Mumbai: Billionaire jeweller Nirav Modi named in Rs 11,400 crore scam

Nirav Modi (centre). File pic

The state-owned Punjab National Bank yesterday said it has detected a USD 1.77 billion (about Rs 11,400 crore) scam where billionaire jeweller Nirav Modi allegedly acquired fraudulent letters of undertaking from a branch in Mumbai to secure overseas credit from other Indian lenders. PNB has suspended 10 officers and referred the matter to CBI for investigation.

India's second-biggest state-run bank said in a regulatory filing, "The Bank has detected some fraudulent and unauthorised transactions in one of its branch in Mumbai for the benefit of a few select account holders with their apparent connivance. Based on these transactions other banks appear to have advanced money to these customers abroad."

While PNB did not name the other lenders, Union Bank of India, Allahabad Bank and Axis Bank are said to have offered credit based on letters of undertaking (LoUs) issued by PNB. An LOU is a letter of comfort issued by one bank to branches of other banks, based on which foreign branches offer credit to buyers. Foreign bank branches too are under investigation.

Three other jewellers, Gitanjali, Ginni and Nakshatra are under the scanner with CBI and ED looking at their arrangements with various banks and end use of money, said a senior official of a public sector bank. No immediate comments were available from these companies. Last week, PNB had lodged an FIR with CBI stating that fraudulent LoUs worth Rs 280.7 crore were first issued on January 16. At the time, PNB had said it was digging into records to examine the magnitude of the fraud.

In the complaint, PNB had named three diamond firms - Diamonds R Us, Solar Exports and Stellar Diamonds - saying they had approached it on January 16 with a request for buyers' credit for making payment to overseas suppliers. Nirav Modi, his wife Ami, brother Nishal and Mehul Choksi are partners in Diamonds R US, Solar Exports and Stellar Diamonds, which has shops in foreign locations such as Hong Kong, Dubai, and New York. Modi wrote to banks promising to honour all dues.

He says he is looking for suitors for his flagship brand Firestar Diamond, which is valued at over Rs 6,435 crore. Modi says the sale process of Firestar Diamond would take three to six months and has promised to repay all dues to lenders from proceeds of this sale.

Part of a clean-up drive
Financial services secretary Rajiv Kumar said this is not going to impact other lenders. "The finance ministry has taken proactive steps by asking the lender to report the matter to CBI and ED," he said. He added,"This (investigation) is a part of the cleanup drive that started with AQR in 2015. Post clean up, this is going to make banks forever clean, healthy, responsive and enable them to provide hassle-free banking to all honest borrowers."

Not the first case
The designer, himself a celebrity, grew up in Belgium's Antwerp - the diamond capital of the world - and started his own brand by the name of "Nirav Modi". The designer's name first appeared in a CBI case earlier this month after the agency registered a case against him and Mehul Choski, who runs a jewellery and gem store chain with the brand name Gitanjali, for alleged cheating and forgery worth Rs 280 crore on a complaint from PNB.

Also read: PNB suspends 10 in a fraud involving top Mumbai jewellery designer

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