ALSO READPNB scam: ED raids Nirav Modi, Gitanjali Gems, seizes Rs 51 bn in jewellery PNB fraud to impact other banks, increase their bad loans provisions Rs 114-bn fraud: Other lenders flouted RBI rules, PNB tells 30 bank heads PNB names Nirav Modi and Gitanjali Gems in the mega Rs 114-bn fraud PNB fraud case: Lenders seek forensic audit of Gitanjali group's books
The central government’s agencies have widened their probe into Punjab National Bank’s (PNB’s) Rs 114-billion fraud, with the income tax (I-T) department launching criminal prosecution against Nirav Modi and also seizing bank accounts of his entities as well as real estate spread across the country on Friday.
Meanwhile, the Central Bureau of Investigation (CBI) filed its second First Information Report (FIR) against three companies — Gitanjali Gems, Gili India, and Nakshatra — owned by Modi’s maternal uncle Mehul Choksi. The Enforcement Directorate (ED) too filed its second FIR against the three companies under the Prevention of Money laundering Act (PMLA).
On Friday, the CBI also conducted searches at 20 properties linked to Choksi and his group companies in Mumbai, Pune, Surat, Jaipur, Hyderabad, and Coimbatore. “Searches were conducted at locations belonging to Gitanjali group, other directors of the accused companies and other group factories and plants including offices, factories and residences,” a CBI official said.
I-T officials say it is one of the biggest scams in the country’s banking history, allegedly premeditated by Modi and Choksi, through a clutch of companies they own, in collusion with some PNB officials.
The CBI said PNB officials Gokulnath Shetty and Manoj Kharat, in connivance with the accused companies, defrauded the bank to the tune of Rs 48 billion. This was done by issuing fraudulent and unauthorised letters of undertaking (LoUs) in favour of foreign branches of Indian banks and purportedly issuing letters of credit in favour of foreign suppliers of Nirav Modi’s firms between 2017 and 2018.
Simultaneously, tax authorities on Friday attached Modi’s 103 bank accounts and 40 properties in multiple cities. Further, the I-T department also issued notices against Modi under the black money and imposition of tax Act, 2015, for alleged undisclosed foreign accounts of Rs 2.71 billion in Singapore.
Confirming the development, an I-T official said criminal prosecution was filed in the magistrate court for willful evasion of tax. Under this, Modi would be summoned by the court and the case would be admitted for further hearing, explained the official. If convicted, he would be given a jail term for up to seven years, according to provisions under the Act, he said.
The total amount of seizures couldn’t be ascertained since the taxmen are still in the process of valuing the assets. However, sources said it could be in the order of tens of billions. Continuing its probe, the ED conducted another round of searches on Friday at several properties linked to Modi and Choksi across the country, officials said. The ED seized Rs 5.49 billion worth of diamonds, jewellery and gold. On Thursday, it had attached diamonds, jewellery and gold worth Rs 51 billion.
Meanwhile, the enforcement agency summoned Modi, Choksi and two other relatives named in the CBI’s FIR. During the search operations, the ED found that the bank’s money was withdrawn from Hong Kong. Apart from these, the ED also received a list of 29 immovable properties belonging to Modi entitites from the Central Board of Direct Taxes. ED sources said the four accused were given a week’s time to be present before the agency for questioning under PMLA. Explaining the modus operandi, a CBI official said the said bank officials deliberately omitted entries, purportedly issued on behalf of accused companies, to avoid detection.
Funds raised through LoUs were meant to be issued for payment of import bills of the accused companies whereas it was dishonestly and fraudulently utilised for discharging the earlier liabilities on account of the buyer's credit facilities allowed by the overseas branches of Indian bank, it was alleged.
While in case of foreign letters of credit (LC), they were opened initially for smaller amounts by creating purported entries in core banking solution system and sending the relevant LC through SWIFT messages.
The accused bank officials, pursuant to the conspiracy, enhanced the value of the LC manifolds and issued amendments to the said earlier LCs issued through SWIFT messages without recording it in the core banking solution system, explained a CBI official.
According to Reserve Bank of India guidelines, LoUs for diamond and precious stones cannot be longer than 90 days. But these LoUs rolled over for a year in some cases. This raised suspicion among officials of overseas branches of Indian banks. Further, the CBI also approached Interpol with a request for issuing diffusion notice which was aimed at locating individuals. Both the CBI and ED also sent a request to the government seeking revocation of passports of Modi and Choksi.