CBI arrests 3, Nirav remains untraceable
Arrested bankers suspected of steering fraudulent loans to companies linked to Modi and Choksi; Nirav retains lawyer Vijay Aggarwal
NEW DELHI: A Punjab National Bank (PNB) employee arrested in connection with the fraud of ₹11,400 crore in the bank involving diamond merchants Nirav Modi and Mehul Choksi said during questioning that the unauthorised issue of bank guarantees to the duo’s companies was a “regular” occurrence at the firm and that “many other officers” had issued such guarantees, belying claims by senior bank officials that the fraud was perpetrated by a few rogue employees.
Meanwhile, tax officials familiar with the matter said that other companies of Modi and Choksi have borrowed a significant sum of money from banks and that if the issue remains unresolved, the size of the problem could balloon to over ₹20,000 crore.
Interestingly, the officials, who asked not to be identified, say they have documents to show that Modi’s companies were either over-invoicing goods or simply trading in non-existent ones. Over-invoicing refers to fraudulently increasing the price of a product.
The Central Bureau of Investigation (CBI) on Saturday arrested former PNB deputy manager Gokulnath Shetty and single-window operator Manoj Kharat (both worked at the Brady House branch of the PNB in Mumbai; Kharat was suspended by the bank after the fraud came to light) and Hemant Bhatt, who the agency claimed is an accountant of Nirav Modi.
The whereabouts of Nirav Modi aren’t known, and the federal investigation agency is trying to get confirmation from the Interpol about his alleged presence in New York.
Top lawyer Vijay Aggarwal, who represented Shahid Balwa in the 2G case, is believed to have been retained by Modi.
While making a case for their custodial interrogation, the CBI told a Mumbai special court that Shetty was one of the officials at the branch who was using the SWIFT system (a messaging system used for inter-bank transactions) in the capacity of maker/ verifier/authoriser to enter fraudulent SWIFT messages guaranteeing the borrowings of Modi and Choksi’s companies.
“The involvement and connivance of more staff members and outsiders at this stage cannot be ruled out. But he is not cooperating with the investigation and giving evasive answers in respect of the aforesaid issues,” the CBI remand application said.
The agency cited Kharat as saying that “this (fraudulent issuance of letters of undertaking or LoUs) was happening regularly and many other officers have done this before”.
“But he was also not revealing their names, hence their custodial interrogation is necessary,” CBI said in its application. The three arrested have been remanded to police custody for 14 days till 3 March.
A CBI spokesman added that six more PNB officials are being investigated by the agency in Mumbai. Minister of state for finance Shiv Pratap Shukla said on Saturday it is working with the Prime Minister’s Office and the government will try to extradite and punish Modi.
According to PNB’s complaints to CBI, firms of Nirav Modi and Mehul Choksi were issued LoUs to avail buyer’s credit on the basis of import documents presented to the Brady House branch, but none of the transactions were routed through the Core Banking System of the bank.
NEW DELHI: The political blame game over one of India’s biggest bank frauds continued on Saturday, with the BJP targeting Congress president Rahul Gandhi for attending an event organised by jeweller Nirav Modi. Gandhi hit back minutes later, blaming Prime Minister Narendra Modi for destroying the economy.
“In June 2013, (the state-owned insurer) LIC took a 4% stake in Gitanjali gems; the finance ministry questioned it. The ministry said the company has been questioned for malpractice and also suspended from doing business in NSE for almost six months. On September 13, Rahul Gandhi participated in a promotional event for this group and on September 15, a proposal for restructuring the loan and giving additional loan up to ₹1,550 crore goes to Allahabad bank,” defence minister Nirmala Sitharaman said.
An independent director of Allahabad Bank has claimed he was against the loan, wrote to the Reserve Bank of India and the government against it, and then, when pushed to sign off on the loan, resigned in protest.
Gandhi brushed aside the allegations of his ties with the jeweller and said “they are trying to divert the issue”. He even drew a link between demonetisation and the PNB fraud, saying it all started when the PM banned ₹1,000 and ₹500 notes and “when he took out all public money and put it into the banking system”.
The government has said it will spare no one but Opposition parties have hit out at the government for the fraud and for allowing Nirav Modi and Mehul Choksi to leave India.
Sitharaman alleged that Congress leader Abhishek Manu Singhvi’s wife Anita and his son are directors in the company Adwait Holdings that had given its premises in Mumbai’s Lower Parel on lease to Modi’s company, Firestar Diamond. The BJP also
demanded to know why the Congress-led UPA government sought the resignation of a whistle-blower (the Allahabad bank director Dinesh Dubey) who had flagged concerns about giving loans to Modi’s Gitanjali Gems.
Rejecting the charges, Singhvi said his family has no links with Modi. “Nirav Modi’s company was a tenant of a Kamala Mills property owned by Adwait Holdings in which my wife and sons are directors. Adwait Holdings owns a commercial property at Parel, as it does elsewhere, which was rented by Firestone many years ago. Neither Adwait nor my family has any interest with Modi or Firestone. Last August, Firestone gave notice to quit the tenancy and vacated the Kamala Mills premises in December 2017,” Singhvi said.
“The original sin was committed in 2011 with help of delinquent officials. Letters of undertaking with currency of 90 days were not put into the core banking system; they were with the delinquent officer who kept files under his control,” Sitharaman said.
Meanwhile, CPM general secretary Sitaram Yechury initiated talks with other opposition parties to press for a joint parliamentary committee probe into the fraud.