Now, DRI to probe Nirav Modi for selling low quality diamonds at inflated prices in India

The Enforcement Directorate (ED) has decided to widen the probe in the Punjab National Bank fraud case, by bringing in the Directorate of Revenue Intelligence (DRI) for further investigation, especially for "selling overvalued diamonds" to Indian customers.

Sources says, once the valuation process of ED team gets over, hopefully in the next 7-10 days, the details would be shared with DRI to investigate it further under the Customs Acts, 1962.

As reported earlier, both diamantaires Modi and Chokshi were selling "low-quality diamonds at inflated prices" to Indian customers.

"It is a crystal clear case of overvaluation, where imported diamonds were overvalued and sold to customers, almost by 50-60 per cent. The inflated profit has been pocketed and diverted in unknown bank accounts", the ED source said.

The DRI is an intelligence agency with expertise in cracking commercial frauds and trade-based money laundering. It is also the first agency to take action against Nirav Modi. The DRI cracked a whip on Nirav Modi in 2014 and now would begin its second round of investigation.

A source from DRI said, "Overvaluation is also an offence. But we need to find out exactly what Modi was doing and in what different ways he was committing offences under Customs and Exim Law."

For the past 20 days, the ED officials and government-approved valuers have been struggling to meet the deadline and complete the valuation process at crucial locations like Surat SEZ and Hyderabad SEZ.

"The process of getting exact value of each diamond of different shape, size and variants is taking a lot of time", the source said. Till today, the ED team has conducted searches at 200 locations, across India and seized diamonds and precious jewels worth Rs 6000 crore.

Earlier, in 2014, following specific intelligence, the DRI had barred Nirav Modi from exporting consignments of diamond-studded gold jewellery to Hong Kong, UAE, Canada and US, over "exporting low-quality diamonds outside India".

Later, the DRI conducted searches at Nirav Modi's factories at Surat SEZ and verified the stocks, which revealed huge variation when compared to cut and polished diamonds and pearls. The agency issued two show-cause notices (SCNs) to Modi, but subsequently, he paid a fine of Rs 48 crore in 2016.

Now, in 2018, the DRI has decided to initiate prosecution under sections 135, 135 A and 140 of the Customs Act 1962 - against Nirav Modi with an accusation of mis-declaring exports and diverting imported, duty-free, cut and polished diamonds to the domestic market.