CBI probing Nirav Modi after PNB detects Rs 11,000 crore fraud in Mumbai branch

On February 5, CBI had booked diamond jeweller Nirav Modi, his wife Ami Modi, brother Nishal Modi and his maternal uncle Mehul Choksi in connection with an alleged Rs 280-crore cheating case after it received a complaint from PNB on January 29.

The CBI is investigating billionaire diamond jeweller Nirav Modi and some of his firms in connection with a Rs 11,000 crore fraud case detected by state-owned Punjab National Bank (PNB), said agency sources. On Wednesday, PNB, in a regulatory filing to BSE Ltd, said it had detected fraudulent transactions worth $1,771.7 million (over Rs11, 000 crore) in its Mumbai branch.

“The bank has detected some fraudulent and unauthorised transactions (messages) in one of its branches in Mumbai for the benefit of a few select account holders with their apparent connivance. Based on these transactions, other banks appear to have advanced money to these customers abroad,” said PNB.

On February 5, CBI had booked Modi, his wife Ami Modi, brother Nishal Modi and his maternal uncle Mehul Choksi in connection with an alleged Rs 280-crore cheating case after it received a complaint from PNB on January 29. On Wednesday, PNB said these transactions were contingent in nature and the liability arising out of these on the bank would be decided based on the law and genuineness of underlying transactions. “The matter was already referred to law enforcement agencies to examine and book the culprits as per law of the land. The bank is committed to clean and transparent banking,” said PNB.

According to banking secretary Rajiv Kumar, the case is an isolated one that dates back to 2011. At least 10 employees of the bank have been suspended in connection with the case. The CBI FIR said a few public servants “committed abuse of official position to cause pecuniary advantage to Diamond R US, Solar Exports, Stellar Diamonds and wrongful loss of Rs 280.70 crore to Punjab National Bank during 2017”. Modi, his wife, brother and Choksi are all partners of these three firms, the FIR said. The case has been booked under IPC sections related to criminal conspiracy, cheating and provisions of Prevention of Corruption Act.

According to the PNB complaint, two of its employees have “fraudulently ” issued eight letters of undertakings (LOUs) and “transmitted SWIFT instructions to the overseas branches of Indian Banks” to raise buyers credit of at least Rs 280 crore for Modi’s firms without “making entries in the bank system”. The bank alleged that it was making an “in depth” inquiry to find outstanding LOUs that have not been detected in its system. The bank also alleged that a fraudulent issuance of LoUs took place on January 16, 2018 for and on behalf of the accused firms, which approached the bank and presented a set of import documents with a request to allow buyers’ credit for making payment to overseas suppliers.

The bank officials requested the firms to furnish 100 per cent cash margin for LoUs for raising buyers’ credit. The firms contested this, saying they availed of the facility in the past also, the complaint has alleged. However, branch records did not reveal details of any such facility granted to the said firm, it said. The bank has alleged that its then deputy manager Gokul Nath Shetty and another employee Manoj Kharat had fraudulently issued LoUs totalling Rs 280.70 crore for Hong Kong-based Allahabad Bank and Axis Bank for and on behalf of Diamond R US, Solar Exports, Stellar Diamonds. “While tracing old entries, it transpired that buyer’s credit based on fake LoUs might also have been paid through NOSTRO A/C,” the bank said.

On January 2017, The Indian Express had reported that the income tax department had raided over 50 offices and residential premises of Modi, one of India’s top diamond merchants, and seized cash, jewellery and several documents that allegedly revealed tax evasion by his firms. The agency had allegedly found evidence of bogus purchases and cash sales that were not recorded in the books of the firms.

A recent entrant to the billionaire club, Modi was named in the Forbes India’s Richest People List 2016, with a net worth of $1.74 billion. Modi is known for his high-value jewellery that cost as much as Rs 50 crore and regularly feature at auctions conducted by houses like Christie’s and Sotheby’s. In 2010, Modi’s Golconda necklace sold for Rs 16.29 crore at a Christie’s auction.

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