Finance Minister Arun Jaitley slams regulators’ failure to detect PNB fraud

Finance Minister Arun Jaitley today slammed regulators for failing to detect the Rs 11,400-crore fraud at Punjab National Bank for seven long years, saying unlike politicians, regulators in the Indian system are unaccountable.

Speaking on the scam for the second time this week, he said employees conniving with fraudsters is worrisome. Also worrisome is that no red flag was raised.

Regulators should have a “third eye” open to detect and check such frauds.

Speaking at the ET Global Business Summit, he said the industry needs to get into the habit of doing ‘ethical’ business as such frauds are “scars” and push reforms and ease of doing business to the background.

Unethical behaviour in the lender-borrower relation has to end, he said. “If needed laws will be tightened further to punish delinquent persons.”

He also slammed bank management for failing to do their job saying inadequate supervision and top management being unaware of what was going on in the bank was worrisome.

PNB fraud : Vipul Ambani and 5 others in CBI custody till Mar 5

A special court here today remanded Vipul Ambani, the president (finance) of Nirav Modi’s Fire Star Diamond, and five others in CBI custody till March 5 in connection with the Rs 11,400 crore alleged fraud in Punjab National Bank (PNB).

The six were arrested yesterday in connection with two FIRs registered by the CBI involving Modi and his uncle Mehul Choksi, the owner of Gitanjali Gems.

The FIRs are related to fraudulent issuance of 150 Letters of Undertaking (LoU), a kind of bank guarantee, worth Rs 6,498 crore and 143 LoUs worth Rs 4,886 crore, issued during 2011-17.

Ambani, Kavita Mankikar (executive assistant and authorised signatory of three firms–Diamond R US, Stellar Diamond, Solar Exports), Arjun Patil (senior executive, Firestar group), and Rajesh Jindal, the then head of the Brady House branch of PNB, were listed as accused in the FIR registered by the CBI on January 31.

Those arrested in connection with Choksi’s firms are Nakshatra group and Gitanjali group CFO Kapil Khandelwal and Gitanjali group manager Niten Shahi.

The six were remanded in CBI custody till March 5 by Special Court Judge S R Tamboli.

While seeking Shahi’s custody, the CBI said he fabricated applications and related documents for issuance of purported LoUs for fraudulently availing buyers credit from PNB.

Shahi claimed that all documents were prepared and submitted to Shetty at the instance of one Vipul Chatalia, it said, adding that he was evasive on what was done with the documents once the transactions were completed.

“It is understood that Shetty was returning the set of documents without making the entries in their books although the corresponding SWIFT messages were conveyed to the overseas bank”, the agency said.

According to the CBI, “there is every reason” to believe that Shahi had actively participated in the conspiracy and was aware of other conspirators, the modus operandi adopted and of the end-use of defrauded funds.

On Khandelwal’s role, the CBI said he was reporting to Choksi and was privy to all transactions, including the illegal ones.

“He admitted that he was looking after various credit limits that were extended to the companies by PNB. During examination, he stated the companies were only undertaking transactions, including imports, against credit limits sanctioned to them,” the CBI said.

Special Public Prosecutor Limosin A told the court that they had to unearth how and where these documents for the issuance of LOUs and FLCs were prepared.

He said the agency wanted to recover the documents relating to issuance of LOUs which were handed back by Shetty after transactions and unearth utilisation of the proceeds of the defrauded amount.

“We have to identity other accomplices involved, identify the modus operandi, and to ascertain how many other banks have been defrauded”, said Limosin.

On Ambani’s role, the agency said being the finance department’s head from May 2013 to November 2017, he was aware of the fraudulent and illegal LOUs which were being issued by Shetty in conspiracy and guidance of Modi and other employees.

He was visiting and meeting not only the Brady House branch officials of PNB but also the officials of its circle and zonal offices.

“Ambani’s knowledge of the fraudulent transactions is proved from the fact that during searches at his office, the applications of fraudulent LoUs made to PNB by the three firms of Nirav Modi were seized,” the CBI stated in its remand application.

“The documents and circumstances prove his (Ambani’s) knowledge of the fraudulent applications for LOUs being made in the same premises of Firestar group companies.

“They also prove deliberate acts of omission by Ambani by not protesting the issuance of such fraudulent LoUs that led to the continuance of concealment and large-scale fraud in this case of PNB and loss and diversion of thousands of crores of public funds. This fact prove his part in this sinister conspiracy to cheat PNB,” the agency said.

On Mankikar’s role, CBI said she was the authorised signatory of Modi’s firms that fraudulently obtained LoUs from PNB for the issuance of buyers credit.

“She had fraudulently signed the applications for issuance of the LoUs. She told the agency that she was signing documents as per Modi’s instructions without knowing facts or ramifications of her actions,” the CBI said.

According to the CBI, Patil had prepared the application submitted to PNB in the name of Modi’s firms for issuance of buyers credit. “He has not disclosed how and where such applications were fraudulently prepared,” the agency said.

Seeking remand of Jindal, the CBI said they questioned him about the LoUs issued during his tenure in 2010-2011. “He allowed Shetty to continue issuing LoUs without following existing banking procedure, policy guidelines of PNB and RBI,” it said.

Opposing the custody of the accused, defence lawyers told the court that they had revealed to the CBI whatever they knew.

PNB fraud: Centre opposes plea for SIT probe

The Centre today opposed in the Supreme Court a PIL seeking an independent probe and deportation of billionaire jeweller Nirav Modi in the over Rs 11,000 crore PNB fraud case, saying an FIR has been lodged and a probe was on.

A bench comprising Chief Justice Dipak Misra and Justices A M Khanwilkar and D Y Chandrachud said it would not say anything on the matter now and listed the PIL filed by lawyer Vineet Dhanda for further hearing on March 16.

Attorney General K K Venugopal, appearing for the Centre, said he was opposing the PIL on various grounds, including that an inquiry has started after the FIR was registered.

The PIL has made Punjab National Bank, Reserve Bank of India and the ministries of finance and law and justice as parties. It has sought a direction for initiation of deportation proceedings against Nirav Modi and others allegedly involved in the banking fraud, preferably within two months.

The plea has asked for a special investigation team (SIT) to probe the banking fraud, allegedly involving billionaire jewellers Nirav Modi and Mehul Choksi. It has also sought a probe into the role of the top management of the Punjab National Bank (PNB).

The CBI has already registered two FIRs — one on January 31 and another a few days ago — against Nirav Modi, his relative Mehul Choksi of Gitanjali Gems and others for allegedly defrauding the PNB of about Rs 11,400 crore.

The plea has sought a direction to the finance ministry to frame guidelines on the grant and disbursal of loans involving big amounts.

“Issue an appropriate writ, order or direction directing the Finance Ministry and the RBI to frame guidelines in granting of the loan of the 10 Crores and above to ensure safety and recovery of such loans,” the PIL has said.

It has also sought the setting up of an experts’ body to deal with cases of bad banking debts in the country. Besides, the petition seeks framing of rules for the recovery of loans from the defaulters within a stipulated period, even by attaching their properties and auctioning them in the open market.

In his PIL, Dhanda has asked for a direction to fasten liabilities on the employees of a bank for sanctioning loans on the basis of deficient documents and said loans should also be recovered by attaching the properties of such bank officials even after their retirement.

Another plea filed by Sharma on a similar issue has not come up for hearing yet.

Sharma, in his plea, has said the SIT should consist of retired judges of the apex court and said that the banking fraud has caused serious injury to the general public and the state’s treasury. It should be investigated not by an agency “being controlled by the political leaders/authorities”, he has said.

The plea has alleged that loans were issued in the case without following RBI’s financial rules and regular systems.

Source : PTI

PNB fraud PMLA case : ED summons Nirav Modi and Mehul Choksi

The ED today issued summons for appearance to billionaire diamond merchant Nirav Modi and his business partner Mehul Choksi in connection with its money laundering probe in the Rs 11,400 crore alleged fraud in Punjab National Bank (PNB), officials said.

They said both Modi and Choksi were summoned under the Prevention of Money Laundering Act (PMLA) and asked to depose within a week’s time.

The notices were handed over to the directors of the firms of the two businessmen as they were not in the country.

While Modi runs the jewellery brand chain under his name, Choksie is the promoter of Gitanjali Gems.

The ED had registered a PMLA case against them and others based on a CBI FIR which was the result of a PNB complaint.

The ED yesterday carried out multiple raids on showrooms, workshops, offices and residences of Modi and Choksi and seized diamonds, jewellery and gold worth Rs 5,100 crore.

The agency was probing if the allegedly defrauded bank funds were laundered and these proceeds of crime subsequently used by the accused to create illegal assets and black money.

Modi, 46, a regular feature on the lists of rich and famous Indians since 2013, was booked by the CBI, along with wife, brother and Choksi on January 31, for allegedly cheating the state-run PNB to the tune of Rs 280 crore.

The bank has sent two more complaints to the CBI on Tuesday, saying the scam was worth more than Rs 11,400 crore.

The CBI had earlier raided the residences of Modi, his brother, wife and Choksi, all partners of Diamond R US, Solar Exports and Stellar Diamonds and two bank officials — Gokulnath Shetty (now retired) and Manoj Kharat, who were also named in the FIR as accused.

“The public servants committed abuse of official position to cause pecuniary advantage to Diamond R US, Solar Exports, Stellar Diamonds and a wrongful loss of Rs 280.70 crore to Punjab National Bank during 2017,” the CBI FIR has alleged.

The jewellery designer is a citizen of the country but his brother Nishal and wife Ami are not Indian nationals. They all left India between January 1 and 6, the CBI said.