The Ketan Parekh Scam

"My only mistake was that I shot my mouth off without really doing anything. Naturally, the media made me out to be a joker."

- Vijay Kumar Sharma, Chairman, JVG Group, in 1998.

The Doomed Depositors

In October 1997, the Reserve Bank of India (RBI) banned all non-banking financial companies (NBFCs) of the JVG Group of companies - JVG Finance, JVG Leasing and JVG Securities - from accepting deposits from the public. This was after an investigation revealed that these companies had been accepting deposits in excess of their stipulated limits. Soon after, JVG downed the shutters of several of its offices in small towns of Maharashtra, Uttar Pradesh and Bihar, claiming it had detected huge irregularities in the operations. The closing of the offices created a panic among the depositors and strong voices were raised against the group in the media. In November 1997, JVG hurriedly rented an office in Gurgaon (Haryana) to accommodate irate investors. Hundreds of investors and agents camped on the grounds of the office. The agents (or the field-workers), who raised deposits from investors on behalf of JVG, were extremely worried. They said they could not go back to their local offices without collecting the dues fearing the wrath of the investors. More and more depositors and field workers teemed over the next few days with hopes of getting their money back.

The situation seemed rather bleak with rumors of the JVG group being in deep financial crisis. At this point, JVG Chairman V.K.Sharma (Sharma) dropped another bombshell on the investors. He claimed that a majority of the certificates were fake and hence they would not be paid back. For many depositors who had invested as little as Rs 500 and who could not even dream of taking the dispute to court, it meant kissing their investments goodbye. Analysts remarked that the investors and agents had themselves to blame for the loss - because the activities of the JVG Group had always been looked at with suspicion by the industry.

JVG Group - The Background

From being a small-time contractor earning less than Rs 2500 a month, Sharma went on to run a group, which on paper had an annual turnover of Rs 1000 crore, in just seven years. Known for his lavish lifestyle - his farmhouse in Delhi, his fleet of expensive cars and the helicopter he had taken on lease to tap deposits from small towns in north India were talked about quite often. A graduate from Kurukshetra University, Sharma began his career as a materials supplier to Swadeshi Polytex in 1979. Between 1985 and 1989, Sharma supplied construction materials and equipment to contractors. In September 1989, Sharma launched his first company JVG Finance.

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