PNB scam: Govt moves NCLT to freeze assets of Nirav Modi, Choksi firms

The Ministry of Corporate Affairs (MCA) on Friday filed a petition against Gitanjali Gems, a listed firm promoted by Mehul Choksi, and other companies belonging to both Choksi and Nirav Modi in the National Company Law Tribunal (NCLT), Mumbai.

The petition sought attachment of all assets of the 114 companies promoted by the two jewellers and their families, who are alleged beneficiaries in the Rs 114 billion Punjab National Bank (PNB) fraud case. 

According to a ministry source, it has sought ex-parte relief, which is typically meant for extraordinary circumstances. MCA officials along with the ministry’s joint legal director were in Mumbai and requested the tribunal to intervene in the matter on an urgent basis.

The MCA sought restrictions to be imposed on all securities and assets held by the accused in the matter. While filing the petition, the MCA counsel said four accused — Modi, his wife Ami, brother Neeshal, and maternal uncle Choksi — were the main perpetrators of the fraud and it was essential to freeze their assets in India and overseas.

The petition was filed under Section 221 (freezing assets), Section 222 (imposition of restriction of securities), and Section 246 (pertaining to fraud) of the Companies Act. Ministry officials believe that since multiple agencies are investigating the fraud, properties owned by the accused should be seized.

Explaining the rationale behind the urgent petition, the ministry counsel said probe agencies had come across at least 200 shell firms and dummy directors in India and abroad that were being used to route or receive funds as part of the alleged fraud.  

Probe agencies are looking into these firms and their transactions. So it was important, the counsel said, to take over all their assets so that they could not get away from the investigation.

Sources said the MCA also wanted to supersede or take over boards of the companies in public interest, especially minority shareholders, which would be applicable mainly in Gitanjali Gems.

The government may take the Satyam fraud route in Gitanjali case as well and supersede the board and management. The Satyam case had triggered the overhaul of corporate governance guidelines in 2009, and brought various terms and conditions in the appointment of directors such as their tenure, remuneration, and so on. “It had also prompted market regulator Securities and Exchange Board of India (Sebi) to amend the listing agreement to include provisions dealing with the appointment of a chief financial officer,” said a corporate lawyer.

Further, in 2013, the government replaced the Companies Act, 1956 with a new act, which incorporated various new provisions including the role and responsibilities of independent directors, and accountability of auditors, he explained.

Choksi and Modi, the key accused, are being investigated by multiple probe agencies after it came to light that PNB was allegedly cheated of Rs 114 billion through letters of undertaking, with the purported involvement of a few employees of the bank. The Central Bureau of Investigation and the Enforcement Directorate (ED) have registered two first information reports (FIRs) each. So far, the ED has seized assets of both accused and their firms to the tune of Rs 60 billion. Meanwhile, the income-tax department is examining 103 bank accounts, which directly and indirectly belong to both jewellers.