Sebi issues attachment order against Mehul Choksi for non-payment of penalties

The Securities and Exchange Board of India (Sebi) on Friday issued a recovery attachment order against absconding diamond merchant Mehul Choksi, who is a co-accused in the Rs 13,850-crore Punjab National Bank (PNB) fraud case, which is one of the biggest banking scams in India's history.

Sebi's recovery officer has been assigned the task of taking action on the attachment order, issued on June 4 by the financial agency's Mumbai office.

The action against the fugitive diamond merchant had been initiated due to the non-payment of a Rs 1.5 crore penalty imposed by Sebi on January 31, 2022.

Sebi went ahead with the attachment as it believed that Choksi might dispose of funds, thus obstructing the recovery of the total dues amounting to Rs 2.10 crore.

Choksi, who has been wanted in India since 2018, was arrested in Belgium in April. His arrest, which took place on April 12, was made by Belgian authorities after a request from Indian agencies like the Central Bureau of Investigation (CBI) and the Enforcement Directorate (ED).

He was detained in a hospital in Belgium, where he was said to be receiving medical treatment.

ABOUT PNB SCAM

The Rs 13,850-crore PNB scam involved Choksi and his nephew Nirav Modi, who is currently languishing in a jail in the UK and is soon to be extradited to India.

Together, they were able to take loans from foreign banks using Letters of Undertaking (LoUs) issued by PNB's Brady House branch in Mumbai. An LoU is a bank guarantee which allows customers to get short-term credit from overseas banks.

From 2011 to 2018, Choksi, Modi and their companies used these LoUs without following the normal procedures. Some bank officials were involved and allowed the LoUs to be issued without entering them into the bank’s main system. This helped the fraud go unnoticed for years.

The funds, which were shown as being used for importing goods, were mostly never returned. Instead, new LoUs were taken to repay the earlier ones, and the money was used for business and personal gains.

The total value of the fraud reached around Rs 13,850 crore. Out of this, Nirav Modi’s companies were linked to Rs 6,498 crore and Choksi's Gitanjali Group to Rs 6,097 crore. The remaining amount includes interest and other charges.