Finance Case Study - The JVG Scandal|Finance|Case Study|Case Studies

The JVG Scandal

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Case Details:

Case Code : FINC007
Case Length : 6 Pages
Period : 1997 - 1998
Pub. Date : 2002
Teaching Note : Available
Organization : JVG Group of Industries
Industry : Finance
Countries : India

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Detailing the Frauds

JVG's troubles started in June 1997, after the Securities and Exchange Board of India (SEBI) asked JVG Finance to refund the Rs 45 crore it had raised from a public issue in March 1997.

A day after the issue had opened, RBI issued a show-cause notice asking why JVG Finance should not be barred from accepting deposits as the group companies had already exceeded their deposit limits. By the time RBI conditionally cleared the issue after assurances from Sharma, the 70-day stipulated period for listing the shares had passed. Because of the time-lapse, SEBI intervened and ordered the refund of the public's money according to the allotment rules. Sharma refused to refund the money to the investors and appealed against the order to the Finance ministry. He admitted that JVG had exceeded its limits while accepting deposits but claimed that since December 1996 (much before the RBI ban) it had stopped accepting deposits on its own and had even given RBI an undertaking...

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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...


Exhibit I: A Note on Indian Financial Sector Scams

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