National: In a significant development in the multi-crore Punjab National Bank (PNB) loan fraud case, fugitive diamond trader Mehul Choksi has been apprehended in Belgium. The arrest comes after persistent efforts by Indian probe agencies, specifically the Central Bureau of Investigation (CBI) and the Enforcement Directorate (ED), who had formally requested his extradition.
Choksi, who is the second prime suspect in the staggering Rs 13,000 crore fraud, had non-bailable warrants issued against him by courts in Mumbai. This action against him follows that of his nephew, diamantaire Nirav Modi, who is also a key accused in the same case. The apprehension took place on Saturday, acting upon the extradition request initiated by the CBI and the ED.
Investigations reveal that Choksi had been located in Belgium since last year, having reportedly travelled there citing medical reasons. Prior to this, he had been residing in Antigua since 2018, after having left India. Sources indicate that an Interpol Red Notice previously issued against him for arrest had been removed sometime ago, compelling Indian agencies to pursue his extradition through diplomatic channels.
As part of the extradition request submitted to Belgian authorities, Indian agencies shared at least two open-ended arrest warrants issued by a special court in Mumbai in 2018 and 2021. Following the arrest and subsequent detention, formal legal procedures are currently underway. It is anticipated that Choksi may seek bail, potentially citing health grounds.
The CBI and the ED had jointly booked Choksi, Nirav Modi, their family members, employees, and several bank officials back in 2018 for their alleged involvement in orchestrating the massive loan fraud at the Brady House branch of the Punjab National Bank in Mumbai. The accusations detail how Choksi, along with his firm Gitanjali Gems and others, allegedly engaged in criminal conspiracy and cheating against PNB. This was purportedly achieved through fraudulent acquisition of Letters of Undertaking (LoUs) and the enhancement of Foreign Letters of Credit (FLCs) in collusion with certain bank officials, all without adhering to prescribed procedures, thereby causing substantial wrongful loss to the bank.
The CBI has to date filed at least two chargesheets against Choksi in connection with this intricate case, while the Enforcement Directorate has filed three prosecution complaints. Meanwhile, Nirav Modi, who has been officially declared a fugitive economic offender, has been in a London jail since his arrest by authorities there in 2019, based on a legal request from the ED and the CBI. He is currently contesting his extradition to India.
According to the findings of the investigating agencies, officials at PNB’s Brady House branch in Mumbai allegedly issued a total of 165 LoUs and 58 FLCs during the period of March-April 2017, against which a staggering 311 bills were discounted. These financial instruments were purportedly issued to Choksi’s associated firms without any sanctioned limit or the mandatory cash margin, and crucially, without any corresponding entries in PNB’s core banking system. This alleged omission was a deliberate attempt to evade scrutiny in the event of a default.
Letters of Undertaking (LoUs) function as a bank’s guarantee on behalf of its client to a foreign bank, stipulating that if the client fails to repay the foreign bank, the guarantor bank assumes the liability. Based on these allegedly fraudulent LoUs issued by PNB, significant amounts of money were lent by various international branches of Indian banks, including SBI Mauritius, Allahabad Bank Hong Kong, Axis Bank Hong Kong, Bank of India Antwerp, Canara Bank Manama, and State Bank of India Frankfurt.
The CBI’s supplementary charge sheet in the PNB bank fraud case explicitly stated that “since the accused companies did not repay the amount availed against the said fraudulent LoUs and FLCs, PNB made the payment of Rs 6,344.97 crore (USD 965.18 million), including the overdue interest, to the overseas banks, which had advanced buyer’s credit and discounted the bills against the fraudulent LoUs and FLCs issued by the PNB.” In a parallel effort to recover the defrauded funds, the ED has successfully attached or seized assets belonging to Choksi worth Rs 2,565.90 crore, and the court has granted permission for the “monetisation” of all these identified properties.
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