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The Directorate General of Foreign Trade (DGFT) has initiated an internal probe to examine whether companies belonging to Nirav Modi and Mehul Choksi, the prime accused in the Rs 114 billion Punjab National Bank (PNB) fraud case, followed foreign trade guidelines while taking loans from banks.
DGFT Director-General Alok Vardhan Chaturvedi has directed officials to examine if the two groups of companies enjoyed benefits of any export promotion schemes.
“The DGFT will examine whether duty exemption and remission schemes have been violated, enabling duty-free import of raw materials for export production,” an official said on condition of anonymity, adding that companies were required to meet some commitments towards export of goods after availing of the facility.
The DGFT, which functions under the Ministry of Commerce and Industry, grants an advanced licence to companies for availing of benefits under duty exemption schemes.
Under the Reserve Bank of India (RBI) guidelines, overseas banks are required to conduct due diligence on requests by importers to see if genuine trade transactions are taking place in accordance with DGFT norms.
“If violations are found, the importer-exporter (IE) code of the companies will be suspended under the Foreign Trade (Development and Regulations) Act, 1992,” the official quoted above said. The move will bar these firms from export and import of goods.
Employees of PNB had issued fraudulent letters of undertaking (LoUs) on behalf of the group of companies promoted by Nirav Modi and Mehul Choksi for import of fresh pearls.
In a letter sent to 30 banks earlier this month, PNB had said the foreign branches of Indian banks to which the fraudulent LoUs were issued had not shared the documents that companies produced for availing of buyer's credit.