PNB scam: BJP’s lies stand exposed, all 360 LoUs renewed in 2016-17 

CBI now says the amount investigated in the first FIR is over ₹6,498 crore, involving 150 LoUs and in the second FIR LoUs worth over ₹4,886 crore issued for Gitanjali Gems are being investigated

Photo courtesy:  Twitter/GauravGogoiAsm
Photo courtesy: Twitter/GauravGogoiAsm


Former Union Law Minister Kapil Sibal on Saturday mounted a direct attack on Prime Minister Narendra Modi, alleging that he had been directly “involved” in the ₹21,306 crore fraud featuring fugitive diamond merchant Nirav Modi.

“We are making direct allegations against the Prime Minister’s Office and the Finance Minister,” Sibal said. “Chaukidar so raha tha, chor bhag gaya (The thief fled away while the watchman was snoozing), he added.

Sibal, also a former telecom minister, debunked BJP’s allegations that the scam had started during the time of the United Progressive Alliance (UPA) government in 2011, saying that both the CBI FIRs, the first one dated January 29 and the second one dated February 15, reveal that all the Letter of Undertakings (LoU) issued to Nirav Modi and his related companies were renewed between 2016 and 2017.

The Congress leader further pointed that the credit limit in this case had been stretched to a year, even though the original bank rules don’t permit money to be loaned beyond 90 days.

Sibal said that he would raise the issue in Parliament in the upcoming Monsoon session.

The original FIR, filed on Jan 29, listed eight fraudulent transactions involving the Punjab National Bank, the combined value of which amounted to ₹280 crore. Based on further complaints from the bank, the CBI now says the amount investigated in the first FIR is over ₹6,498 crore, involving 150 LoUs.

The remaining 150 fraudulent LoUs worth over ₹4,886 crore issued for Gitanjali group of companies are part of the second FIR registered on February 15 by the agency against Choksi and his companies Gitanjali Gems Ltd, Nakshatra Brands Ltd and Gili India Ltd, they said.

According to the second FIR, credit limit for import of semi-precious and precious stones, including pearls, shouldn’t be more than 90 days. However, in most cases the credit allowed under referred LoUs is much beyond 90 days.

Document courtesy:
Document courtesy:
A copy of the written complaint by PNB on Feb 13

“This should have evoked suspicion in the minds of overseas branches of the Indian banks extending buyer’s credit. These banks never raised any alarm on violation of RBI guidelines and continued to provide funding against fraudulent LoUs,” the FIR adds.

The complete FIR can be read here.

How the scam happened

Nirav Modi allegedly secured counterfeit approvals for credit from two officials, Gokulnath Shetty and Manoj Khare, at Punjab National Bank’s (PNB) Brady House branch in Mumbai in February 2017, according to an FIR filed by the bank with the Central Bureau of Investigation (CBI).

According to the first complaint dated January 29, two Letter of Undertakings (LoUs) were allegedly issued by the PNB staffers on Februsry 9, 2017, guaranteed against an account in Allahabad Bank in Hong Kong, both of them due to be repaid on Jan 25 this year.

An LoU is a guarantee by the issuing bank to the receiving bank and the companies that it would undertake to pay a certain amount of money on a specific date.

Three more LoUs were allegedly issued the next day on Feb 10 by the same duo, against a guarantee in Allahabad Bank in Hong Kong. The date for repayment was the same ie Jan 25, 2018. Three more LoUs were allegedly issued on Feb 14, with the repayment due on Jan 25. This time around, the loan was guaranteed against deposits at Axis Bank in Hong Kong.

Reportedly, the PNB employees misused the SWIFT network to transmit messages to Allahabad and Axis Bank on fund requirement. One has to log on to the SWIFT network to fill up fields like the account number and SWIFT code, following which it is endorsed by a supervisor. The process is completed once the bank gets a confirmation message. In this case, the transactions were reportedly never recorded on the bank’s system due to connivance of Khare and Shetty.

In total, it’s alleged that eight LoUs amounting to a total of ₹280 crore were given away to Nirav Modi and his associates, as per the first FIR.

“In the light of the above, it has now transpired that the above named accused Gokulnath Shetty and Manoj Hanument Kharat in connivance with the partners of the above firms namely Nirav Modi, Nishal Modi, Ami Nirav Modi and Mehul Chinubhai Choksi and their authorised signatories Hemant Bhatt and Kavita Mankikar committed fraud upon the banks (PNB, Allahabad Bank, Axis Bank) to the tune of ₹280.70 crore,” Deputy General Manager of Punjab National Bank’s (PNB) Zonal Office in Mumbai, Avneesh Nepalia, wrote in a written complaint to the CBI on Jan 29.

Choksi, the maternal uncle of Nirav Modi and allegedly a personal connection of Prime Minister Modi, is the Chairman and MD of Gitanjali Jewellery Retail Limited, Modi was associated with several companies including M/S Solar Exports, M/S Stellar Diamonds and M/S Diamonds R US. In the light of the accused named in the complaint being untraceable, an INTERPOL notice has been served against Nirav Modi, his wife Ami Modi, brother Nishal Modi and uncle Mehul Choksi. All these persons have been named in the FIR.

The funds so raised for payment of import bills have not been utilised for such purposes in many cases, according to the CBI complaint.

As it turns out, this was just the tip of the iceberg. In a face-saver press conference, PNB Chief Executive Sunil Mehta revealed on Thursday that a fraud of a total of ₹11,500 crore had been committed, which wasn’t an accurate representation of the total figure.

Mehta also echoed BJP’s claim that the scam actually began in 2011, without delving into much details if an LoU had been issued back then too.

On Friday, Congress party spokesperson Randeep Surjewala said in a press conference that the value of the scam was much higher, pegging the figure at approximately ₹21,306 crore.

It is emerging that any bank with exposure to Nirav Modi and his associates has been defrauded using the same modus operandi.

It is now learnt that at least 30 banks, including Bank of Baroda, Andhra Bank, Central Bank of India, Vijaya Bank, Union Bank of India, Oriental Bank of Commerce, Dena Bank, Syndicate Bank, UCO Bank, Corporation Bank, IDBI Bank, ICICI Bank, Standard Chartered and EXIM Bank, among others conducted financial transactions with Firestar International, Firestar Diamonds, Gitanjili Gems and Gitanjali Export Corporation. Al, the companies have been named in the FIR filed against Modi and his associates on Jan 29.

Latest updates in NiMo-PNB Scam

Nirav Modi, the kingpin of an at least ₹21,306-crore scam involving Punjab and National Bank (PNB), in now untraceable. He was last seen rubbing shoulders with other CEOs at a meeting with Prime Minister Narendra Modi at the World Economic Forum in Davos on Jan 23, a week before a written complaint was filed against him with the Central Bureau of Investigation (CBI).

He is also believed to be part of an Indian business delegation that accompanied Finance Minister Arun Jaitley to Switzerland. In the wake surfacing allegations against Nirav, the CBI has conducted raids on his properties across the country, with the Enforcement Directorate (ED) confiscating assets worth ₹5,500 crore.

Meanwhile, a lookout notice has been served against Nirav, his uncle Mehul Choksi, as both of their passports have also been revoked. The family members of Nirav, all of them named in the CBI complaint, fled India in the first week of January.

Police, however, were met with some success as they arrested Gokulnath Shetty, who had been absconding, and Manoj Khare on Saturday.

As a the embers of the unfolding scam encircle the Prime Minister himself, the BJP has gone in a huddle to defend their leader.

(With inputs by Dhairya Maheshwari and agencies)

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Published: 17 Feb 2018, 4:18 PM