CBI widens PNB fraud probe amid BJP-Congress blame game

Punjab National Bank has declared Gitanjali Gems as a fraud company, even as RBI said it has undertaken an assessment of PNB’s control systems. Photo: Mint

New Delhi: The Congress and the Bharatiya Janata Party (BJP) traded charges over the Rs11,400 crore PNB fraud involving jewellery designer Nirav Modi and his uncle Mehul Choksi on a day when the Central Bureau of Investigation (CBI) registered fresh complaints against the latter and his Gitanjali Group.

Meanwhile, the ministry of external affairs suspended the passports of the duo for four weeks, the Enforcement Directorate seized Rs549 crore worth of precious stones and gold from premises of the two, and the income tax department attached 29 properties and 105 accounts of Modi, his wife and their companies.

The Congress claimed the actual size of the fraud at the bank was Rs21,306 crore and stepped up heat on the prime minister and his government for the escape of Modi, who left India on 1 January.

Human resources development minister Prakash Javadekar retorted that the fraud was perpetrated in 2011, when the Congress-led UPA government was in power.

Matters took an interesting turn with Dinesh Dubey, a former independent director of Allahabad Bank claiming to news agency ANI that in 2013 he had sent a dissent note to the UPA government and the Reserve Bank of India against a decision to provide a loan to Choksi’s Gitanjali Gems. He added that he resigned after he was pressured to sign off on the loan. Former banking secretary Rajiv Takru said he had no knowledge of this and had met Dubey only once, when the latter visited him to hand over his resignation.

The CBI’s complaints against Choksi and his company Gitanjali Gems were in relation to a Rs4,887 crore fraud, which is part of the larger Rs11,400 crore fraud perpetrated on PNB. A Gitanjali Gems spokesperson declined to comment.

A CBI officer who asked not to be named said the fresh complaint concerned “143 letters of undertaking (LoUs) and 224 foreign letters of credit (LoCs)”. He added that CBI officers found a server on one of Gitanjali’s premises that could have data pertinent to the PNB fraud.

According to CBI, Choksi and his companies used these LoUs, which were unauthorized by the bank, and issued by corrupt officials, to raise buyer’s credit overseas—the same charges levelled against Modi’s companies. This money was supposed to be used to buy pearls and diamonds, but wasn’t. The banks that loaned money to Choksi and Modi—on the basis of PNB’s guarantees—now want the lender to pay up. According to PNB, the fraud dates back to 2011.

Separately, PNB moved to declare Gitanjali Gems a fraud company, which means other banks with exposure to the company will now have to do the same.

On Friday, CBI started questioning four PNB officials named in its earlier complaint, Sanjay Kumar Prasad, Bechu Tiwari, M.K. Sharma, and Manoj Kharat. PNB also suspended eight more officers including one at the general manager level, Press Trust of India reported. That takes the total number of officers suspended by the bank since Wednesday, when it first declared the Rs11,400 crore fraud, to 18.

The Reserve Bank of India (RBI) said it has undertaken an assessment of PNB’s control systems but denied news reports that it had directed the lender to meet its commitments to other banks.

On Thursday, the Enforcement Directorate recovered around Rs5,100 crore of gold, diamonds and precious stones from 17 premises of Modi and Gitanjali Gems. On Friday, it asked Modi and Choksi to appear in its Mumbai office next week for questioning. Like Modi, Choksi too left India in early January, as did their families.

The Hindustan Times’ Rajesh Ahuja and Mint’s Alekh Angre in Mumbai contributed to this story.