It has been reported that the CBI has arrested fugitive jeweller Mehul Choksi in three fresh cases of bank loan fraud. Amidst accusations that he defrauded the Punjab National Bank (PNB) and his nephew Nirav Modi of more than Rs 13,000 crore, Choksi has now been accused of defrauding and diverting loan funds totalling over Rs 6,700 crore. An ICICI Bank and PNB consortium granted the loans.
Based on the three CBI FIRs, Choksi, his three companies – Gitanjali Gems, Gili India, and Nakshatra Brands – as well as their directors are being investigated. In the FIRs, the companies are alleged to have inflated sales figures, obtained fraudulent foreign letters of credit (FLCs), and diverted loan funds to related companies.
An extradition request from India is pending in a court of competent jurisdiction against Choksi who fled India in January 2018.
According to the complaints, a forensic audit was conducted on all Choksi’s companies that have taken advantage of loans from the consortium due to fraud detected in the functioning of the Gitanjali Group.
It was alleged in the FIR filed against Gitanjali Gems that Choksi and some of the directors of the company engaged in criminal conspiracy and were engaged in “fudging of accounts, siphoning of funds, and utilizing sanctioned credit limits for purposes other than legitimate trade transactions.”.
As alleged in the FIR, Mehul Choksi engaged in fraudulent activities with the company’s directors to enrich himself illegally and derive unlawful and unjust gains in the accounts of Gitanjali Gems and, as a result, caused loss to consortium members…cheated the consortium members to the tune of Rs 5,564.64 crore.”
Similarly, two other FIRs were registered against Gili Diamonds and Nakshatra Brands, which involved loan fraud amounts of Rs 375.71 crore and Rs 807.72 crore, respectively.
In the case of Gitanjali Gems, the audit revealed that one of its major customers, Trans Exim, had creditor debt of US$ 39.87 million (Rs 272 crore) in March 2016, while Gitanjali Gems reported trade receivable of Rs 1,431.6 crore in its stock statement for the same month. In the audit, this amount was found to be considerably higher than Trans Exim’s reported total creditors.
As a result, Gitanjali Gems appears to have reported trade receivables at significantly higher levels, according to the FIR.
Gitanjali Gems has also flagged a payment of Rs 5.22 crore to Mozart Trading Pvt Ltd, which it has described as a related entity. Further, packing credits amounting to over Rs 34 crore were allegedly used to pay import bills that were drawn on fraudulently enhanced foreign letters of credit.
Based on Gili India’s audited balance sheet for March 31, 2017, the inventory of diamonds reported by the company was Rs 922 crore. According to the audited balance sheet of March 31, 2017, the actual amount of diamonds stock was only Rs 521 crore, indicating that over 401 crores of inventory had been reported.