PNB scam: ED summons Nirav Modi again, seizes watches; top 10 developments

Nirav Modi might have escaped the legal consequences for the Rs 114-billion Punjab National Bank (PNB) scam so far, but central probe agencies have kept up the pressure on the absconding businessman. The Enforcement Directorate (ED) on Friday said it had frozen bank deposits and shares worth about Rs 440 million (Rs 44 crore) of the Nirav Modi group and seized a huge collection of imported watches from locations linked to the billionaire diamantaire. 

If Modi didn't feel the pain after the agency on Thursday seized his luxury cars, including a Rolls Royce, the seizure of his huge collection of imported watches might not do the trick. However, the ED is not relenting with its searches at multiple locations linked to the billionaire diamond jewellery designer. Further, fresh summons were issued against Nirav Modi, after he failed to appear and depose before the ED on Thursday. 

Modi isn't the only one under the microscope, people who bought his jewellery are also facing scrutiny. According to reports, the Income Tax (I-T) department has issued notices against 26 people who allegedly purchased diamond jewellery worth Rs 2.52 billion in cash from Nirav Modi's group. According to the sources, these individuals made cash transactions with the jewellery firm between Rs 10 million and Rs 50 million in 2016-17. 

Meanwhile, PNB has a message for Nirav Modi: submit "a concrete and implementable plan" to clear your liabilities. 

According to news agency ANI, the Finance Ministry has written to Hong Kong branches of four Indian banks that received Letters of Undertaking (LoUs) from PNB.   

Here are the top 10 developments in the massive scam involving one of India's richest men, Nirav Modi:

1) Modi takes Rs 440 million hit: On Friday, bank deposits and shares worth about Rs 440 million of the Nirav Modi group were frozen and a huge collection of imported watches seized by the ED, from locations linked to the billionaire diamantaire. ED officials said that they have put freeze orders on bank accounts containing Rs 300 million and shares worth Rs 138.6 million of the group under the Prevention of Money Laundering Act (PMLA).   

A huge collection of imported watches, 176 steel almirahs, 158 boxes, and 60 other containers were seized during searches at multiple locations linked to the absconding billionaire.

2) FinMin writes to SBI, Axis, Allahabad Bank and BoI's Hong Kong branches: The Finance Ministry has written to Hong Kong branches of four Indian banks that received LoUs from PNB, sources told news agencies on Friday.   

"The Finance Ministry has written to Hong Kong branches of the State Bank of India, Axis Bank, Allahabad Bank and Bank of India that got letters of undertaking (LoUs) from the PNB and told them to reconcile accounts and check for irregularities," said sources.

The Finance Ministry has also directed all banks to reconcile issued LOUs, the sources added. 

Further, the ministry has put several regulatory measures in place. "The public sector banks have also been directed to appoint special representative or agency to monitor all loans that exceed Rs 2.5 billion (Rs 250 crore)," the sources informed. The ministry has also issued guidelines for consortium financing and said that only seven banks can be in a consortium.

Till now, there was no cap on the number of banks in a consortium. Under consortium financing, several banks fund a borrower with a common appraisal, common documentation, joint supervision and follow-up exercises. 

3) CAs under the scanner too: The Institute of Chartered Accountants of India (ICAI) is probing whether auditors played a role in perpetrating the Rs 114-billion fraud at the Punjab National Bank.  

The ICAI said on Thursday that it has asked the Securities and Exchange Board of India, PNB and investigating agencies to share their findings about the alleged fraud, including anything related to the involvement of any chartered accountants. 

4) Even Modi's customers not spared: Tax sleuths have issued notices against 26 people who allegedly purchased diamond jewellery worth Rs 2.52 billion in cash from Nirav Modi's group. According to sources, these individuals made cash transactions with the jewellery firm between Rs 10 million and Rs 50 million in 2016-17.  

The I-T department has sought an explanation on the "nature and source" of transactions with the Modi Group firms. Further, it has demanded that those served notices furnish details of the mode of payment made to the firm. "Non-satisfactory answers would entail penalty and prosecution," said an I-T official. 

5) PNB demands 'concrete plan' from Modi: On Thursday, PNB told Nirav Modi to submit "a concrete and implementable plan" to clear his liabilities. Responding to a recent e-mail from the absconding billionaire, the lender said that companies owned by Modi had obtained LoUs illegally and in violation of the Foreign Exchange Management Act (FEMA), prompting it to go public about the fraud.  

Further, the scam-hit bank termed the whole loan-taking exercise by the accused firms as "money laundering". The bank said that the LoUs were not backed by collateral, and these companies did not submit any timeline for import of goods (in this case, pearls). "You were getting LoUs issued illegally and in an unauthorised way through a few bank officials. At no stage were such facilities extended by our bank to the three partner firms. When these illegal activities surfaced, they pointed to an apparent violation of FEMA and the money laundering law," PNB's general manager (international banking division), Ashwini Vats, said in an e-mail response. 

6) PNB sets PwC on Modi's trail: PNB has roped in PwC to conduct a probe into the alleged fraud that would help the bank build a case against jewellers Nirav Modi and Mehul Choksi.   

According to the Economic Times, PwC has been tasked with identifying the money trail and ending the use of funds availed through the LoUs. Further, the auditor would identify bogus transactions and trace the assets of Nirav Modi and his accomplices that have not been disclosed in their balance sheets. 

7) Modi tells ED he can't depose: Nirav Modi on Thursday told the ED that he could not appear before it as his passport has been suspended. According to ED officials, Modi, in his email reply to the agency, said that he "cannot depose before the agency now as his passport has been temporarily suspended". 

On Friday, the government temporarily suspended the Modi and Choksi's passports for four weeks on the request of the ED. It had also asked Modi and Choksi to respond within one week as to why their passports should not be impounded or revoked under Section 10 (3) (c) of the Passports Act 1967. 

8) CBI confident of water-tight case against Vipul Ambani: CBI sources claimed that the agency has strong evidence to make a water-tight case against Vipul Ambani, the president (finance) of Firestar International, in the PNB fraud case.  

The CBI is reportedly in possession of crucial information showing that Ambani's assets were disproportionate to his known sources of income. According to a senior CBI official, Ambani's assets are being examined and if the allegations are proved, the assets could be seized by the concerned agency depending on the laws violated by him. "Documents revealed that he has created substantial assets in the past three-four years soon after he joined Nirav Modi's group of companies," he said.  

9) I-T dept attaches Rs 12-bn SEZ unit of Gitanjali Gems: Tax sleuths on Thursday said that they have attached Rs 12 billion worth of the Gitanjali group's property located in a Special Economic Zone (SEZ) in Hyderabad in connection with a tax evasion probe.  

The officials said the property has been provisionally attached under the Income Tax law and the action was taken to "recover outstanding tax demands". They said the valuation of the property, in the SEZ at Rs 12 billion, has been done by the assessee and the department has put up a notice on the property.

The department, in the last few days, has similarly attached nine bank accounts and seven properties of the group and Choksi. 

10) CBI questions PNB's deputy general managers: On Thursday, CBI officials said that the agency has questioned three PNB deputy general managers in connection with its probe into the Nirav Modi fraud. 

The agency also confronted the 12 accused arrested by it with the material seized during searches, documents and each others' statements so far, the officials said. 

The CBI had arrested Vipul Ambani, president (finance) of Fire Star Diamond, executive assistant Kavita Mankikar, and senior executive Arjun Patil (all from Modi's companies) on Tuesday. Kapil Khandelwal, CFO of Nakshatra Group and Gitanjali Group, and Niten Shahi, manager of Gitanjali Group, were also arrested by the agency on the same day. An authorised signatory of Modi's company was also arrested. 

From PNB, the agency has arrested Rajesh Jindal, a general manager, retired official Gokulnath Shetty, and single-window operator Manoj Kharat, besides three other officials -- Bechhu Tiwari, Yashwant Joshi, and Praful Sawant.   

With agency inputs