"You were getting LoUs issued illegally and in an unauthorized way through few bank officials."
Enforcement Directorate, India’s financial law enforcement agency, has seized 9 luxury cars from Indian jeweller Nirav Modi and his firms.
This is the latest development of the alleged $1.8 billion (£1.3 billion*) Punjab National Bank (PNB) fraud case linked to the businessman. The agency announced the raids on 22nd February 2018.
The vehicles taken included 1 Rolls-Royce Ghost, 2 Mercedes GL Class cars, 3 high-end Hondas, 1 Toyota Fortuner and 1 Porsche Panamera.
Modi and his 22 companies are the main focuses of the scandal. Along with his firms, which are connected to his uncle Mehul Choksi, the ‘Pappu of the Diamond Trade’.
The fraud concerns illegal Letters of Undertaking (LoU) from PNB, used to obtain loans from overseas branches of most Indian banks.
The PNB has accused the jeweller of illegally using letters of undertaking (LoU). They also claim he is guilty of money laundering and committing FEMA violations. He has further accusations from the bank of defrauding Rs 11,300 crores (£1.25 billion).
Reports cite it as the largest fraud in India’s banking history. In a letter written to Modi, the second largest Indian bank said:
“You were getting LoUs issued illegally and in an unauthorized way through few bank officials. At no stage, such facilities were extended by our bank to your three partner firms.”
Modi replied back to the PNB’s message and suggested the bank’s over-zealousness on their part led his jewellery brand’s destruction. He also believed it jeopardised its ability to clear the dues. He said:
“The erroneously cited liability resulted in a media frenzy which led to immediate search and seizure of operations, and which in turn resulted in Firestar International and Firestar Diamond International effectively ceasing to be going-concerns.
“This thereby jeopardised our ability to discharge the dues of the group to the banks.
“In the anxiety to recover your dues immediately, despite my offer (on February 13, a day before the public announcement, and on 15, your actions have destroyed my brand and the business and have now restricted your ability to recover all the dues leaving a trail of unpaid debts.”
Modi’s lawyer denies his client’s involvement while Choksi has not commented. His firm Gitanjali Gems also claimed they had no involvement in the alleged fraud.
Enforcement Directorate conducted separate searches at Nirav’s homes and offices. By 17th February 2018, they seized more than 56.7 billion rupees (£625.8 million) of jewellery, gold, diamonds, precious metals and stones.
Also, they have frozen the shares and mutual funds worth 78 million (£861,000) and 867.2 million (£9.58 billion) rupees held by Modi and Choski respectively.
Officers revealed that Modi left India in January 2018 with his family. Before the bank filed a complaint, which triggered the inquiry. The businessman claims his companies owed the PNB less than 50 billion rupees (£551.9 billion). Well below the amount alleged by the bank.
His suspected fraud is being investigated by various agencies which include the Enforcement Directorate and the CBI.
Currently, the police have arrested a dozen people. These include six PNB staff members, as well as another half a dozen from Modi and Choksi’s companies as the probe continues.