In one of the biggest claims distributions in nearly two decades since the securities scam hit the market, Satish Loomba, custodian of Big Bull Harshad Mehta group (HMG), handed over a cheque for Rs 1,995.66 crore to the Income Tax department and Rs 200 crore to the SBI from the group's liquidated assets on Wednesday.

The payments, albeit interim in nature, settle the total principal claim of the Income Tax authorities of Rs 3,221 crore against the biggest share market scamster as its dues for the ten-month scam period in 1991-92. It was a banker's cheque issued in the name of SBI where the I-T department has its account. Mehta died while in jail in 2001.

The Joint Parliamentary Committee set up after the 1992 scam had estimated the scam to be worth Rs 4,400 crore.

The custodian released the payments on undertakings given by the revenue department and the State Bank of India that the amounts will be brought back if so ordered by the Special Court for any adjustments. Nilima Mansukhani, chief commissioner Income Tax, said the department would consider filing for even the interests and penalties that run up to Rs 20,000 crore for the HMG alone and cross Rs 32,000 crore for all the notified parties in the scam, including HMG.

The disbursal took place a day after the Supreme Court upheld an order of Justice D K Deshmukh of the Bombay High Court to release the amounts to I-T and SBI. The State Bank of Saurashtra had two decrees, including one for Rs 99 crore, passed in 1999 by the special court set up in 1992 for trying the scam cases. The bank had later merged with SBI, hence the money went to SBI.

Under the Special Court (trial of offences relating to transactions in securities) Act, legislated by Parliament in 1992 to deal with the extraordinary situation arising out of the scam, the main aim was to aid recovery of the huge amounts lost by banks and financial institutions. The aim was to also "restore public confidence in the financial system." Under the law, the income-tax department gets first priority over other claimants but this position is under legal challenge too.


Loomba, interacting with the media after handing the cheques, said it was "a solemn moment" but also a momentous one as it showed that the system did work towards corrective measures.

The Act does not address losses of individuals in the scam. After the payment, the Custodian still has assets of the HMG worth Rs 500 and worth about Rs 1,000 of the other notified parties. Most of the money was got through cash, liquidation of shares (worth Rs 2,500 crore), and immovable properties. Most of Harshad Mehta's commercial properties were sold and proceeds utilized while some of his residential properties, including the building Madhuli at Worli-where he resided and a portion of it which his family still occupies-is caught in an intense legal battle over its sale. The Big Bull also had residential properties at Bandra and Charni Road.

There could be more of HMG assets, currently contested, that could come into the Custodian's kitty. This could be worth Rs 920 crore and include assets worth Rs 750 crore belonging to Harshad Mehta's mother Rasila and sister-in-law Rina, officials said.

Loomba said after I-T's claims, the banks and financial institution get next priority and only after that could other claimants line up. The main dues of I-T have now been cleared. "The SBI received Rs 600 crore earlier. The earliest order of decree gets distributed first," said Loomba. The other big claimant is Standard Chartered with its pending claim of Rs 500 crore.
TOI