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I-T's claims in Harshad scam cleared
March, 17th 2011

Nearly two decades after the Harshad Mehta scandal resulted in claims worth thousands of crores, the Income-Tax department has got its full share of the amount that was due from the late stock broker . The State Bank of India, or SBI, and Standard Chartered, however, may have to wait for some more time before their dues are cleared.

The I-T Department and State Bank of India together received payments totalling 2,195 crore on Wednesday in the largest disbursement of claims against losses incurred on account of the 1992 securities scam.

With this, the custodian appointed by the central government to liquidate the assets of Harshad Mehta and his entities and to distribute the proceeds against his outstanding dues, has released more than 4,000 crore. Of this, 3,400 crore has gone to the I-T department alone, custodian Satish Loomba told reporters.

While the amount released so far are the priority payments of principal amount, the total outstanding liability of Harshad Mehta and his group companies relating to the scam and non-scam period amounts to a huge 27,000 crore.

This includes the I-T department's demand of 22,000 crore (principal amount of 2,100 crore and interest of 20,000 crore), banks and financial institutions' share of 5,200 crore and 200 crore due to other parties, Mr Loomba said.

Of the 2,194 crore released on Wednesday, 1,996 crore was paid to the I-T department while the remaining was 199 crore was given to SBI. A total of 1,700 crore is due to banks, of which Rs 800 crore has been cleared, said Mr Loomba.

He also said Standard Chartered Bank has claimed 500 crore, which, is yet to be released. The bank has moved the Supreme Court claiming a share of Harshad Mehta's assets. It has appealed against an order of the special court, but has not been able to get any stay on the disbursement of the proceeds from the sale of his assets. The total I-T demand of 2,100 crore, the principal amount, has been met in full, said Mr Loomba.

Standard Chartered Bank has said the distribution based on the date of decree is wrong.

The custodian has attached both movable and immovable assets of the stockbroker and his group companies, which largely include cash and securities. The funds released from the sale of assets are being disbursed among the claimants, which mostly includes banks and financial institutions.

Soon after the scam broke, parliament legislated the Special Court Act to deal with the extraordinary situation arising out the scam. The Act gives powers to the custodian to notify individuals and entities and attach their assets to solve dispute and settle claims of the scam-hit parties. The custodian also received claims from many individual investors for loss of capital on account of the scam. The custodian, however, could not act on those claims, as, said Mr Loomba, the Act gives priority to bigger claimants like the I-T department, banks and financial institutions.

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