Home / Companies / News /  PNB scam: ED unearths Rs5,000 crore money trail

The Enforcement Directorate (ED) has traced more than Rs5,000 crore that has been funnelled through layers of shell companies controlled by jeweller Nirav Modi and his uncle Mehul Choksi in the Punjab National Bank (PNB) fraud case, two people directly aware of the matter said.

Based on the investigations, ED will likely file charges against Modi and Choksi within a month, the people, including an official at the investigative agency, said, requesting anonymity.

The agency is probing alleged money laundering in the Rs12,636 crore PNB scam, involving billionaire diamond merchant Modi and his uncle Mehul Choksi, both of whom fled the country before the fraud was discovered in February.

“The layers of companies appear to be shell structures. In the case ED suspects involvement of as many 40 shell structures," said one of the two people cited above. 

“Funds, instead of being directly transferred to overseas subsidiaries, have passed through at least two or more companies. And with loans not being refunded, such fund flow suggests mala fide intent. Even in previous fraud cases we have come across similar modus operandi," said the ED official, the second of the two people cited earlier. “About half of Rs5,000 crore has come back to Modi and Choksi’s India-based firms as foreign investment or through hawala route."

The filing of a chargesheet will help in the provisional arrest request and extradition of the accused, he said, adding that Modi is in Hong Kong and Choksi is in the US.

“The (foreign) ministry has sought the provisional arrest of Nirav Deepak Modi by the government of the Hong Kong Special Administrative Region, People’s Republic of China, for which a request has been submitted to them on 23 March 2018," V.K. Singh, minister of state in the ministry of external affairs, told the Rajya Sabha on 5 April. 

While both Modi and Choksi have denied wrongdoing and have said that they are unable to join the ongoing investigation, their lawyers told Mint that the two were unable to travel to India since their passports have been suspended.

According to the first person cited earlier, the bulk of these so-called shell structures have been traced back to Hong Kong and Dubai. 

Meanwhile, the Central Bureau of Investigation (CBI) has expanded its probe to other Indian banks whose overseas branches were involved in the issue of buyers’ credit on the basis of letters of undertaking (LoUs) issued by PNB. 

“The agency has observed the involvement of shell companies; that is why the examination of other banks has become necessary," said a CBI official. 

According to public records with the Registrar of Companies, Modi’s Firestar International Ltd has 48 subsidiaries. Four of these are based in India and the rest overseas. 

Meanwhile, PNB managing director Sunil Mehta said the lender will emerge from the mess created by the Nirav Modi fraud case in six months. “The worst is behind us. Everything now seems to be under control as surgery is over, now we are in recovery phase," Mehta said in an interview to PTI.

PTI contributed to this story.

Jayshree P Upadhyay
Jayshree heads a team of reporters focussing on legal, regulatory, investigative stories. She has worked for over a decade, reporting on financial scams, legal stories and the intersection of corporate and regulatory issues. She is based in Mumbai and has previously worked with Business Standard, Mint, The Morning Context and Bloomberg TV India.
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