Nirav Modi-PNB Fraud: CBI Raids Cyril Amarchand Mangaldas Law Firm

On 14 February, India’s second largest state-owned lender, the Punjab National Bank (PNB), accused billionaire jeweller Nirav Modi of carrying out fraudulent transactions worth Rs 11,400 crore.

In a complaint to the Central Bureau of Investigation (CBI), the bank said that Modi and the companies linked to him colluded with its officials to get letters of undertaking (LoU) to help fund buyers’ credit from other overseas banks.So far, the CBI has arrested 12 persons. More than 10 PNB officials, including the bank’s executive directors, were questioned by the agency. The government, on 23 February, revoked the passports of Modi and his uncle, Mehul Choksi – both of whom reportedly fled the country before the complaints were registered.The Mumbai office of law firm Cyril Amarchand Mangaldas was raided by a CBI team last week in connection with the investigation into the Rs 11,300 crore Nirav Modi scam, Bar and Bench reported quoting sources.As per the report, the firm was involved in a banking assignment but it dropped the assignment as soon as news of the scam broke.Continuing to target the prime minister in his campaign in poll-bound Karnataka, Congress president Rahul Gandhi on Sunday, 25 February, asked why Narendra Modi, who had described himself as the country’s “chowkidar,” was “silent” on the PNB fraud.He also asked Modi why he was not taking any action against the alleged sudden increase in turnover of a company owned by BJP president Amit Shah’s son, Jay Shah.”Modiji comes to Karnataka and speaks about corruption. He had told the country not to make him prime minister but a chowkidar (watchman) of the country,” Gandhi said at rallies in Vijapura and Bagalkote districts in north Karnataka.Widening its probe into the PNB fraud case, the Enforcement Directorate will soon send judicial requests to over a dozen countries for obtaining information about the overseas businesses and assets of diamantaire Nirav Modi and owner of Gitanjali Gems Mehul Choksi.Official sources told PTI that the agency would approach a competent court in Mumbai with a request to obtain letters rogatory (LRs) to be sent to around 17 countries where the central investigation agency has traced the footsteps of the diamond and gold jewellery businesses of the firms owned by Modi, his uncle Choksi and others associated with them.The countries where the LRs would be sent include Belgium, Hong Kong, Switzerland, the United States, the United Kingdom, Dubai, Singapore, and South Africa.

Lawyer Says He Will Advise Nirav Modi Not to Return to India for Investigation

Vijay Aggarwal – Nirav Modi’s lawyer – told BloombergQuint that the case against his client wouldn’t last for “even five minutes” in court.Aggarwal said PNB’s claim of lacking records of the LoUs could be easily refuted.To say it is not in the books of the bank is an incorrect statement, absurd, which is not going to stand for even five minutes in the court of law.Aggarwal said that although he would advise Modi to appear for the trial, it was best for him stay away from investigations because the “atmosphere was not conducive.”Earlier, without revealing his client’s whereabouts, Aggarwal had told PTI, “Everybody is saying that Nirav Modi has run away. Why would anyone flee leaving assets worth Rs 5,000 to 6,000 crore for the Enforcement Directorate to recover?”The Finance Ministry may be planning to order Punjab National Bank to compensate other lenders for losses arising out of the Rs 11,400 crore fraud, BloombergQuint reported quoting a source familiar with the matter.Allahabad Bank, Axis Bank and UCO Bank were the ones to be affected by Nirav Modi’s fraudulent transactions. All the transactions found valid would have to be honoured by the PNB, but if the fault lies with the paying bank then the amount would be apportioned accordingly, the source said.The Finance Ministry has also asked all state-run lenders to review their systems to eliminate possibilities of a loophole.Rattled by a spate of frauds in the banking sector, lenders are now planning to increase insurance cover against delinquencies by their employees to protect their bottomlines.”Frauds of such magnitude and scale – PNB fraud of Rs 11,400 crore and OBC of fraud Rs 390 crore – has forced us to consider substantially much higher risk cover than the basic banker’s indemnity policy which various banks have right now,” a top public-sector bank official told PTI.For example, SBI alone in 2016-17 reported frauds of Rs 2,424.74 crore (837 cases). Out of this, an amount of Rs 2,360.37 crore (278 cases) represents advances declared as frauds.However, the official said that cover can be for fraud not for the wilful default where number of lenders are involved, and these two have to be dealt separately.The official said, for example, the cases of Winsome Diamond Group and Nirav Modi are completely different, and the legal treatment and provision for both are diverse.

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