The diamond merchant Nirav Modi. Billionaire jewellery designer Nirav Modi left the country on January 1 much before the CBI received a complaint from Punjab National Bank on January 29 about a Rs 280 crore fraud. His brother Nishal, a Belgian citizen, also left the country on January 1, while wife Ami, a US citizen, and business partner Mehul Choksi, the Indian promoter of Gitanjali jewellery chain, departed on January 6. The agency issued a look out circular against all the four after registering the first FIR against them. A look out circular is issued by enforcement agencies to all exit and entry ports to inform them about the movement of an accused.
Reeling under the $1.8 billion fraud blow, Sunil Mehta, MD and CEO of Punjab National Bank (PNB) on Thursday said the bank “will not spare anyone” involved in the crime, even as the main political parties started a blame game.
“We are known for clean banking. The fraud started in 2011. We have brought it under the notice of regulatory and law enforcement agencies as soon as we came to know about it. We will not spare anyone involved in the fraudulent practice,” Mehta told reporters here in a hurriedly called press meet on Thursday.
Meanwhile, the Enforcement Directorate (ED) on Thursday launched nationwide raids on the offices, showrooms and workshops of billionaire diamond trader Nirav Modi in Mumbai, Surat (Gujarat) and New Delhi.
Nirav Modi, who was featured in Forbes India Rich List of 2013, was described by the magazine as a “third-generation diamantaire” who grew up in Belgium and after dropping out of Wharton moved to India in 1990 — to eventually expand the “Nirav Modi” brandname to 16 stores in Delhi, Mumbai, New York, Hong Kong, London and Macau.
The Rs 11,515 crore fraud had been going on since 2011 at the Brady House branch of the bank but could only be detected on January 25 this year, the PNB chief said, adding that it was reported to the investigative agencies, including the Central Bureau of Investigation (CBI), on January 29.
“We have scanned all our branches also. This is a standalone case in one of our branches. There is nothing (such) in other branches,” he added.
He said he had received a “vague email” from the customers involved in the fraudulent transaction about settling the dues and the bank had asked them to send their detailed response.
As for other banks, he said overseas branches of other Indian banks were affected by the transactions, except in one case. His answer was in response to a question whether any foreign bank branch was also affected.
“There is clear criminal connivance of the group companies of Nirav Modi and Gitanjali Gems with our branch official and also, apparently, with officials of overseas branches of Indian banks,” the PNB said in a detailed note sent to 30 Indian nationalised banks, a private bank and a foreign bank.
The PNB virtually accused other banks’ foreign branches of not sharing with it information or documents made available to them by these Indian companies at the time of availing buyers’ credit from them.
The PNB chief said the finance ministry was taking stock of the matter on a day-to-day basis and would “come down heavily in support of booking the culprits”.
“We have the capabilities and capacities to come out of the situation,” he said.
“We are confident and committed to resolve the issue. We will honour all our bonafide commitments. We will not shirk our responsibilities,” he added.
Regarding recovery of the amount, Mehta said: “We have already initiated the process. ED is also seizing the properties, seizing the current assets and we hope we will be able to recover good amount.” According to reports, the ED had seized property worth over Rs 5,000 crore belonging to Modi and his family members.
Shares of PNB on Thursday continued to drop for the second consecutive day, closing almost 12 per cent lower, after having fallen 10 per cent the first day.
Talking about the modus operandi of the fraud in his letter to bank chiefs, Mehta said that the buyers’ Credit availed against fraudulent letter of undertakings (LoUs) of the bank was used either to retire import bills or replenish the maturing credit of some other banks. The bank staff issued these LoUs on behalf of companies belonging to Nirav Modi without routing them through PNB’s core banking solution (CBS) system which tracks all bank transactions.
He further added that: “LoUs had not been converted into funded transaction so far, so it is a contingent liability… This matter we will decide after the completion of the investigation. If the investigation process says it is your liability, we will accept it.
The fraud saw a major fallout in the political arena. The Congress lashed out at Prime Minister Narendra Modi asking him to “come clean” on the government’s failure to prevent the scam and identify those who helped the kingpin, Nirav Modi, to flee the country. Nirav Modi is said to have left the country on January 1 this year with other accused family members leaving within a week.
A lookout notice was issued by the CBI against Nirav Modi and his associates last month in the banking fraud case but by then they had escaped from India, CBI sources said on Thursday.
According to the sources, a Look Out Circular was issued against Modi along with his wife Ami, brother Nishal Modi and Mehul Choksi in the Punjab National Bank (PNB) fraud case on January 31.
The circular was issued to all airports, ports and exit points to stop them from escaping. However, according to the sources, Modi and his associates fled the country before the notices were issued.
While Nirav and his brother Nishal left India on January 1, his wife Ami, a US citizen, and Choksi left on January 6, all before the CBI received a complaint from the PNB on January 29.
The source added that around 150 Letters of Understanding were issued to Nirav Modi’s firms by the PNB. In course of the probe, the CBI has finished imaging computers seized during searches at Modi’s properties on February 3, 4 and 21.
A day after a massive $1.8 billion fraud was unearthed in a PNB branch here, the Enforcement Directorate launched a nationwide raid on the offices, showrooms and workshops of billionaire diamond trader Nirav Modi.
ED teams carried out simultaneous raids on Modi’s offices, showrooms and diamond workshops in Mumbai, Surat (Gujarat) and New Delhi.
ED officials landed at Firestar Diamond Pvt Ltd. head office in Bharat Diamond Bourse, in Bandra Kurla Complex, Modi’s private office at Kohinoor City in Kurla West, his showroom and boutique at Itts House in Fort in south Mumbai and a workshop in Peninsula Business Park in Lower Parel.
In Gujarat, six diamond workshops were raided in Surat SEZ at Sachin town and an office in Belgium Towers on Ring Road, the hub of diamond jewellery trade.
Two diamond jewellery boutiques of Modi in New Delhi – in Chanakyapuri and Defence Colony – were also raided.
The multi-pronged action came a day after the Punjab National Bank admitted to unearthing a fraud of Rs 11,515 crore involving Modi’s companies and certain other accounts with the bank’s flagship branch (Brady House) in Mumbai and its second largest lending window in India.
At least 10 bank employees have been suspended but it is not clear whether anybody from the crucial PNB Credit Approval Committee or its Board of Directors figure among them.
The fraud, which includes money-laundering among others, concerns the Firestar Diamonds group in which the CBI last week booked Modi, his wife Ami, brother Nishal and a maternal uncle Mehul Choksi.
It followed a complaint lodged by PNB on January 29 pertaining to an alleged cheating case of Rs 280 crore perpetrated by these four in 2011.
It is learnt that Modi – whose operations are spread across Europe, the US, Middle East and Far East besides India – has written to PNB and other banks that he would return their outstandings.
The latest case — which involves a sum considerably higher than the Vijay Mallya default of around Rs 9,000 crore — comes at a time when the Indian banking system is already grappling with swelling non-performing assets. (IANS)