Companies owned by fugitive diamantaire Mehul Choksi have allegedly siphoned off over Rs 6,344.96 crore from the Punjab National Bank (PNB) using fraudulent letters of undertaking and foreign letters of credit, a CBI investigation into the scam has detected.
The findings were submitted by the CBI in a supplementary chargesheet filed before a special court in Mumbai last week, where the agency said the PNB was conned by its employees who were allegedly hand in gloves with Choksi and his company executives and who facilitated the scam as part of a criminal conspiracy.
The PNB officials at the bank'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 to the foreign bank, the liability falls on the guarantor bank.
"Since the accused companies did not repay the amount availed against the said fraudulent LoUs and FLCs, the PNB made the payment of Rs 6,344.97 crore ($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," the CBI's supplementary chargesheet has alleged.
The PNB had accused Choksi of duping it to the tune of Rs 7,080 crore.
CBI officials said the matter is still under investigation and the final figures of loss suffered by the bank can only be determined once all the LoUs are examined and the probe is complete.
In addition to the 18 accused named in the first chargesheet, the agency has named four new accused in its supplementary report, including the former international head of the Gitanjali Group of Companies, Sunil Verma, two PNB officials -- single-window operator Sagar Sawant and AGM Sanjay Prasad -- and a director of the Gili and the Nakshtra brands under the group, Dhanesh Sheth.
The supplementary chargesheet, filed more than three years after the first chargesheet in the case against Choksi and his companies, coincides with the legal proceedings against the fugitive diamantaire in a court of Dominica, where he was arrested for "illegal entry" on May 24 after his mysterious disappearance from neighbouring Antigua and Barbuda.
"This supplementary chargesheet after three years shows that it is only an attempt to cover up anomalies that the defence had pointed out in the first chargesheet. Moreover, the addition of section 201 of the IPC for destruction of evidence is not legally tenable as a document becomes evidence only after its filing in the court and the allegations are of a period much prior to the FIR," Choksi's lawyer Vijay Aggarwal said.
Choksi was living in Antigua and Barbuda since 2018, after he fled India in the first week of January that year, weeks before the scam was reported.
The diamantaire and his nephew, Nirav Modi, have allegedly siphoned off over Rs 13,000 crore of public money from the PNB using LoUs and FLCs by bribing officials of the bank's Brady House branch.
The agency has slapped charges of criminal conspiracy, cheating, breach of trust, disappearance of evidence, falsification of accounts, bribery and criminal misconduct by public servant in its supplementary chargesheet.
The CBI investigation has found that accused PNB official Gokulnath Shetty, in a conspiracy with Choksi, had in an "unauthorised" manner issued 165 LoUs from the PNB's Brady House branch between March 1, 2017 and April 29, 2017 on behalf of Gitanjali Gems (113 LoUs), Gili India Limited (35 LoUs) and Nakshatra Brands (17 LoUs) -- all accused firms -- the chargesheet has alleged.
The purpose of this trade transaction was shown as purchasing fresh water pearls from Shanyao Gong Si Limited and 4Cs Diamond Distributors, both based in Hong Kong, the CBI has said.
It has found that the accused companies availed 142 buyer's credit amounting to Rs 3,011.38 crore and did not make payments on the due date "wilfully", causing loss to the bank and corresponding profits to themselves.
It is alleged that Choksi and Modi used the mechanism to get credit from foreign banks, which was not repaid, bringing a liability of over Rs 13,000 crore on the PNB.
The investigation has further revealed that the fraud was allegedly perpetrated despite circulars issued by the Reserve Bank of India (RBI), which was in the knowledge of senior PNB officials.
Further, the PNB officials did not implement the circulars and caution notices issued by the RBI regarding safeguarding the SWIFT (international banking messaging system) operations and instead, misrepresented the factual situation to the RBI, the agency has alleged.