ED files charge sheet against Mehul Choksi
The Enforcement Directorate on Thursday filed its charge sheet against businessman Mehul Choksi and his associate companies in the ~140-billion letter of undertaking (LoU) scam. This comes more than a month after the ED’s first charge sheet in the case against businessman Nirav Modi.
On the basis of the charge sheet, the ED will approach a special court to declare Choksi an economic offender and further confiscate his assets in the country.
According to the charge sheet, Choksi, along with eight others and five companies, has been accused of money laundering under the Prevention of Money Laundering Act.
The charge sheet states that three companies of Choksi — Gitanjali Gems Ltd, Gili India Ltd and Nakshatra Brand Ltd — fraudulently got LoUs issued to the tune of ~30 billion and got credit limits enhanced to ~31 billion.
“During the investigation, it was revealed that funds of LoUs obtained fraudulently were siphoned off through their alleged overseas suppliers namely 4C’s Diamonds Distributors HK, Shanyang Gong SI Limited HK, Asian Diamonds and Jewellery FZE, UAE, Gitanjali Ventures DMCC, UAE and Abbeycrest (Thailand) Limited,” said a press release issued after filing of the charge sheet.
“Most of these companies had no genuine business and were only paper companies used for rotation of funds. The proceeds of crime were also remitted back to Gitanjali Group Companies in India in guise of export-import transaction,” the press release stated.
“In addition, there are several other dummy companies controlled by Mr Mehul Choksi in Dubai and Hong Kong, which were used for layering and rotation of such funds,” it said. These companies had dummy directors and partners and the ultimate decision-making rested with Choksi, the agency said.
“Such remittances received in India were again circulated among group companies and other Indian companies for settling earlier liabilities of LoUs at Punjab National Bank,” it stated.
The overseas companies, mainly based in Hong Kong and the UAE and several Indian entities were used for rotation of goods and funds in order to project inflated turnover in the Gitanjali Group of companies, the charge sheet stated, adding that the goods exported from India were of abysmally low quality but the value was highly inflated.
In its charge sheet against Choksi’s nephew Nirav Modi last month, the agency had detailed a plan startlingly similar to the one used by Choksi’s companies.
That charge sheet had alleged that various dummy directors were mechanically transferring goods and money, following Nirav Modi's directions. The charge sheet listed a complex modus operandi, involving fraudulent import and export without any manufacturing activity in any of the dummy overseas companies. The invoices of imports and exports were overvalued to a large extent, so as to inflate the balance sheets and procure high credit facilities from the banks.