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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"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.

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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.

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