Diamonds to Dust
The Vijay Mallya case was not the only one of undermining the Indian banking system and running away from justice. The year 2018 opened with arguably one of the biggest business scams in recent years. Nirav Modi, the high-flying diamantaire with swanky outlets overseas, allegedly cheated Indian banks of over Rs 11,000 crore. Modi, the founder of Firestar Diamond with revenues of $2.3 billion, had a net worth of $1.6 billion in 2016, according to Forbes, but used his clout to con banks of the huge sum.
How exactly did he do it? Modi had apparently been conniving with officials of the Punjab National Bank (PNB) since 2011 to raise letters of understanding (LoUs) without the mandatory collaterals, and obtaining foreign loans ostensibly for importing pearls and diamonds to make jewellery. However, the money thus raised was used only to retire old debt, ultimately leading to an ‘evergreening’ of loans. The scam came to light only when there was a change of guard at the operational level at the bank.
Like Mallya, Modi too has been traced to the UK. The Enforcement Directorate raided several Nirav Modi and Gitanjali Gems (belonging to uncle Mehul Choksi) outlets in India and seized Rs 5,100 crore worth of gold, diamonds and precious stones from 17 premises in February, but Modi and his family have remained elusive. Modi’s lawyer has told a special court in India that he is wary of returning home for fear of “getting lynched” by irate citizens. But such arguments are likely to be of little help.
Experts say the litigation and recovery of money from Modi and his family is a process that could drag on for several years. Since there has already been a steep erosion in the value of the Nirav Modi brand, any further sell-off of his assets is not likely to yield much, they say. In a letter Modi wrote to the PNB management in February, he pegged the amount his companies owe to the bank under Rs 5,000 crore and said it will be hard for him to pay up, since the issue has acquired much media attention.
Parliament passed the Fugitive Economic Offenders Bill, 2018, in July to prevent perpetrators of major financial frauds from fleeing the country. The bill is expected to help confiscate properties of fugitives even before they are convicted. For now, though, the high-profile offenders remain elusive.