PNB Fraud Case: CBI Registers Fresh Case Against Gitanjali Group, Conducts Searches

The CBI has registered a fresh FIR against Gitanjali Group promoter Mehul Choksi in connection with alleged fraud in the issuance of Letters of Understanding worth Rs 11,400 crore from Punjab National Bank, officials said today.

The CBI has alleged that the new FIR pertains to 143 LOUs worth over Rs 4,886 crore fraudulently issued to three companies of Choksi -- Gitanjali Gems, Nakshatra and Gili -- during the period 2017-18, they said. The agency had earlier registered a separate case involving Rs 280-crore fraud, which has now been expanded to cover LoUs worth Rs 6,498 crore issued to accused companies of Nirav Modi and Choksi.

An LoU is a letter of comfort issued by one bank to branches of other banks, based on which foreign branches offer credit to buyers. After registering the FIR, the CBI carried out searches at 26 locations across six cities covering the premises of 18 Indian subsidiaries of Gitanjali Group.

The CBI also questioned four officials of Punjab National Bank -- Bechu Tiwari, Chief Manager posted at Nariman Point branch, Mumbai during February 2015-17; DGM Sanjay Kumar Prasad who was then AGM at Brady house branch during period 2016-17; Chief Manager of zonal audit office Mohinder Kumar Sharma, who was then concurrent auditor during Nov 2015-January 17; and Manoj Kharat, then Single Window Operator during November 2014-Decemeber 2017, the officials said.

They said a special team under a Deputy Inspector General (DIG) is being formed to probe the case.

In its complaint, the public sector bank has alleged that 293 Letters of Understanding (LoUs) worth Rs 11,400 crore were fraudulently issued to the companies of Nirav Modi and Mehul Choksi from one of its branches in Mumbai.

Expanding the ambit of the first FIR registered on January 31 against the billionaire diamond merchant and Choksi, the agency has 150 LoUs worth Rs 6,498 crore issued by the bank.

The LoUs were issued by the Punjab National Bank to Indian banks in Mauritius, Bahrain, Hong Kong, Antwerp and Frankfurt for the accused companies, the officials said.

The remaining 143 LoUs worth Rs 4,886 crore will be part of probe under the new FIR registered today.

The accused in the new FIR include Choksi (Managing Director Gitanjali Gems), Gokulnath Shetty (retired DGM of PNB), Manoj Kharat (then single window officer of PNB), and companies -- Gitanjali Gems Ltd , Gili India Ltd, Nakshatra Brand Ltd, directors of the companies Krishnan Sangameshwaran, Nazura Yash Ajaney, Dinesh Gopaldas Bhatia, Aniyath Shivraman Nair and Dhanesh Vrajlal Sheth.

Also named in the FIR are Jyoti Bharat Vora, Anil Umesh Haldipur, Chandrakant Kanu Karkare, Pankhuri Abhijeet Warange, Mihir Bhaskar Joshi and unidentified bank officials.

The CBI has alleged in the FIR that accused bank officials Shetty and Kharat in connivance with accused companies and others defrauded PNB to the tune of Rs 4,886.70 crore, the CBI spokesperson said.

The agency alleged that the accused officials issued fraudulent and unauthorised letters of undertakings in favour of foreign branches of different India-based banks.

The officials omitted entries of LoUs in the core banking system of the bank issued on behalf of the accused companies to avoid detection, they said.

It is alleged that they used SWIFT--global messaging service to move money internationally--and did not make any entries in core banking system, used to process daily transactions, to avoid any scrutiny.

Since SWIFT messages to raise credit abroad were not available in the bank's core system, they went undetected, they alleged.

The bank officials also fraudulently issued foreign letters of credit or FLCs in which PNB guaranteed payment on behalf of the accused to their suppliers which was to be recovered from the firms of Choksi and Nirav Modi, they alleged.

Funds raised through LoUs were meant to be used for payment of import bills of the accused companies whereas it was dishonesty and fraudulently utilised for discharging the earlier liabilities on account of buyer's credit facilities in a kind of roll over of payments, they alleged.

The PNB has alleged in its complaint that they opened the Letters of Credit initially for smaller amounts by creating purported entries in core banking system, they said.

The accused bank officials pursuant to the conspiracy unauthorisedly enhanced the values of the FLCs and issued amendments to the FLCs issued through SWIFT which were encashed in overseas branches of Indian banks.

According to the RBI guidelines, LoUs for gems should not be valid for more than 90 days.

The officials also said the central agency approached the Interpol with a request for issuing 'Diffusion Notice' which was aimed at locating an individual.

Forty-six-year old Nirav Modi, who holds an Indian passport, left the country on January 1, while his brother Nishal, a Belgian citizen, departed from the country on same day. However, whether they travelled together has to be probed, they said.

Modi's wife Ami, a US citizen, left on January 6 and his business Mehul Choksi left the country on January 4, the officials said.