84 Crore

Happened in: 2018

Involved person: Nirav Modi, Mehul Choksi.

Background: Nirav Modi the man behind one of the biggest frauds in India was a renowned diamond businessman. He is charged with allegations of money laundering, cheating, and fraud.

Nirav Modi’s family was in the diamond business for generations. When he was 19 his father came to India to join his uncle’s diamond retail business named Gitanjali Group which has 4,000 stores across India.

When Nirav shifted to India in 1989 he studied the trading business and founded Firestar in 1999 a diamond sourcing and trading company. He then began to produce contract-based diamond jewelry.

He opened several jewelry stores in India under his name. He became one of the finest jewelry designers. His “Golconda Lotus Necklace” studded with 12-carat pear-shaped diamond in the center glittered in the eyes of everyone.

His two necklaces were auctioned in a Hong Kong auction. He was on the Forbes List of Indian Billionaires in 2013.

How he scammed PNB: Nirav Modi and his uncle Mehul Choksi with the help of two corrupt PNB employees issued an LOU (Letter of Undertaking) from the branch of PNB Mumbai to make payments to firms related to Modi and Choksi. The LOU enables clients to raise funds on short-term credits by holding some securities.

Employees used the SWIFT system to transmit messages to Allahabad Bank and Axis Bank for funds. While it was all done using SWIFT passwords the transactions were never recorded on the core PNB system.

The scam came to light in 2018 when PNB lodged FIR with CBI stating the fraudulent of LOUs worth Rs. 280 Crores. The scam is now of Rs. 14,000 Crores.

Action Taken: Nirav Modi and Mehul Choksi fled to the UK. He is arrested by UK authorities.

Till now Rs. 500 Crore is recovered by selling properties and firms of Nirav Modi.

7. Satyam Scam

Satyam scam, biggest scams in India

Amount: ₹ 14,000 Crore

Happened in: 2009

Involved persons: Ramalinga Raju and his brothers with the internal management of Satyam Computer Services.

Background: Satyam Scam is still the biggest corporate fraud in India. The scam is Rs. 14,000 Crore big pulled by the founder of Satyam Computer Services.

Satyam Computer Services was founded by Ramalinga Raju and his brother in 1987. He also served as Chairman and CEO of his company.

Satyam Computers was providing IT and BPO services. Within a few years of its establishment, Satyam Computers was a successful company handling over 500 clients. The company’s growth was skyrocketing.

The company hired 50,000 employees and was operating in 60+ countries. Soon it became so big to give tough competition to its rivals like TCS, Wipro, and Infosys. It became the fourth largest IT Software exporter.

Being successful from the beginning, the company got listed and opted for IPO in BSE in 1991. The company was good at maintaining financial records which helped it to get a 300% growth in its stock prices.

What went wrong: The scam started in 1991 when Raju inflated the quarterly profits of his company to increase the stock prices. Using his personal computer he inflated the balance sheets and boosted the share prices of Satyam Computer Services. He then sell shares at high prices and kept only limited shares to be a part of his company making huge profits.

This was not enough for him so he created records of fake employees and collected salaries on their behalf. He was collecting $3 Million every month as fake employee salaries.

But why he was doing so? Although Raju was the owner of IT firm he was getting interested in Real Estate. He was aware of booming real estate and wanted to make a profit from it.

Raju also knew the plan for the Metro route to be built in Hyderabad. So he invested all his money in real estate.

How it got exposed: Along with all other sectors real estate was also impacted by the 2008 recession. The property market collapsed making a huge loss for Raju. And then the whistleblowers began to be heard.

PriceWaterhouseCoopers(PwC) an external investigating company is equally responsible for this scam. The auditor helped Raju to hide the fake bills.

Hence, in 2009 Raju resigned and confessed that he had manipulated the accounts of Rs. 7000 Crores giving shock to the whole world.

Action Taken: Raju was arrested and charged with criminal conspiracy, breach of trust, and forgery. The share prices fell drastically. CBI also acquired fake employee records and land purchasing bills.

Raju, his 2 brothers with 7 others were sentenced to 7 years in prison.

6. Telgi Scam

Telgi Scam

Amount: ₹ 20,000 Crore

Happened in: 2001

Involved person: Abdul Karim Telgi

Background: Another one of the biggest scams in India is the Abdul Karim Telgi’s Stamp papers scam. It is the largest fraud of counterfeit stamp papers.

Abdul Karim Telgi was born in Belgaum, Karnataka in 1961. His father was an India railways employee who died when Telgi was just a child. Telgi completed his schooling by selling vegetables, fruits, and peanuts to passengers on trains.

He then shifted to Mumbai in search of a job and went to Saudi Arabia. Eventually, after losing his job in Saudi Arabia he returned to Mumbai after seven years. He then started his own company exporting workers to Saudi Arabia by creating fake passports and documents.

But he was arrested for duplicity of documents. In jail, he met his partner in crime Ram Ratan Soni, a government stamp vendor from Kolkata. This duo using their connections started selling fake stamp papers. Telgi got a license of being a legal stamp vendor.

He appointed 300 agents to supply fake stamp papers to bulk buyers like banks, insurance companies, and stock exchanges. In 1995, Telgi and Soni were parted and Telgi was arrested and got canceled his license. Then he decided to start his own press of stamp papers. He used to mix fake and real papers and sell them on high margins.

Telgi was successfully running this scandal with the help of corrupt police officers and government employees. He was living his life King size. It is said that once Telgi showered Rs. 90 Lakh in the bar in one night.

How it got exposed: The scam was uncovered when the Bengaluru police arrested two men hawking fake stamp papers. This loose end led to Telgi and his scandal being exposed.

Telgi was arrested in 2001. His case was taken by CBI and reports say Telgi had 100 bank accounts in 18 banks and 36 properties across the nation. The scam was Rs. 20,000 Crore big.

Action Taken: Telgi along with his associates was arrested in 2006 and was sentenced to 30 years of rigorous imprisonment. In October 2017, Telgi died due to multiple organ failure at age 56.

5. ABG Shipyard Scam:

ABG Shipyard Scam, biggest bank fraud in India

Amount: ₹ 22,842 Crore

Happened in: 2012 – 2017

Involved persons: Unknown

Background: ABG shipyard is the most recent and biggest bank fraud in India. The scam is Rs. 22,842 big and the mind behind it has yet not been found.

ABG shipyard is one of the biggest shipbuilding companies in India founded in 1985 in Surat, Gujarat. It offered services like ship designing, building, and ship repairing.

It was a profitable and successful growing company. It is one of the largest private shipbuilding companies in India. It was capable of building vessels of 20 tonnes in weight. ABG built more than 145 vessels in the last 16 years. It also exported 46 vessels in the international market.

It is the second corporate shipyard that received the license to build warships and other water vessels for the Indian Navy. It received awards and titles for its accomplishments.

What went wrong: The sinking ABG Shipyard Corporation is accused of drowning money from 28 banks.

The recession of 2008 hit the ABG corporation and it affected the company’s profits. As the company wasn’t getting orders for commercial vessels, the funds dried and its account became NPA in 2013.

According to the reports ABG Shipyard took loans from 28 different banks and the cash was diverted to overseas parties. It also provided funds to its other subsidiaries in other countries. The funds were also used to purchase properties.

As the account went out of cash the company was unable to pay the installments. The account became NPA in 2013 but several efforts were made to revive the company but failed eventually.

How it got exposed: Due to constantly delaying to pay the installments the banks became aware. In November 2019, SBI filed a case with CBI against ABG Shipyard Corporation.

Action Taken: CBI has booked the former chairman and managing director Rishi Agarwal along with other committee members of this company. They are accused of defrauding, money laundering, etc.

4. Ketan Parekh Scam:

Ketan Parekh Scam, biggest stock market scam

Amount: ₹ 30,000+ Crore

Happened in: 1998 – 2001

Involved persons: Ketan Parekh

Background: Another famous and one of the biggest scams in India from the list of Stock market scams is the 2001 Ketan Parekh Scam.

Ketan Parekh an intern of Harshad Mehta was a professional CA who started working in NH Securities an institutional brokerage firm started by his father.

Later he became familiar with Harshad Mehta and started working in his GrowMore Investments. As he was thoroughly involved in the functionality of the stock market, he learned deeply about the market.

Before the 2001 scam, he was also involved in the Canbank Mutual Fund Scam of 1992.

There was 10 favorite stock of Ketan which were known as ‘K-10 Stocks‘. He was manipulating the prices of these stocks using inappropriate ways.

During his peak time, Ketan became one of the most demanding personalities. He started a startup investing company with an Australian media entrepreneur Kerry Packer. He was enjoying his life to the fullest. His connections with Bollywood, politicians, and businessmen were highlighted.

How did the scam happen: As Ketan was the center point of the Stock Market. Marketmen were trusting him and blindly following his leads.

There were two types of investors in K-10 stocks – company promoters and banks. Ketan used funds from the investors to invest in the shares and raise the price of shares. He then sold those shares grabbing high profits.

Ketan was taking funds from the banks to manipulate the prices. As the stock prices went up he was taking loans against that shares and reinvesting them in the shares.

Ketan was good at convincing and trapping institutional investors as they invested in huge amounts. He wanted the media to highlight his stocks so they remain in the limelight which would attract more investors.

He took shares of ZEE telefilms from Rs. 127 to Rs. 11,000 in just three months. And rose the price of many shares in a similar way.

How it got exposed: The price of Technology stocks was dropping in 2001. Investors started to sell K-10 stocks as they were overvalued. The bull market was oppressing K-10 stocks.

To manipulate stocks he formed a network of 20 – 25 companies. The funds and profits were transmitted to these companies and invested in the market through them.

As the big investors were exiting and many short sellers were selling K-10 stocks, he faced big losses. He was unable to maintain the prices and fight for a long time.

After the complaint filed by the Bank of India for Rs. 137 Crores with the CBI, the scam was uncovered.

3. Commonwealth Games Scam:

Commonwealth Games Scam, biggest sports scam in India

Amount: ₹ 70,000 Crore

Happened in: 2010

Involved person: Suresh Kalmadi

Background: Commonwealth Games scam which happened in 2010 was one of the biggest frauds that happened in the sports domain ever. And it is the third biggest scam that happened in India.

Commonwealth is an international-level sporting event that is conducted every four years. It is the third biggest sporting event after the Olympics and the Asian Games.

In 2010, Commonwealth was conducted in New Delhi. India was voted against Canada and was decided as the host for 12 days Commonwealth games. It was a remarkable event that was going to take place in India, it was representing India at the international level.

‘Game Village’ was also constructed to represent the event.

Initially, the budget for the CWG was around Rs. 1,000 Cr but it was revised to 2,460 Cr.

How did the scam happen: The total fund for the event was Rs. 1,000 Cr but according to the committee the expenditure went up to Rs. 2460 Cr, but the actual cost of the event went up to Rs. 70,000 Cr.

It included the renovation of stadiums, construction of bridges and flyovers, street-scaping, road signages, etc. Nearly Rs. 3,000 crores were spent on the construction of the metro.

According to the committee Rs. 18,000 crores were spent on bus service for that government purchased a new bus for Rs. 60 lakhs whose actual cost was 40 lakhs. The same was with the metro connectivity and the opening ceremony. The committee showed higher expenses than the actual.

Committee also gave contracts to the companies who offered higher prices but didn’t provide the services accordingly.

The Chairman of the organizing committee of the Games gave the contract to Swiss Timings for the timing equipment for Rs. 141 Crore whose actual price was half of it.

The allocated fund was never used for the betterment of the event. According to the reports only half of the amount allocated was used for the Indian sportspeople.

Athletes were forced to live in shabby flats. Services were not provided to them.

How it got exposed: After the completion of the event several complaints were raised such as leaky walls, improper accommodation, never-ending construction, etc.

The total expenditure report was asked by the OC. However, the total expenditure was not revealed to the public but it exposed the scam.

Action taken: On 25th April 2011, Suresh Kalmadi was arrested by CBI, and a charge sheet was filed against him.

Kalmadi was removed from his post by Indian Olympics Association and was banned to involve in the 2012 London Olympics.

This one event spoiled the reputation of India across the globe.

2. 2G Spectrum Scam:

2G Spectrum Scam, top 10 largest scams in India

Amount: ₹ 1.76 lakh crore

Happened in: 2007 – 2010

Involved persons: A. Raja and 17 others.

Background: 2G spectrum scam is the second biggest financial fraud in the history of independent India. It is also considered one of the largest scams globally.

As the spectrum is a natural resource like water and electricity, it is in the hands of the government to sell it. Government can auction or sell spectrum at a fixed price. So, the communication & IT minister A. Raja decided to sell it at a fixed price for his own gain.

The scam was so big that the CBI filed a charge sheet of 80,000 pages and it was brought to the special CBI court in seven trunks.

How did the scam happen: In 2007, A. Raja became the minister of communication and the IT department. New 122 2G licenses were granted to the telecom companies on a first-come-first-served basis.

A. Raja allocated the license to telecom companies at a very low price. Due to this many new companies entered the telecom sector. Raja allocated the licenses to the companies that accepted his demands and he favored some companies for fixes.

Raja also reduced the deadline for application and cheque submission which resulted many companies not applying for the license. The companies favored by him were granted the license without any rules and regulations.

During this process, Prime Minister wrote a letter to DoT to regulate the procedure but Raja ignored the advice. He also neglected the recommendations of the Law & Finance ministry.

Due to the favoritism and selling licenses at a low price than the market price the government experienced a loss of Rs. 1.76 lakh crore.

How it got exposed: On May 4, 2009, NGO Telecom Watchdog complains to the Central Vigilance Commission (CVC) about the illegalities in the 2G spectrum license allocation.

In 2011, A. Raja was arrested and sent to Tihar Jail.

As a result of this scam licenses of many telecom companies were canceled.

1. Coalgate Scam:

Coalgate Scam, India's biggest scam

Amount: ₹ 1.86 lakh crore

Happened in: 1993 – 2010

Background: Coal Allocation scam famously known as Coalgate Scam is the biggest financial scam that happened in India. The scam is Rs. 1.86 lakh crore big and happened between 1993 – 2010.

Like other natural resources, coal mines are controlled by the government. Usually, the process to allocate the coal mines is the Government auctions the coal mines to the highest bidders and earns profit from it.

There are several guidelines Government should follow before allocating coal mines to the companies. Government should check the net worth, production capacity, technical experience in terms of mining coal, the recommendation from the state government, and analyze the track record and economic strength of the applicant.

The UPA Government is blamed for the biggest scam in India. But, the UPA Government denies the charges concluding that the states governed by the opposition parties denied auctioning the mines reasoning the resulting price hiking of coal.

The CAG initially estimated the fraud of Rs. 10.6 lakh crore but the final report claimed the loss of Rs. 1.86 lakh crore.

How did the scam happen: The mother of all scams began during the early ’90s when the Government decided to allocate 143 coal blocks and listed these blocks on the official website.

Later the list extended to 216 blocks. But due to the backing off of some applicants due to non-profitable coal mining 24 blocks were de-allocated. Of those 24 blocks, two blocks were reallocated to other applicants resulting in a total number of 194 blocks.

The government did not follow the guidelines to allocate the coal blocks. Auctioning was not done before allocation. Due to this many new and inexperienced companies were selected noticing the profits to the government.

The UPA Government is also accused of favoring some companies for the extra profits and allocating more coal blocks to them beyond their extracting limits.

How it got exposed: The scam got exposed when the Comptroller and Auditor General of India (CAG) charged the government to allocate coal blocks by violating the guidelines of coal block allocation.

BJP also filed an FIR with CBI regarding the manipulation of the coal blocks allocation.

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