BOMBAY has been rocked by news of the latest scandal to hit the stock market - a multi-million rupee fake share certificates racket that could hit innocent investors hard. The name of Harshad ''Big Bull'' Mehta has been indirectly associated with the racket. On Saturday, New Delhi police arrested five people who they said dealt in fake shares of blue-chip companies by delivering and circulating share certificates allegedly printed in Delhi. Fake shares worth 20 million rupees (about HK$5 million) were seized. Police said fake share certificates with a market value of 90 million rupees had been pumped on to share markets of several cities since in late 1991. Deputy Police Commissioner P.K. Shrivastava said: ''If this racket had not been detected . . . the total fraud perpetrated on innocent and gullible investors would have run into hundreds of crores [billions] of rupees.'' The counterfeit shares, floated in the markets of Bombay, New Delhi, Surat, Ahmedabad, Agra, Noida in Uttar Pradesh and Moradabad, were issued in the names of pivotals such as Reliance Industries, Larsen & Toubro, Hindustan Lever, Hindustan Ciba Geigy, Unit Trust of India's Masterplan, and the State Bank of India's Magnum. Apart from several hundred investors, some banks, including foreign ones, are believed to have been defrauded. The fake shares were pledged with businessmen, who would then advance loans. Banks were induced to fork out loans on the basis of the certificates. The fraud took such a long time to discover because the lending parties seldom checked with the companies concerned about the authenticity of the shares. It was only detected when the accused became overly ambitious and made delivery of counterfeit shares to brokers, who passed them on to investors, who in turn tried to get them registered with the companies concerned. When the companies returned these shares with the remark ''holders' signatures do not match'', investors complained to the brokers and police were brought in. The principal accused, Gurdeep Kamboj, who operated from Chawri Bazaar in Old Delhi, has pointed the finger at Harshad Mehta, the man at the centre of the securities scam in 1992. ''I did nothing wrong,'' he said. ''I got the idea from Harshad, who was dealing in faked bank receipts.'' Kamboj, believed to head the racket, had spent four years in the United States between 1988 and 1991. His father continues to be an American green-card holder. Others accused are Rajiv Sharma, whose father owns a restaurant in Hyderabad, and Tara Chand, who owns an offset printing press in Delhi's Sadar Bazaar. Also involved in the scam are five large brokers operating on the Bombay and Delhi stock exchanges.