Sebi attaches bank, demat, MF accounts of Mehul Choksi to recover dues

Markets regulator Sebi has ordered the attachment of bank accounts and shares and mutual fund holdings of fugitive businessman Mehul Choksi to recover dues totalling Rs 5.35 crore.

The latest decision has been taken after Choksi failed to pay the fine imposed on him in October 2022 by Sebi in a case pertaining to indulging in fraudulent trading in the shares of Gitanjali Gems Ltd.

Choksi, who was the chairman and managing director as well as part of the promoter group of Gitanjali Gems, is the maternal uncle of Nirav Modi. Both of whom are facing charges of defrauding state-owned Punjab National Bank (PNB) of more than Rs 14,000 crore.

Both Choksi and Modi fled India after the PNB scam came to light in early 2018. While Choksi is said to be in Antigua and Barbuda, Modi is lodged in a British jail and has challenged India's extradition request.

In an attachment notice on Wednesday, Sebi said the pending dues of Rs 5.35 crore include the initial fine of Rs 5 crore, interest of Rs 35 lakh and a recovery cost of Rs 1,000.

To recover the dues, Sebi asked all the banks, depositories -- CDSL and NSDL -- and mutual funds not to allow any debit from the accounts of Choksi. However, credits have been permitted. Further, Sebi has directed the banks to attach all accounts, including lockers, held by the defaulter.

Initiating the recovery proceedings, Sebi said there is sufficient reason to believe that Choksi may dispose of the amounts in the bank accounts, mutual fund folios and securities in the demat accounts held with the depositories and "realisation of the amount due under the certificate would, in consequence, be delayed or obstructed".

Before the attachment proceedings, Sebi, on May 18, had sent a demand notice to Choksi, asking him to pay Rs 5.35 crore in the case and warned of arrest and attachment of assets as well as bank accounts if he fails to make the payment within 15 days.

In October 2022, Sebi levied a fine of Rs 5 crore on him for indulging in fraudulent trading in the shares of Gitanjali Gems Ltd.

Apart from penalising, the regulator barred him from the securities market for 10 years.

The regulator had issued a common show cause notice to Choksi in May 2022 pursuant to an investigation into the alleged manipulative trading in the scrip of Gitanjali Gems. The regulator conducted an investigation into the trading activities of certain entities in the scrip of the company for the period July 2011 to January 2012.

Sebi said that Choksi had funded a set of 15 entities known as 'front entities', who were directly or indirectly connected with him and with each other and who had taken a position in the scrip of Gitanjali Gems both in the cash and derivative segments during the investigation period. He had used them as front entities for manipulation in the company's scrip.

In February 2022, Sebi prohibited Choksi from the securities markets for one year and levied a fine of Rs 1.5 crore on him for violating insider trading rules in the matter of Gitanjali Gems, and in February 2020, the regulator slapped a total fine of Rs 5 crore on Choksi, Gitanjali Gems and another individual for violating various regulations, including listing norms, in connection with the massive fraud on PNB.