They are calling it Dancing with Apes—a television commercial of the housing loan division of Punjab National Bank—where partying chimpanzees are warned by a grizzly bear not to blare music after 2100 hours.
In the power corridors of the Indian capital, mandarins are wondering why India's second largest bank didn't issue a similar warning to wannabe music conductor-turned-diamond merchant, Nirav Modi, who now stands at the heart of a $1.2 billion fraud.
Modi, having concluded meetings with his lawyers in Hong Kong, is now firmly ensconced at his apartment at Dubai’s JL towers, flatly denying he owes PNB ₹12,000-plus crore.
The belligerent Modi has argued in a letter that he, actually, owes the bank only around ₹5,000 crore, and indicated that he and his family members would not return to India. He is not worried about losing his Indian passport. He had acquired a Belgian passport last year. Antwerp, the world’s biggest hub for diamonds where Indian traders now have greater heft than Europeans, is his safest home. Modi has even argued that PNB’s gross non-performing assets (NPAs) was much higher than the ₹12,000 crore pinned on him. What he means is that another ₹12,000 crore hit would not kill PNB, especially when the government is there to back the bank!
Modi, who had initially fallen silent after his companies were found to have taken Letters of Undertaking (LoUs) from PNB without offering collateral, is rising from the ashes. He even tweeted his innocence, asking the proverbial question all corrupt people ask when caught: Why Me? And then he deleted the tweets.
Even as TV channels and breaking news split the issue wide open, turning a business scandal into a political slugfest, Modi—it is reliably learnt—has started counting his baubles, asking his lawyers to figure out how much cash he could collate immediately.
Modi’s total inventory includes 14 international stores in New York, London, Beijing, Las Vegas, Honolulu, Macau, Hong Kong and Singapore. And also his flats six flats, including a sea-facing duplex in the famous Samudra Mahal building at Worli in South Mumbai, a flat in Grosvenor House in tony Peddar Road, the iconic Rhythm House in Kala Ghoda and a flat in the high-end Al Shera Tower in Dubai. Modi also wanted to evaluate all the paintings he owns, which include works of Francis Souza, Amrita Sher-Gil, Bharti Kher, VS Gaitonde, Akbar Padamsee, and MF Husain.
Even as lawyers plan strategies to pull Modi out of the rubble, diamond merchants across Mumbai, Antwerp and Dubai wondered why it took so long for the banks to gauge that Modi and his maternal uncle Mehul Choksi, were virtually bankrupt.
“So, why they were constantly offered LoUs?” asked Chander Bhai Suta, a seasoned diamond trader in Surat, where many diamond cutters protested outside PNB branches, saying they should not be harassed if they fail to pay their monthly instalments for loans.
Modi’s total inventory includes 14 international stores in New York, London, Beijing, Las Vegas,Honolulu, Macau, Hong Kong and Singapore. And also six flats, including a sea-facing duplex in the famous Samudra Mahal building at Worli in South Mumbai, a flat in Grosvenor House in tony Peddar Road, the iconic Rhythm House in Kala Ghoda and a flat in the high-end Al Shera Tower in Dubai. Modi also wanted to evaluate all the paintings he owns, which include works of Francis Souza, Amrita Sher-Gil, Bharti Kher, VS Gaitonde, Akbar Padamsee, and MF Husain
If not Modi, pressure was definitely mounting on Choksi, once considered among the biggest diamond merchants in Asia. A Bhavnagar-based jeweller, Digvijay Jadeja, had filed a plea in the Gujarat High Court and argued why Choksi should not be labelled a fraudster and be prevented from travelling outside India. Jadeja, in his affidavit, had warned the court that Choksi was under severe debt and could run away from India to settle in Dubai’s Burj Khalifa, where he had an apartment. It was in July, 2016 that Jadeja alerted the court that Choksi, who had a whopping debt of ₹9,000 crore plus, was settling his family members abroad. “Wish the courts had taken notice, and confiscated his passport,” says Jadeja. The case is now being contested in the Supreme Court.
But the pending case did not prevent both Modi and Choksi—an influential person in the Gems and Jewellery Export Promotion Council (GJEPC) —from visiting Delhi to meet ministers and bureaucrats of the Finance Ministry and Commerce Ministry. “They visited Delhi regularly till December 2017 to meet bureaucrats, lobbyists and ministers,” said a person with knowledge of the diamond market.
Their LoU route was both brilliant and unique, and not much was known about this modus operandi used to cheat the banks. By many standards, it was a Ponzi scheme.
Modi, who always wanted to be a musician and a conductor like Zubin Mehta, was forced into the business by Choksi, who was confident Modi would be successful with solitaires. So Modi shifted from Bach and Beethoven and worked on diamonds, calling his brands Love on Body. His craftsmen strung the stones through an imported metal that never showed. It looked as if diamonds were stuck on the body. But Modi’s glittery showrooms never impressed those in the business, who say his products were grossly overpriced. Senior Enforcement Directorate and the Central Bureau of Investigation officials are wondering whether the diamonds and jewellery seized are actually worth ₹5,000 crore or just ₹1,50 crore.
But Modi and Choksi did not care about what rivals thought; they knew they needed loads of cash. Marketing is an important element of the diamond business.
How Modi and Choksi got the cash is now known. What is unknown is why the cash was offered by the banks without securing any collaterals.
“And it is here Modi played dirty,” says veteran lawyer Prashant Bhushan.
This was happening since 2011, a trigger the BJP-led NDA is now using to argue that Modi was, actually, close to the Congress and hence, manipulated the system. The ruling party got its Defence Minister, Nirmala Sitharaman, to argue the process, knowing very well that Sitharaman, a former Commerce Minister, handled diamond merchants every month because her ministry was responsible for the trade, and its growth.
But PNB is not offering satisfactory answers. Its auditors went to Republic TV and said they have been red-flagging such scams for long, since early 2009. They cited the example of one Jatin Mehta of Winsome Diamonds and Forever Diamonds, whose ₹6,800 crore plus loan is India’s second biggest corporate default after Vijay Mallya’s ₹9,000 crore.
Now what is interesting is that the auditors did not say why they continued to give positive feedback to due diligence reports to Mehta’s firms year after year, describing the companies as “positive and professional”.
Nor did the auditors say what was the current status of Mehta’s loans. Now consider this one.
Judgements from the Sharjah court have given legitimacy to reasons cited by Mehta as to why he faltered on payments. Mehta, who was once the youngest president of the GJEPC, had said he faltered his payments to the banks because one of his biggest clients suffered a billion dollar loss in bullion and forex derivatives, and could not pay him.
Indian investigating agencies had claimed Mehta had deliberately not paid the Indian banks and diverted cash to his accounts in global tax havens. But now, the Sharjah judgement, a copy of which is on the Bombay Stock Exchange website, could turn the heat on both the ED and the CBI. An expert committee of lawyers and accountants formed by the Sharjah Federal Court to probe charges by the ED and CBI against Mehta, have informed the Indian agencies that Mehta’s claim was legitimate. This finding is in response to the Letter Rogatory sent by the ED to the Sharjah Federal Court.
Modi, who had initially fallen silent after his companies were found to have taken Letters of Undertaking (LoUs) from PNB without offering collateral, is rising from the ashes. He even tweeted his innocence, asking the proverbial question all corrupt people ask when caught: Why Me? And then he deleted the tweets
The auditors of PNB mentioned nothing about the Sharjah judgement during their studio debate that tried hard to pin the Modi-Choksi payment crisis to one political party. Nor did the auditors say why PNB, which now has an “unfunded” exposure of ₹12,000 crore, does not even reveal it in their latest Basel III disclosure. Worse, the bank was even awarded by the government for being “the most vigilant bank in India”.
Modi, it is reliably learnt, has asked his friends and associates to pray for him at various temples across India, worried he could be held solely responsible for tanking the PNB stock, that has already fallen by 17%.
Like Modi, even Choksi—a highly religious person—has asked his friends to do the Sankat Mochan puja (prayers for Lord Hanuman) to ward off the crisis. Chokshi, a devout Hindu, had recently splurged crores on a dharmshala in Shankheshwar near Ahmedabad. An ardent follower of the highly acclaimed Premsuri Maharaj, who died in 2016, Chokshi had even met up with his spiritual guru a number of times in 2016 to sort out his financial problems.
But nothing worked. Now, as the scam unfolds with new revelations hitting headlines every day, it is becoming clear that in the Indian banking system, nobody bribes as well as diamond merchants do. For the record, Savji Dholakia, a top Surat-based diamond merchant who once gifted his employees expensive cars, has not been paying interest to a private bank for a ₹4,000 crore plus loan. But the bank has not even reacted.
“It is here that the banks fault big time,” says Bhushan, adding that when the Palanpuri Jain community and fellow businessmen had stopped lending cash to both Modi and Choksi, how come the banks continued to lend them money? Both Modi and Choksi are Palanpuri Jains.
What is extremely interesting is that the scam would not have surfaced if Modi’s brother, Nishal Modi had not messed up his interactions with PNB officials. Modi Junior, who was born and brought up in Antwerp and holds a Belgian passport, visited the bank and asked for a LoU. When he was asked for a 100% guarantee for the same, Nishal reportedly told the officer that his family has been taking this letter since the last few years. And then, the officer checked the records and on finding nothing, pressed the alarm bell. A thorough check followed and the fraud was detected.
This rattled Modi. He remembered he was questioned by the Directorate of Revenue Intelligence (DRI) in 2015, around the time when Forbes India had pushed him into its rich list at No 63, his net worth a whopping $1.52 billion. He was questioned by DRI officers on charges of diverting imported, duty-free, cut and polished diamonds and pearls to the domestic market while using cheaper, low-value diamonds to make jewellery for export to sectors like Hong Kong and the UAE, considered among the biggest diamond hubs in Asia.
“He walked the style,” laughed a now retired DRI official. Modi came in a Rolls Royce and carried bottles of Evian water, sprouts and green tea, even paper napkins. Modi never favoured litigation and instead, settled his cases under Section 28 (5) of the Customs Act by paying demand, interest and 15% penalty, altogether amounting to ₹48 crore
The belligerent [Nirav] Modi has argued in a letter that he, actually, owes the bank only around ₹5,000 crore, and indicated that he and his family members would not return to India. He is not worried about losing his Indian passport. He had acquired a Belgian passport last year. Antwerp, the world’s biggest hub for diamonds where Indian traders now have greater heft than Europeans, is his safest home
The 47-year-old diamond merchant is now in a bigger soup, even as there are strong rumours in Delhi that Sunil Mehta, the chairman of PNB, has offered his resignation to Finance Minister Arun Jaitley.
No one is answering, in Delhi and Mumbai, why it took a whopping 41 FIRs for the case to be registered by the CBI, and how the state-owned bank continued to give Modi loans, the last tranche offered as late as February 2017. PNB has asked as many as 30 nationalised banks if they offered similar, uncovered loans to Modi and Choksi, also named in the FIR. A fast track computation is in place and if some banks say they have unpaid loans, the amount could even cross $20 billion.
Modi, who was influential both in India and in the Hoveniersstraat district of sleepy Antwerp, the world’s most famous diamond hub, knows a way to emerge out of the crisis. He and other Indians, for over two decades, have dominated the global diamond trade, turning the pre-dominantly Jewish neighborhood near Antwerp's central station into a home for Gujaratis from India.
Modi’s men, dressed in Versace and Armani suits, haggled with Hasidic Jewish diamond buyers in their trademark long black coats, side curls and skullcaps. He is still considered powerful in Hoveniersstraat. Many remember him and his power lunches—mostly veggies—loved by local Europeans. Thanks to people like Nirav Modi, the growing Indian population has even turned the street’s celebrated kosher restaurants into numerous curry corners—mostly veggies. There is even an iconic Jain temple, to which Modi donated liberally.
Modi was a part of the total Indian takeover of Antwerp. Now, he will have problems walking down the same streets.
Shantanu Guha Ray’s book, ‘Diamonds: The India Story’ will be published this year by Harper Collins