IMPACT OF HARSHAD MEHTA SCAM ON CORPORATE GOVERNANCE IN INDIA

"The collapse of corporate governance in 1992 marked a turning point, as the scam revealed the urgent need for reform and vigilance in India's financial system." The Security and exchange Board of India (SEBI) was established on 12th April 1988 as a non-statutory body. At that time SEBI had very limited powers of India's financial markets, forcing extensive overhaul of corporate governance that still shapes the way businesses operate today. SEBI had no power to enforce the guidelines or to take punitive action against violations. Indian share market was regulated by Controller of Capital Issues (CCI) and the Stock Exchanges, before the establishment of SEBI in 1988. Harshad Mehta was the main individual involved in the scam in early 1990s, he manipulated his connections with banks and financial institutions to increase the stock prices, it majorly included the bank receipts (BRs), and the internal information, it allowed Mehta to receive the money from banks without actually having the securities. After this he would inflate the prices and sell the shares, repay the banks and repeat the process, this manipulation resulted in massive stock market bubble. This scam came to the light in April 1992, Mehta manipulated the Financial and banking system to rip off 5000 crore rupees (approx. $1 billion at that time) from banks and used it to perform this shattering scam. On 30th January 1992, SEBI became a Statutory body, it has introduced new reforms in the primary market including improved disclosure standards, simplification of issue procedure; It has increased the transparency and also many provisions have been enacted towards the protection of investor in share market. It is required for legal provisions, regulations to improve as to the progress of society; Newly introduced laws are needed for smooth working of company governance. The Harshad Mehta scam had untrustworthy impact on investor protection mechanism and market confidence. Insider trading is still profound issue, it is punishable with fine under SEBI regulation, Monetary punishment is not sufficient in today's technological world. It is necessary that legal provisions protecting investor and regulating finance and corporate sector to be of evolving nature. Introducing investor protection measures for small investors, like set up an investor protection fund and ensuring prompt resolution of investor grievances, it helps in educating investors of possible market risks, spread the awareness about their rights, it also helps them in making smart investment decisions. Improving Internal Controls and Risk Management, it can require companies to put efficient internal control systems and risk management framework that play an important role in identification and prevention of financial irregularities. The researcher has undertaken this topic to study the concept of corporate governance in India and also analyse the impact of SEBI regulations after becoming statutory body.