The Enforcement Directorate’s dossier has revealed the technicalities of the 2 billion dollars Punjab National Bank scam in which Mehul Chosksi, Nirav Modi and their families are prime accused. The 2 billion dollar scam shook Indian banking system at a time when most of the public sector banks were already facing Non Performing Assets (NPAs) issue. The ED’s investigation reached to same conclusion as CBI had concluded previously, “Choksi obtained letters of undertaking and credit from PNB to settle previous obligations. Money generated through letters of undertaking and credit was partly remitted back to Choksi’s Gitanjali group of companies in the guise of export-import transactions for settling earlier liabilities,” revealed ED document.
Shell companies were leisurely used by fraudsters to show fake export and imports from foreign company firms. “The remittance emanated from the dummy firms in Hong Kong on account of purchases/export transactions were transferred to different banks (accounts) of Mehul Choksi/Gitanjali Group of Companies operating in India. Part of the funds were routed to overseas companies controlled by Mehul Choksi located in USA, UAE, UK, Hong Kong and Thailand in the guise of export-import transactions,” states the documents which is part of the formal charges filed against Choksi.
The government took strict action against shell companies in previous years. In the fiscal year of 2017-18 as many as 2, 26,000 companies were removed from Registrar of Companies (ROC) because they did not file annual returns over last two or three years. The task force has identified another 2.25 lakh shell firms to de-register this financial year. Shell companies are used for tax evasion, money laundering, and other fraudulent transactions. Sometimes money obtained through Hawala transactions is also used for terrorist and other anti national activities. In the PNB fraud case, shell companies owned by Nirav Modi’s family showed sham import and exercises to loans from bank. “There were no manufacturing activities in any of the overseas companies (of Mehul Choksi) situated Hong Kong and UAE; only bogus import and export and sale among themselves were carried out. The invoices of export/import were overvalued to a huge extent, so as to inflate the balance sheets and procure higher credit facilities from the bank. The export/import was also not genuine and was just rotational transaction,” said ED in its dossier.
ED has been appointed as Nodal agency to probe the scam under Prevention of Corruption act. It has already confiscated the properties of Nirav Modi and Mehul Choksi in India and looking to confiscate their overseas properties. The agency has asked Interpol to issue red corner notices to Choksi, Modi and several of their family members. The Interpol has issued notices against Nirav Modi and his sister but the request of notice against Mehul Choksi is pending for months. Choksi is now a citizen of Antigua and Barbuda, if a red corner notice is issued then Indian government could pressure Antigua government to handover Choksi or an extradition trial could be initiated in some other country like United Kingdom. The extradition case against Nirav Modi is expected to proceed in United Kingdom where he is residing currently and had sought political asylum. ED has already moved against him in a Mumbai special court under the new Fugitive Economic Offenders Bill (an amendment in Prevention of Corruption Act) which was brought to give more teeth to investigation agencies in fugitive offender cases. According to agency officials, the court will hear its applications on September 25 ( Nirav Modi) and 26 (Choksi).