PNB hits back at Nirav Modi: Filed complaint as your LoUs were illegal

The bank said at no stage were such facilities extended by Punjab National Bank to the three partner firms

Punjab National Bank on Thursday responded to the letter sent by Nirav Modi, one of the prime accused in the Rs 114-billion scam at the bank, saying the letters of undertaking issued to his companies were illegal and in violation of the Foreign Exchange Management Act. And, this was what prompted the public-sector bank to go public about the fraud, terming the whole loan taking exercise as “money laundering”, PNB clarified.

“You were getting LoUs issued illegally and in an unauthorised way through a few bank officials. At no stage such facilities were extended by our bank to the three partner firms. When these illegal activities surfaced, they pointed out to apparent violation of FEMA and money laundering aspect,” PNB’s general manager (international banking division) Ashwini Vats said in the letter.

PNB added that the bank was “compelled to bring these activities to the notice of law and enforcement agencies which the bank did.” The bank further added that “the commitment and undertaking for sparing of the total liability was not backed by providing upfront amounts and timelines.”

In the letter, the bank told Modi to submit a concrete and implementable plan to pay back the liabilities. The PNB letter was in response to a letter sent on Monday by Nirav Modi to banks affected by the scam saying the companies controlled by him were unable to clear their dues owing to actions taken in “haste” by PNB.

“In the anxiety to recover your dues immediately, despite my offer, your actions have destroyed my brand and the business and have now restricted your ability to recover all the dues leaving a trail of unpaid debts,” Modi had said in his letter to various banks, including PNB.

He also said the operations of his companies Firestar International Private Ltd (FIPL) and Firestar Diamond International Private Ltd (FDIPL) had effectively ceased owing to raids launched by investigative agencies, including the Enforcement Directorate and the Central Bureau of Investigation.

“This has thereby jeopardised our ability to discharge the dues of the group to the banks. I would request you to permit salaries for FIPL and FDIPL to be paid for the 2,200 employees from the balance lying in the current accounts. Our HR head will send you a break-up of the monthly salary,” Modi had said, adding the inventory, including assets and receivables, of FIPL and FDIPL and three other firms could have settled the pending dues to the banks.

To Modi’s letter saying that the bank had closed all avenues to recover dues by going public, PNB said in a regulatory filing on Thursday that it followed lawful avenues available under law of the land to recover the dues.

PNB Managing Director and Chief Executive Officer Sunil Mehta had said last week that Modi, in his email exchanges, had come up with “vague offers” to repay the amounts due and had not submitted a concrete plan.