INDIA’S federal investigation agency has filed a fresh case against absconding diamantaire Mehul Choksi for allegedly defrauding a financial institution.
Choksi, who is also wanted along with his nephew Nirav Modi in a loan fraud case of Rs 135 billion (£1.41 bn), is accused of inflating the value of diamonds and jewellery pledged to get a Rs 250-million (£2.6m) loan, officials said on Monday (2).
The Central Bureau of Investigation (CBI) has booked Choksi, his company Gitanjali Gems and valuers Surajmal Lallu Bhai and Co, Narendra Jhaveri, Pradip C Shah and Shrenik Shah, they said.
The central agency has acted on a complaint from Industrial Finance Corporation of India (IFCI) Ltd alleging that Choksi had approached it in 2016 seeking a Rs 250m working capital loan for which he had pledged shares and gold and diamond jewellery.
According to the valuations submitted by four different valuers, the jewellery pledged was in the range of Rs 340m (£3.54m) and Rs 450m (£4.68m) based on which IFCI sanctioned the loan sought by Choksi.
As the company allegedly defaulted on payments, IFCI started to invoke the pledged shares and jewellery.
However, it could only sell 6,48,822 shares amounting to Rs 4.07 billion (£4.20m) of the total 20,60,054 pledged shares because the client ID of Choksi was blocked by the depository NSDL, according to the complaint which is now part of the first information report (FIR).
IFCI now focussed on pledged jewels - gold, diamonds and studded jewellery - but its fresh valuations by a different set of valuers showed that their values were 98 per cent below the initial reports submitted by Choksi at the time of availing loan.
The fresh valuations showed that the pledged jewellery valued anything between Rs 7m (£72,853) and a little more than Rs 20m (£208,152) only, it said.
IFCI alleged that Choksi "with dishonest and fraudulent intention colluded with the valuers and got the valuation of the pledged jewels done with exorbitant and inflated value".
The fresh valuations showed that diamonds were of low-quality “lab-prepared” chemical vapour diamonds and other inferior colour stones and not real gemstones.
The loan account was declared a non-performing asset on June 30, 2018, causing a wrongful loss of more than Rs 220m (£2.29m) to IFCI, it said.
"The CBI conducted searches at eight locations in Kolkata and Mumbai at the premises of the accused valuers. Incriminating documents were recovered," CBI spokesperson R C Joshi said.
Choksi is already accused of siphoning off more than Rs 63.44 bn (£660m) from Punjab National Bank (PNB) using fraudulent letters of undertaking and foreign letters of credit.
Officials at PNB's Brady House branch in Mumbai issued 165 letters of undertaking (LoUs) and 58 foreign letters of credit (FLCs) during March-April 2017, against which 311 bills were discounted.
These LoUs and FLCs were allegedly issued to Choksi's firms without any sanctioned limit or cash margin and without making entries in the bank's central banking system to evade any scrutiny in case of a default.
LoUs are a guarantee given by a bank on behalf of its client to a foreign bank. If the client does not repay the foreign bank, the liability falls on the guarantor bank.
Based on these LoUs by PNB, money was lent by SBI, Mauritius; Allahabad Bank, Hong Kong; Axis Bank, Hong Kong; Bank of India, Antwerp; Canara Bank, Mamana; and State Bank of India, Frankfurt.
As the accused companies did not repay the amount availed against the fraudulent LoUs and FLCs, PNB made the payment of Rs 63.44 nm (£660m), including the overdue interest, to the overseas banks, the CBI had alleged.
Indian diamantaire Choksi pledged ‘fake diamonds to get loan’
