Haridas Mundhra did not hail from a wealthy family nor was he educated, but his unbridled ambition and manipulative zeal did ensure that he would emerge as the protagonist of what was to be independent India’s first financial scandal.

The Calcutta-based Mundhra hit the headlines in the early ‘50s when he acquired FC Osler, the Indian subsidiary of the largest European glass lamp-maker. His buyout binge continued when he snapped up controlling stake in Richardson & Cruddas, followed by Jessop & Co. His reputation as an aggressive M&A specialist grew when in 1955 he went on to acquire British India Corporation, and also the UK-based Turner Brothers’ 49% stake in Turner Morrison India.

But the leverage that was fuelling Mundhra’s meteoric rise was coming from our very own desi banks, who were largely lending against pledged stock of Mundhra’s group companies. And by manipulating prices on the Calcutta Stock Exchange with the help of brokers, he gave bankers a false sense of comfort on their exposure to his group. For instance, he struck a deal with British India Corporation to buy its shares at Rs.12, and later drove the stock price to Rs.14 having pledged the stock with banks for Rs.11.

By 1956 his game was up, as a slide in the broad market forced him to cough up more collateral. Even as Mundhra was making every attempt to stay afloat, one of the four banks that had lent money to Mundhra, discovered that fake share certificates were pledged with two of its branches. Around the same time, Feroze Gandhi, husband of Indira Gandhi was on an anti-corruption crusade that had led to the arrest of well-known businessman, Ramkrishna Dalmia, for defrauding his life insurance company, Bharat Insurance Corporation. That event resulted in Parliament passing the Life Insurance of India Act on 19 June, 1956, under which 245 private insurers were nationalised