'Neither a fugitive nor a bank defaulter': Mehul Choksi

In an exclusive interview with Business Standard, diamantaire Mehul Choksi claims he turned a defaulter only after banks "wrongly implicated" him in the Nirav Modi case and his assets were seized

Fugitive diamantaire Mehul Choksi claims he had planned to leave the country much before the letter of undertaking (LoU) scam at Punjab National Bank broke out in February 2018. In an exclusive and rare interview with Business Standard, conducted over Zoom, Choksi, who has been living in Antigua, also said he turned a defaulter only after banks “wrongly implicated” him in the Nirav Modi case and investigative agencies seized his assets. In an hour-long interview with Tamal Bandyopadhyay, in which he broke into tears twice, Choksi said he wanted to come clean and was ready to be probed by a special task force for his alleged role in the scam.

Pleading innocence, he said he had been made “a political football”. And, the closure of his companies was India’s loss. In the third week of November, Choksi, chairman and managing director of Gitanjali Gems, moved the Bombay High Court seeking a quashing of proceedings initiated by the Enforcement Directorate declaring him a fugitive economic offender. In this free-wheeling interview conducted in the first week of December, Choksi touched upon many issues, including his relationship with his nephew Nirav Modi and alleged girlfriend Barbara Jabarica, his “kidnapping”, banks’ complacency, and, of course, his own innocence. Edited excerpts:

In mid-July this year, you returned to Antigua and Barbuda, where you had been staying since 2018 after leaving India. You also spent 51 days in custody in neighbouring Dominica for illegal entry. You, of course, said you were kidnapped. Where are you now?

Since July 8 (2018), I'm very much only in Antigua, and nowhere else, as my health had deteriorated a lot in New York. And, I was in a lot of tension after the news (of raids on my company). Basically, I had a heart problem, diabetes problem, blood clot problem, and hypertension at the time.

Since coming to Antigua, I've never been anywhere else. I've informed both Indian agencies and the Antiguan government that I am nowhere else but only in Antigua, except the very sad incident when they kidnapped me because I was not moving out of Antigua. I had a red-corner notice and they thought I was not moving out as I had a citizenship here.

Fortunately, I am back, but it was a 51-day saga, with nearly 27 hours on the yacht in a very bad condition, without any doctors or treatment. So, my health deteriorated further. Finally, after 51 days, when people talked about it, they checked me on in Dominica and announced that they could not treat the kind of health I had arrived with in Dominica. So, they sent me back to Antigua.

When you say ‘they’, whom do you mean? Who are they?

Basically it was a joint operation by Indian agencies, Dominica and Antigua, and a British team of mercenaries. Human traffickers were involved. There were yacht owners. There were five or six British people involved. They have been after me, tracking me for nearly eight months on this island. Since last August, they were tracking all my movements. They were staying in a bunch, exactly opposite my house.

Tell us what exactly happened? Media reports say you went missing from Antigua on May 23 and were captured in Dominica while you were trying to flee to Cuba in a boat.

It is completely fake news. In fact, when I was kidnapped, the very next day my kidnappers, who were Indians (but residents of Britain), revealed to me that this was the news that would come out. The Prime Minister of Antigua would disown me. They also showed me a social media message in the evening – my chef’s photograph was there, and he said I might have gone to Cuba.

They thought it was perhaps Dominican Republic, which is near Cuba. But Dominica is in a different direction. I didn't even know. I thought I must be on a trip to Guyana. It was a Saint Vincent boat with a St Lucian crew – this means the boat was doing business in St Lucia.

In the third week of November, you moved the Bombay High Court seeking to quash the proceedings initiated by the Enforcement Directorate declaring you a fugitive economic offender...

Sir, these are completely fake charges. Since I left India, I have been in a very bad health and advised very strongly not to travel. I have always said I'm eager to clear out my name because I am a very reputed person in India so far. My doctors have advised me not to take up a long travel, so I am ready to appear on (a) Zoom call. What is wrong in that? After last incident, I am very, very scared. Even if there is an opportunity, and even if my doctors allow me, what is going to happen? But I want to come and clear my name.

I am not a political person, but it has gone in a very wrong way. I've become a political football. As a big businessman, I knew lots of politicians from both parties. And there are so many things appearing at the moment. These started immediately after they put the charges in the FIR. They were completely fabricated and wrong.

You fled in January 2018 to Antigua and Barbuda, just a few days before the PNB scam was uncovered. Was it a coincidence? How did you get a Caribbean passport just before the fraud was unearthed? Media reports suggest you had planned your escape: The citizenship to Antigua in 2017 well before the PNB fraud broke out in 2018...

I very strongly condemn these charges. I had applied for my passport a year before, in early 2017. I completed 40 years in my career in 2017, and I was concentrating on my American unit to expand. So, I decided to apply for international passport. We were looking at many countries but finally decided on Antigua in March (2017) because of the tax situation there. I wanted to expand my American chain there. I was not totally going to go there. In India you have to go through a lot of visa process. So why not expand the units in America and sub-continent?

My Indian units were very well settled and governed. So, I decided that maybe I would start giving more time and expand my entire business in the Caribbean and Canadian countries together. I saw that there was a great chance to expand my retail network. I was owning Samuels and Rogers, which have 150 stores and are the third-largest chain in America. So, yes, to expand this chain further into the Caribbean countries, I took the passport of Antigua and Barbuda.

Your group of companies owes Rs 15,000 crore to the Indian banking system. Of this, Rs 5,500 crore is on account of allegedly fraudulent/unauthorised LC/LoUs taken from Punjab National Bank. Were you aware that Rs 5,500-crore exposure was not backed by valid documents and therefore unauthorised?

I was enjoying Rs 7,000 crore of approved limit by a consortium of bankers. On top of that, there was an ad hoc need-based transaction limit in the form of LCs/LoUs. All jewellers bank using the instrument of LCs or LoUs. I have been doing this since 1990. Of course, there would be a few bankers who would want to take a pie of the gold business or a jewellery business. In the 1990s, I probably had Rs 2,000-3,000 crore worth of letters of credit. My overall finance in India was at about Rs 11,000 crore with this transaction limit, over and above my regular bank limits.

I was enjoying it with this bank since 2015. But I have done this business with many others in the past – with IndusInd bank and ICICI Bank; there was a gold business with YES Bank, too. I had banked with many in the past; as and when a suitable term came, we switched (banks). These are backed by jewellery or merchandise in store. This is how the entire jewellery business works in the country.

Basically, the lacuna was, when I saw everything – of course I'm not a finance person as such, but as a chairman of the company – I knew this was the cheapest possible way to bring down the credit rate. They (PNB) had not given correct information or a proper information flow to their head office.

Now, let me just tell you there was a concurrent auditor sitting in the branch. There was a regional audit. There was a branch manager. There was a foreign exchange branch involved. Every three months, a statutory auditor came to us, came to the bank (sic). There was an RBI inspection. And, you wouldn't believe, even the RBI has put this whole case against PNB – that its information flow was not proper and not correct.

Essentially, what you are saying is: Yes, there were irregularities, but you are not aware of them. These irregularities were done by your people as well as this person Gokulnath Shetty (of PNB) at the branch level. Is that correct?

I absolutely deny this matter. There was nothing (wrong done by) my company or any of my people. Also, I don't think there was anything that the company did wrong. It was only at the bank’s level. I do not know the person; all the charges they have framed are bogus. They have put the charges of corruption, too, which is completely wrong.

In fact, after they put these corruption charges, I informed why no CBI (Central Bureau of Investigation) action was taken (sic). From whom did this gentleman take money? The CBI report also says that none of my company people ever met. There was a bank agent who parted with some commission to Gokulnath Shetty or the person who is involved. We were not even aware of this. The bank used to work with them since 2012. We brought to the notice of CBI, that why this person was not booked (sic). All the charges against my company’s people are incorrect.

Investigative agencies say Vipul Chitalia, vice-president of Gitanjali Group of Companies, was the "mastermind" who reported directly to you. He had left the country along with you and Nirav Modi. There was a look-out notice against him and the immigration officials detained him at the Bangkok airport. He was instrumental in preparing applications for putting through the fraudulent transactions of the LoUs and FLCs (Foreign Letters of Credit), conniving with Gokulnath Shetty at PNB’s Brady House Branch. Chitalia was also Gitanjali Group’s unauthorised signatory for issuance of applications for LoUs and FLCs. Right?

Sir, Vipul Chitalia was at the manager level. He was keeping accounts of payables and receivables. Please do not say that it was a fraudulent transaction because my company has never done any fraudulent transaction whatsoever. If you give me a few moments, I will explain what had happened.

On January 29, they put some charges against Nirav Modi's company which we were completely unaware of. In that FIR, they put my name. I was in America for my treatment and I was going through tests at the time. My final date of operation was not even decided. But when the news came to me, I immediately contacted all my consortium members, as well as Sebi (Securities and Exchange Board of India), to inform the markets that I had no connection.

I even called up PNB, and told them why you have put my name in this (case) (sic). I am not a partner in this and I have left his company since 2000. I was there as a partner only for six months or a year. My nephew was learning with me, and when he started his company, I joined as a partner to help him. But after that particular year, we parted ways.

Despite that, there were lots of raids on my companies. They even seized my server and lots of inventory from my company in the first FIR of Nirav Modi. When I informed the stock exchange, the news came out and they were a bit embarrassed. I called them up. They also froze my limit and started informing other banks that my name was in the FIR with Nirav Modi.

In that FIR, I'm not even named there. I argued and wrote a letter on February 13, when I was in America. On February 7 or 9, I had a talk with the consortium of banks, too. I also clarified my situation. Until PNB froze all my accounts, there was not a single default by any of my companies (sic).

When making transactions became difficult, my Indian companies called me and said they were not able to pay salaries because the bank had frozen our account. So, I wrote even to PNB. They came back to me, saying “we know that your name was put and we are ready to discuss this matter and sort this out. So please give us an appointment”. On the same day, before that, many of my assets had been frozen. They'd already taken it. Or they were sealed.

The whole matter became very, very politically loud. The total amount in this particular (bank’s) mistake (sic) was about Rs 12,000 crore, with Rs 6,000 crore from my companies. They had taken major assets, maybe Rs 5,000 crore or Rs 6,000 crore worth of assets that were already booked in the case of Nirav (sic). At the same time, they said they would sit down with me and sort the matter out.

They put another charge on me, which was totally incorrect. In 10 days, it became a huge political event. In particular, they said they changed the facilities or made something different for gold 82:20 scheme from which I beneffited (sic). That is completely untrue; in that particular gold scheme my imports increased by only about 30 per cent, which was 10-15 per cent less than many other people who had imported thousands of tonnes (of gold).

And this was one of the matters discussed with my kidnappers also (sic). This whole matter was very political and I just became a political football.

What was the amount of non-fund-based facilities availed of by your companies against valid and authorised bank documents?

The total amount of my facilities was approximately Rs 11,000 to Rs 12,000 crore, with Rs 7,500 crore of consortium lending.

Since February 2018, my server was taken (away). I had no access to information whatsoever, despite my company telling them again and again that without server... what if… I know that 80 per cent or 75 per cent of my facilities were non-fund-based because that was the cheapest possible source of money for the company.

Why was the debt not declared in the balance sheet by your flagship Gitanjali Gems in FY15, FY16 and FY17? It’s a listed company…

Everything is reported in the balance sheet, and everything is there. If you get me access, I will show you all the possible information.

So you are blaming the banks, right?

This gold product is so attractive for bankers because they earn a commission. They earn foreign exchange. It’s a very fast business… every 3-6 months, the money revolves. There was never a default. The NPA wouldn’t have happened even in May or June. There was no default. You know that after three months… after 180 days or 90 days of any default, the NPA would be happening (sic).

Without becoming any NPA, they froze my assets (sic). In seven days, all my company resigned because everybody was scared. There were attacks – one agency after another – without any mistake or fraud. People were scared. You wouldn't believe, we were celebrating Valentine’s (Day) on February 14. It's a very important event for our company. And by February 25, the company was shut.

What was the hierarchy of decision-making in your organisation, specifically in the finance department?

There were many, many people there. I do not want to speak about anybody because I know what happens in India. I have respect for all of them. I do not think any of my persons was ever going to do a wrong thing.

What was the value of inventory available with the company at the end of FY17 and also at the time the inventory was seized?

Well, total seizures with the fixed assets and inventory together has been approximately Rs 6,000 crore already.

Is the Rs 6,000-odd crore that has been seized primarily the inventory of gold, gold jewellery and diamonds, or also property?

I don't have exact numbers in front of me because I didn't know what question you were going to ask. But let me just bring to your attention: There was merchandise to the tune of Rs 3,000-4,000 crore (on consignments to various jewellers). There were receivables of Rs 8,000 to Rs 10,000 crore after the company was shut in such a bad way. There was theft also. The date (of seizure) was planned already… When I was in operation theatre for my heart (surgery), all action happened on that day. I've heard a lot of rumours that many people have fled with my merchandise…

Court documents talk about round-tripping of goods through sham transactions, overvalued inventory, and the use of CVD or lab-created diamonds in place of real ones...

This is all the fake allegation (sic). When they seized my inventory, the Central Bureau of Investigation realised that there was nothing going to be happening (sic). This was just complacency on the part of the bank. And then they started… because they wanted to extradite me, they started putting all the charges of round-tripping. What is round-tripping? Every transaction in India goes through the Customs. Every single transaction is valued by the Customs. So, where is the question of undervaluation? There is a stock audit by banks. There is a Custom audit of the merchandise by banks. Tell me, how can this ever happen? If the valuation is even 10 or 15 per cent higher or lower, the Customs will stop the parcel…

This was an exercise for the past many, many years in India. Since 1970, everything has been laid down in a very proper manner. And if this had to happen, why would all my shops open? Why would all my factories open? It was the end of 40 years of a glorious innings for my companies. The company has been in existence for 50 years. Do you think after 50 years of success anybody would like to do anything wrong? I would request that if you put a special task force to look into the matter, there can be a fair job.

I have nothing to do with politics, but it must be checked as it's the loss of one of the finest companies in the country.

CBI’s supplementary charge sheet alleges that you were running a "circular trade" with your own outfits set up as pearl suppliers in Hong Kong. This way you had managed to siphon off at least Rs 6,345 crore borrowed from PNB. You made your employees directors of Shanyao Gong Si Ltd and 4C's Diamond Distributors and Crown Aim, based in Hong Kong, and were controlling them. You availed of LoUs from PNB showing purchase of freshwater pearls from these companies.

It's a completely fake charges (sic). In the diamond and jewellery business, you do business with the people whom you trust, so they may have found some people who (had) worked with the company before and they could have been handling some business (sic). They must understand the norms of the trade. If you see the business in India – either there will be business with related parties or with the customers whom you trust.

These are all fake charges. Let me tell you, these charges have been put to just make the case stronger. That is what anybody would do. Let me tell you, there were also the team of the bankers visiting our customers. They would always visit my major customers of course.

I remember ICICI Bank or maybe even PNB has gone on field trips with my customers in Hong Kong as well as Dubai in the past. So, where would this kind of a thing come from? In any company, particularly diamond companies, they can put charges that these are related companies, but this is completely untrue. Import or export will be concentrated with the people whom we trust.

If letters or credit (LCs) /LoUs were discounted abroad by your group companies/associated companies/companies owned by you, what assets have been created by that money? Were the assets created in India, too? Was the money used to create assets in line with the business of the company?

Please don't put charges because there is no connection whatsoever. In 2017-18, my group companies’ net worth was nearly Rs 23,000 crore, far exceeding the borrowings. Apart from this, there was a brand valuation in India… we were the world’s largest brand house and the brand valuation and enterprise value would not have been less than Rs 15,000 crore. My entire life’s assets and everything… It's rather very miserable to hear such things from you.

What is your current net worth?

At the time when I left the country, the net assets were worth more than Rs 20,000 crore.

And now?

I don't know. There was not even a preliminary inquiry. Nothing at all. They just shut the company without any preliminary enquiry.

Then I heard that the law provides for this kind of a thing. But has any company ever shut down like this anywhere in India? I've lost everything, everything on the earth.

Then how are you able to afford so many lawyers across India and abroad?

Many lawyers have come to offer their services to me. Of course, it’s not free. But there are reasonable costs. My well-wishers from the community are contributing. Apart from this, there are many lawyers who want to work at a very low fee because they know injustice has been done to my company.

Let me just tell you very honestly. This is my main worry: How am I going to go on with this kind of expense if they prop up legal cases when the trial starts? Only God can save me. Things will happen. My lawyers have been supporting and they have been working very reasonably with me.

You must be in touch with your nephews Nirav Modi and Neeshal Modi. Do you discuss your plan of action with them and form your strategy jointly?

No, nothing at all, but of course you know that we are relatives. They are my sister’s sons. So, I have good faith and goodwill from my side. I'm not in touch with them. I'm probably making two to three calls to India in a month, and they're also mostly to lawyers.

You said you were framed in some sense, but was Nirav also framed? Or is Nirav really guilty?

I have no opinion. His business was completely separate. But let me tell you… the creation of brands and everything else... the government should have looked at them and heard the other side also. I do not know about Nirav’s business, but one thing that I know is that they (Nirav) also created a very strong brand. The way the matters have unfolded should not have happened. It's a very big loss for the country. It's hard, very hard (to accept this). Many, many people have worked towards creating my companies, and it is sad to see what has happened. [Breaks into tears].

Tell us about Barbara Jabarica, your alleged girlfriend. She told a news agency that you introduced yourself as Raj to her. She claimed to have met you in Jolly Harbour in August 2020 when she rented an accommodation near where you lived.

She was one of the persons leading… who was following me since August (sic). I was walking on my island and whoever came could walk along with me. She was checking with my chef, and everybody else about me. She was following me. Apart from walks, or one or two lunch or sitting down, I never associated with her (sic). Of course, she was a friend, but basically she was planted by the agency, and she was following me. She was the lead person following my movements. She had come three or four times to Antigua and everything was on record. The matter is sub judice but everything will come out and everything is on record.

Any plan to return to India? How do you plan to repay Rs 15,000 crore to the banking system?

It’s not Rs 15,000 crore – it is Rs 12,000 crore. It is very clear that the custodian of my assets is the government. Of course, I want to clear my name, but the very big mess is being created by mishandling this case (sic). You know the monies are in gold or diamond. What would happen if nobody looks after them for three-four years?

The assets are far more than what is payable. But I wish this case would have been handled in a much better way. These things can happen. Let me just bring to your attention that in 2000 or 2002 there were charges by CBI for gold import by one of my customers who took Rs 2,000 or Rs 3,000 crore and failed to pay back to one of the bankers. His name was also Choksi.

Can you believe that my name was put in that particular FIR even at that time? There was a caution list. Of course I was completely innocent in that case too. So, these things happen. But it was handled in a better way. There was State Bank of India. They froze my limits, but when they found out (that I am not that Choksi), everything was okay, they continued (as lenders). In fact, they took a larger share in my company as a financer. I was shocked by this entire kidnapping episode and the way this whole matter happened – I could have lost my life. By God’s grace, I'm lucky to be here [Breaks down].

It's a trauma that I've gone through and the scare that has been put in my head… I cannot even explain (sic).

Sorry, you did not answer my question whether you want to return to India. You don't, right?

No, no. Let me just tell you that my health has deteriorated. I can't even see properly. I have a back pain. This all added up to my normal disease. There is a problem with my brains. They've found some hematoma here. That is why I have been sent to Antigua to cure it.

I am taking many tablets and going to doctors every day. Other than that, I have nothing to do. And apart from this, first I have to do… once I'm fit… is to get acquitted from the completely fake charge of illegal entry into Dominica (sic).

I really want to come to India once my health improves. For now, why can it (the case) not be discussed on Zoom? Why can't they send people here? I've been telling them for 2 or 3 years about this.    

My last question now: You have repeatedly said that you want to come clean. Given a chance, how do you want to come clean? 

Basically, it is very easy to prove. There are no charges put on me that can ever be proved. The trial can be completed in 90 days. It's like a glass that you can see through. There was nothing wrong in any of the dealings of my company ever. So, it is very easy to prove. We were employing 6,000 to 7,000 people, directly or indirectly, to the last day. And there was inventory worth thousands of crores of rupees left behind. It's very easy to solve the case. But, unfortunately, it has been very, very badly mishandled, and it's a very huge loss to the country.

You said you'd be happy if a special task force was set up to prove your case…

Well, because the opposite party is the government’s own bank. That is the reason I would prefer that there is a proper inspection done by a proper person who could see exactly (what had happened) much before putting any kind of charges (sic).

Thank you, Mr Choksi, for your time and patience. I'm sure you will get better. Stay safe and hope the Valentine’s Day of 2022 would be much better.

Let me just tell you that they must look into the banks and see how many such cases have been and what kind of complacencies have been going on at banks in the country. They must look at whether it was intended. It is impossible that the entire hierarchy of the bank doesn't know about such huge transactions happening for years and years. I would urge for the country's good. I would urge that they go deeper and whether they want to charge or demotivate people I don’t know. But they must fix the problem in the country (sic). Otherwise, many more losses like this can happen. The loss is the country’s loss. The closure of my companies is the country’s loss.

(After the on-record interview on Zoom, Choksi reached out to the interviewer and suggested some corrections – the word chargesheet was replaced by FIR, as – he claimed – there was no charge against him. He repeatedly emphasised his willingness to return to India and come clean once his health condition improved).