PNB roundup: Scam amount may touch $2 billion, ED seeks non-bailable warrant against Nirav Modi

The alleged fraud perpetrated by jewellers Nirav Modi and Mehul Choksi may be around USD 2 billion, over USD 204 million more than previously estimated, Punjab National Bank (PNB) has said.

In a late night filing to stock exchanges, the state-owned lender said that “the quantum of reported unauthorised transactions can increase by USD 204.25 million.”

The bank had earlier put the defrauded amount at Rs 11,394.02 crore (USD 1.77 billion). Adding another Rs 1,323 crore would take this to Rs 12,717 crore.

The bank said it has not received any instruction from the government to compensate other lenders for losses arising out of the fraud.

The jewellers and companies linked to them had allegedly colluded with PNB officers to obtain fake bank guarantees to get loan from overseas branches of Indian banks including Allahabad Bank, Axis Bank, and UCO Bank.

The bank has enough capital/assets to pay for such liability in case of eventuality in accordance with law, PNB said in a separate statement to stock exchange made last night.

In filings earlier this month, PNB said it stumbled upon the scam on January 25, 2018, and a fraud report was filed with the Reserve Bank of India on January 29. On that day, a criminal complaint was also made with the CBI.

Stock exchanges were informed of the fraud on February 5. This was followed by another fraud report being submitted to the RBI on February 7, the day one more complaint was filed with the CBI.

On February 13, an FIR was filed with the CBI against Nirav Modi Group, Gitanjali Group and Chandri Paper and Allied Products Pvt Ltd, as also a complaint filed with Enforcement Directorate. Stock exchanges were informed the next day.

In the complaint, PNB alleged that Modi and companies linked to him colluded with some of its officers including a former deputy general manager Gokulnath Shetty, who was posted in the foreign-exchange department of its Mumbai branch. They fraudulently acquired guarantees to obtain loans from the overseas branches of Indian banks, claiming to need the cash to import pearls.

ED seeks non-bailable warrant against Nirav Modi

The ED on Tuesday moved a special court, seeking issuance of a non-bailable warrant (NBW) against Nirav Modi.

Yesterday, the court, set up under the Prevention of Money Laundering Act, had allowed the central agency’s plea seeking issuance of Letters Rogatory (LRs) to six countries for obtaining information about the overseas businesses and assets of the diamantaire.

Special PMLA Court Judge M S Azmi today heard the arguments of ED’s special counsel Hiten Venegoankar on the agency’s plea seeking issuance of the NBW against Nirav Modi, who is believed to be in the US.

The judge will hear tomorrow Modi’s lawyer Ashul Agarwal on the issue of his locus standi to address the court in the absence of his client.

Venegoankar told the court that the ED registered a case against Nirav Modi on February 15 and from that time issued three summonses to him to appear before the agency.

He said the summonses were issued on February 15, February 17 and February 22, asking him to appear before the ED on February 16, February 22 and February 26, respectively.

The ED lawyer said Nirav Modi did not appear before the agency for questioning and hence it has sought issuance of an NBW was against him.

Venegoankar said the first summons was issued to the billionaire jeweller on his last known address. The other two were issued via e-mail.

He said the agency received replies from Nirav Modi for two summonses. In response to the second summons, Nirav Modi said he cannot appear before the agency owing to his business commitments.

In reply to the third summons, the businessman raised the issue of his security, the ED counsel said.

“He has violated all the three summonses,” Venegoankar told the court and requested the court to issue an open-ended NBW against Nirav Modi.

However, Nirav Modi’s advocate Agarwal told the court he should be heard before any decision is taken on issuing the NBW as it involved fundamental rights of his client.

Nirav Modi’s Firestar Diamond Inc files for bankruptcy

Firestar Diamond Inc., a business owned by the billionaire, has filed for bankruptcy in the U.S., Bloomberg reported.

The firm has reportedly blamed liquidity and supply chain challenges and listed up to USD 100 million in assets and debt, the Chapter 11 documents filed in a bankruptcy court in New York on Monday showed.

Firestar isn’t linked to the complaints filed by authorities in connection with the PNB fraud case, the company had said in an email on February 5.

The bankruptcy filing includes Firestar’s A. Jaffe Inc. wedding jewelry affiliate and Fantasy Inc. affiliate, and estimates the numbers of creditors at between 50 to 99.

The company’s diamond operations span the U.S., Europe, the Middle East and the Far East, according to its website.

With agency inputs