PNB scam: Nirav Modi hasn't fled, out of India for business, says lawyer

The first high-profile arrest in connection with the Punjab National Bank fraud case took place on Tuesday when the CBI arrested Vipul Ambani

Attorney of Nirav Modi on Wednesday reiterated that his client was not an absconder and questioned as to on what basis he has been branded as a fugitive.

Speaking to ANI, Vijay Aggarwal said, "Please explain to me who is a fugitive? He has been summoned to either appear in person or through authorised representatives. You have branded him as a fugitive on what basis, please tell me. There are so many people who are out of country because they have global business."

The lawyer also said that the strategy, in this case, will be worked out once the Central Bureau of Investigation (CBI) files charge-sheet.

"After CBI charge sheet comes out, of course, one will face it. The fate of the case is 'khoda paahad, nikali chuiya'. I have seen each and every bank document, so each fulcrum of this case's basis is wrong," he added.

The lawyer had earlier also refuted the reports that his client was absconding, saying that he was out of India for "business purposes".

Speaking to media here, Vijay Aggarwal said, "This is your perception that he is absconder. He (Nirav Modi) is not absconding. He has a global business and he went out of India for business purpose. Now his passport has been revoked. His family members, some of them are foreign nationals, also stay abroad most of the time."

Earlier today, the matter of Nirav Modi's possible extradition and a probe into the role of the bank's top management in the Rs 114-billion Punjab National Bank (PNB) fraud case reached the Supreme Court on Wednesday, with the Centre opposing a public interest litigation (PIL) seeking such an action. 

Opposing the PIL, Attorney General K K Venugopal told a Bench of Chief Justice Dipak Misra, Justice A M Khanwilkar, and Justice D Y Chandrachud that an FIR had already been filed in the multi-billion PNB fraud case and a probe was going on. As Venugopal rose to oppose the PIL, petitioner lawyer Vineet Dhanda urged the Bench to issue a notice to the Centre as the "kingpin of the scam Nirav Modi" had run away with the "common man's savings".  

Further, carrying forward with the arrests it made on Tuesday, the Central Bureau of Investigation (CBI) on Wednesday said that it has arrested a General Manager rank officer of the PNB in connection with the Nirav Modi fraud case. "Rajesh Jindal, who was holding the charge of Brady House Branch Head between August 2009 and May 2011 was arrested on Tuesday night from Mumbai," a CBI official said. It was during Jindal's tenure at the Brady House that the alleged fraud took place, the CBI officer said. 

While Nirav Modi might have so far escaped legal consequences in the PNB fraud case, the first high-profile arrest in connection with the episode took place on Tuesday when the CBI arrested Vipul Ambani, president (finance) at Modi's Fire Star Diamond. According to officials quoted in a previous report, four other senior executives were also arrested by the agency in connection with two FIRs registered by it in the scam.

Further, the Income tax (I-T) department on Tuesday questioned PNB Managing Director and Chief Executive Officer Sunil Mehta in connection with the scam allegedly involving companies promoted by Nirav Modi and his uncle Mehul Choksi. 

The arrests and interrogation came on a day when Finance Minister Arun Jaitley, in his first public statement since the scam came to light, said the state would chase down cheaters to the end.

Here are the top developments in India's biggest banking scam, involving one of the country's richest men, Nirav Modi: 

1) Senior PNB staffer arrested: The CBI on Wednesday said that it has arrested a general manager-rank officer of the Punjab National Bank in connection with the Nirav Modi fraud case. "Rajesh Jindal, who was holding the charge of Brady House Branch Head between August 2009 and May 2011 was arrested on Tuesday night from Mumbai," a CBI official said.

It was during Jindal's tenure at the Brady House that the alleged fraud took place, the CBI officer said. Jindal was heading the second-largest branch of the PNB when the practice of issuing the letters of undertaking (LOUs) without sanctioned limits to diamond trader Nirav Modi's firms began. Jindal was presently posted as GM Credit at PNB's Head Office in New Delhi. His was the 14th arrest in the fraud case so far.

Since February 14, when the CBI registered the first FIR in the case, multiple raids at Nirav Modi and Choksi's residential and office premises have been conducted. 
 

2) Tax officials grill PNB MD & CEO: I-T officials on Tuesday questioned PNB Managing Director and Chief Executive Officer Sunil Mehta in the Rs 114-billion scam allegedly involving Nirav Modi and the Mehul Choksi companies. "The I-T department came to the PNB headquarters for questioning that went on for hours," said a source.

The CBI also questioned an executive director of PNB along with nine other officials, according to sources.

Meanwhile, the three PNB officials arrested on Monday — Bechhu Tiwari, Yashwant Joshi and Praful Sawant — were sent to CBI custody till March 3 by a special CBI court in Mumbai.

Tiwari, Joshi and Sawant were entrusted to cross-check and verify intimations sent to SWIFT messages and upload them on PNB's core banking solutions system on a daily basis which they allegedly did not do. Gokulnath Shetty and Manoj Kharat, arrested earlier, allegedly sent messages of the LoUs using an international messaging system for banking called SWIFT, but did not make entries in the bank's system to avoid detection. 

3) First high-profile arrest: On Tuesday, the CBI arrested Vipul Ambani, president (finance) of Modi's Fire Star Diamond, the first high-profile arrest in the case, officials said. Four other senior executives were also arrested by the agency in connection with two FIRs registered by it in the scam, they said.  

Ambani was arrested along with executive assistant Kavita Mankikar and senior executive Arjun Patil in connection with the first FIR registered by the agency, in which 150 letters of undertaking (LoUs) worth Rs 64.98 billion, are under probe. Mankikar was also the authorised signatory for three firms — Diamond R US, Stellar Diamond, Solar Exports — listed as accused in the FIR registered by the agency on January 31. The remaining two — Kapil Khandelwal, the CFO of the Nakshatra group and Gitanjali group, and Niten Shahi, manager of Gitanjali group — were also arrested on Tuesday in connection with the second FIR registered by the agency on February 15 against Mehul Choksi and his three firms.

  

4) Modi's lawyer denied any fraud: Absconding businessman Nirav Modi's lawyer Vijay Aggarwal has alleged that the PNB termed commercial transactions as fraud. PNB has lodged two financial fraud complaints of Rs 114 billion (Rs 11,400 crore) and Rs 2.8 billion (Rs 280 crore) against Nirav Modi, his family members and Mehul Choksi, who owns Gitanjali Gems.  

Aggarwal told the media, "The entire matter was in knowledge of the bank (PNB). The bank took commission of crores of rupees but now it is not accepting it. It was a commercial transaction of the bank which is now being termed as a fraud." Aggarwal also refuted the reports that Nirav Modi was absconding after the case came to light and questioned why he would run away from the country leaving behind assets worth over Rs 50 billion (Rs 5,000 crore). 

"He (Nirav Modi) is not absconding. He has a global business. He was already out on business purposes when this case came to light and now his passport has been revoked. His family members, some of them foreign nationals, also stay abroad most of the time," he said. 

The lawyer also said that the strategy in this case would be worked out once the CBI filed its chargesheet. He added, "The business (of Nirav Modi) has been closed, the bank accounts have been seized, and shops have been shut. At the moment, things are very hazy. We are looking at the case. We will know the charges when the CBI files chargesheet and only then can some strategy be worked out." 

The lawyer also questioned the reported fraud amount of over Rs 110 billion (Rs 11,000 crore). "The CBI has itself maintained that at the moment the amount is Rs 2.8 billion (Rs 280 crore), which may go up to Rs 50 billion (Rs 5,000 crore). I don't know from where the media is getting the figure of Rs 115 billion (Rs 11,500 crore)." 

5) Jaitley says govt will chase down cheaters: Finance Minister Arun Jaitley on Tuesday blamed senior officials of public-sector banks (PSBs), lenders’ auditors and the regulator for the financial fraud. The management at public-sector banks has been found lacking in checking delinquent customers, auditors have "looked the other way", and the regulator has to ensure that stray cases of financial fraud don't become the norm, he said. This was Jaitley's first public statement since the Rs 114-billion fraud at PNB came to light. 

He said the state will chase down cheaters to the end. 

"The prime minister himself said at a Gyan Sangam that we want you (banks) to be autonomous, none of us is going to call you up, and, therefore, take your own decisions. When authority is given to the management, you are expected to utilise that authority effectively and in a right manner. Therefore, the question for the management itself is, was it found lacking? And on the face of it, the answer seems yes. You are found lacking when you are unable to check who among them were delinquent," Jaitley said at the event. 

6) Modi's seized assets won't amount to even a fourth of the scam figure: Assets the government's central probe agencies claim to have seized from Nirav Modi's warehouses and showrooms, which are worth around Rs 57 billion at book value, are likely to yield less than half the amount when they are disposed of. The fraud is estimated at Rs 114 billion, but recovering even a fourth of this amount is unlikely, said probe agency sources.  

So far, the Enforcement Directorate (ED) has conducted searches at over 200 premises of Modi as well as Gitanjali Gems and seized diamonds, gold and precious stones worth Rs 56.74 billion based on their book value. The I-T department has seized 103 bank accounts and 40 properties of the Modi group of firms, but the value of this attachment is not available. 

7) Fitch, Moody's place lender's rating under watch: Following the revelation of the Rs 114-billion fraud at PNB, global ratings agencies Fitch and Moody's have placed the public sector lender under watch for a possible downgrade. 

Moody's has placed the bank's Baseline Credit Assessment (BCA) and adjusted BCA of ba3 and the Counterparty Risk Assessment (CRA) of Baa3(cr)/P-3(cr) under review for a downgrade. The agency cited "the risk of weakening of the bank's standalone credit profile, as a result of the discovery of a number of fraudulent transactions" as the primary driver of the rating action. 

At the same time, Fitch Ratings has placed PNB's viability rating of 'bb' on Rating Watch Negative (RWN). Fitch will resolve the rating watch after more clarity emerges on the extent of control failures and the impact on PNB's financial position. The RWN reflects the possibility of a downgrade of PNB's viability rating, following the detection of a large fraud at one of the bank's branches. At this stage, it does not view this event to have an impact on PNB's support rating floor (BBB-) due to the bank's high systemic importance as the second-largest state-owned bank.

8) 'Nirav Modi won't be found guilty': Nirav Modi's lawyer Vijay Aggarwal has said that the case against his client will collapse just like the 2G scam and the Bofors matter.  

Speaking to news agency ANI, Aggarwal said that the probe agencies would not be able to prove the charges against Nirav Modi in the court of law.

"Like 2G Scam and Bofors matter, this case will also collapse. Agencies are making noises in the media but they will not be able to prove the charges in a court of law. I am sure Nirav Modi will not be found guilty," the lawyer said.

9) PNB's 'haste' to blame: Nirav Modi, the alleged kingpin of the largest banking scam in the country's history, has said PNB's overzealous approach shut the doors on his ability to clear the dues. "In the anxiety to recover your dues immediately, despite my offer, your actions have destroyed my brand and the business and have now restricted your ability to recover all the dues leaving a trail of unpaid debts," Modi said in his letter to banks. 

He said the operations of his companies Firestar International Private Ltd (FIPL) and Firestar Diamond International Private Ltd (FDIPL) had effectively ceased owing to raids launched by investigative agencies, including the Enforcement Directorate and the Central Bureau of Investigation.

10) Modi wants banks to pay his employees' salaries: Nirav Modi has asked the banks to pay salaries to the 2,200 employees working in those firms. "I would request you to permit salaries for FIPL and FDIPL to be paid for the 2,200 employees from the balance lying in the current accounts. Our HR head will send you a breakup of the monthly salary," Modi, who left the country along with his family in the first week of January, before the alleged scam became public, wrote in the letter.