The Ketan Parekh Scam

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Deflated Dreams

Sharma was well-known in the industry circles for shooting his mouth off. His grand comments and claims were frequently splashed in business dailies and magazines. In fact, Sharma claimed that it was only the attention he drew to himself by making grandiose announcements that led to his downfall. In May 1998, The Economic Offence Wing of Chandigarh police lodged an FIR against Sharma under Section 420 of the Indian Penal Code. However, Sharma failed to appear in the court despite repeated warrants. He then moved the Mumbai High Court for transferring of all criminal cases registered in various states against the JVG group to the Central Bureau of Investigation (CBI) for further investigation. In June, the court transferred only the cases registered in Maharashtra to the CBI. The next day, Sharma moved an application for anticipatory bail in the high court, upon which he was granted interim bail till July 6. The Mumbai High Court granted four weeks bail to Sharma and directed him to appear in the appropriate court in Delhi. Sharma did not appear before any court in Delhi and went underground.

Following this, a team of officers from the Economic Offences Wing of the crime branch was sent to Mumbai in November. The team arrested Sharma at a flat in Bandra, a suburb in northwest Mumbai. In June 1999, after 16 months in jail, Sharma was granted bail on a personal bond of Rs 1 lakh and a surety of a similar amount and was directed not to leave the country without the court's permission and not to tamper with evidence. Sharma had sought bail on health grounds claiming that he was suffering from hypertension, angina and chest pain. The JVG companies were delisted and barred permanently from indulging in NBFC activities in the future. However, JVG's demise and Sharma's stint in jail would perhaps never replace the dreams and hopes of the investors whose hard-earned money had vanished forever.

Questions for Discussion

1. Analyze the rise and fall of V.K.Sharma and the JVG group of companies. What were the major reasons for the failure of the group? Give reasons to support your answer.
2. Comment on the role of regulatory agencies in the JVG scam and analyze how far the financial and regulatory system contributed to the scam.

Exhibit

Exhibit I: A Note on Indian Financial Sector Scams