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The Hindu
The Hindu
Devesh K Pandey

Explained | The case against Mehul Choksi

The story so far: Earlier this week, Dominica dropped criminal proceedings against diamantaire Mehul Choksi, who was accused of illegally entering the country in May 2021. Now wanted by the Central Bureau of Investigation (CBI) and the Enforcement Directorate (ED) for his alleged role in the ₹13,578 crore Punjab National Bank (PNB) fraud, he had shifted to Antigua and Barbuda in January 2018, days before the first case against him was registered.

What happened in Dominica?

On May 23, 2021, Mr. Choksi went missing from Antigua and Barbuda under mysterious circumstances. He later surfaced about 190 km away in Dominica, where he was detained on the charge of illegal entry. On May 27, 2021, the Dominican government confirmed his presence there. His family and lawyers alleged that he was abducted and taken to Dominica in a yacht, and had in that process, suffered injuries as well. In July 2021, a Dominica High Court allowed him to travel back to Antigua and Barbuda on bail for medical treatment. The Dominican government has now decided to drop all charges against him.

What are the charges against Mr. Choksi in India?

On the PNB’s complaint, the CBI registered the first case against Mr. Choksi, his nephew, Nirav Modi and others on January 31, 2018, alleging that they cheated the bank of over ₹280 crore in conspiracy with some officials. The alleged role of three companies, Diamonds R US, Solar Exports and Stellar Diamonds, was detected after they approached the bank’s corporate branch in Mumbai for buyer’s credit to make payment to the so-called overseas suppliers.

Days later, the agency registered another case against three Gitanjali group companies of Mr. Choksi for causing an alleged ₹4,887 crore loss to the bank. Following investigations, the CBI filed a chargesheet alleging that the amount involved was over ₹7,080 crore.

In an unrelated matter, earlier this month the CBI registered yet another case against Gitanjali Gems Limited, Mr. Choksi and others for allegedly cheating the IFCI Limited of ₹22.06 crore.

The ED has filed chargesheets under the Prevention of Money Laundering Act and attached properties worth hundreds of crores in India and abroad. Proceedings against him have also been initiated under the Fugitive Economic Offenders Act

How was the PNB allegedly cheated by Mr. Choksi and his associates?

The CBI found that Mr. Choksi’s companies were fraudulently issued 165 Letters of Undertaking (LoU). The value of 58 Foreign Letters of Credit (FLCs) were also enhanced in 2017 for payment to dummy overseas suppliers. In all, 347 FLCs were issued from 2014-16. The suspect transactions had been initiated in 2011 and they continued till the bank authorities unearthed the “scam”. They earlier remained undetected as the respective major entries were not made in the bank’s Core Banking Software (CBS).

Initially, the FLCs were opened for small amounts against which entries were recorded in CBS and letters sent to overseas branches through the SWIFT messaging system. As time went by, the value of FLCs was enhanced manifold by making amendments via SWIFT, without making CBS entries. The funds released to “suppliers” were used for clearing previous liabilities and other purposes, as alleged.

When did the shift to Antigua and Barbuda happen?

Mr. Choksi and his relatives flew out of India in the first week of January 2018, days before the bank lodged a complaint with the CBI. The agencies later found that he had applied for Antiguan citizenship in May 2017. His application was approved in November 2017. On January 15, 2018, he took the oath of allegiance to Antigua and since then has been living there. As alleged, Mr. Choksi had visited Hong Kong in December 2017 and told the dummy directors of “supplier” companies to apply for Thailand visa. Therefore, the ED has alleged that he knew beforehand about the impending criminal proceedings.

What measures are the Indian agencies taking to bring Mr. Choksi back?

Based on its findings, the CBI approached Interpol and got a Red Notice issued against Mr. Choksi in December 2018. Through diplomatic channels, the probe agencies have sought the fugitive’s custody for his prosecution in India. India does not have an extradition treaty with Antigua and Barbuda. However, according to a Ministry of External Affairs’ order dated August 3, 2018, provisions of the Extradition Act, 1962, (other than Chapter III) apply to Antigua and Barbuda with effect from the date of notifying India as a Designated Commonwealth Country under the Extradition Act of Antigua and Barbuda on September 17, 2001. India is currently pursuing its request for Mr. Choksi’s extradition in the court there. He is also facing legal proceedings challenging the validity of his Antiguan citizenship.

  • Dominica dropped criminal proceedings against diamantaire Mehul Choksi, who was accused of illegally entering the country in May 2021. Mr. Choksi is wanted by the CBI and ED for his role in the ₹13,578 crore Punjab National Bank fraud.
  • Mr. Choksi flew out of India in January 2018, to Anitgua. On May 23, 2021, he went missing from Antigua and Barbuda under mysterious circumstances and later surfaced in Dominica, where he was detained on charges of illegal entry.
  • Indian is currently pursuing its request for his extradition in Antigua. The CBI found that Choksi’s companies were fraudulently issued 16 LoUs and 58 FLCs.
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