Two bankers and a top official in celebrity designer Nirav Modi’s company seen to be at the centre of a massive Rs 11,300 crore bank fraud have been arrested by the Central Bureau of Investigation. The arrests are part of huge crackdown by central agencies that have carried out at searches at over three dozen locations across the country over the last two days.
The Enforcement Directorate, which has seized over 5,600 crores worth of diamonds, jewellery and gold, is continuing the searches at showrooms and offices linked to firms run by Nirav Modi and his uncle, Mehul Choksi.
By Saturday, there were reports that the raids, which had started from showrooms in major cities, were shifting to showrooms run by Mehul Choksi’s Gitanjali Jewels in smaller cities.
The arrests are, however, the first in the case. A special court in Mumbai on Saturday sent the three to CBI custody till March 14.
A retired PNB deputy manager Gokulnath Shetty and another bank official, Manoj Hanument Kharat, were placed under arrest after the CBI questioned them for several hours to figure how they were able to pull off what is being described as Indian’s biggest banking fraud. Mr Shetty was a deputy general manager in the foreign-exchange department looking after import payments.
Also arrested is Hemant Bhatt, the authorised signatory of the companies run by Nirav Modi, his wife, brother Nishal and uncle Mehul Choksi.
The fraud was revealed in mid-January when Nirav Modi’s companies sought a fresh loan in early January. The officials who had helped them earlier had retired and when the bank insisted on guarantees, the companies allegedly said they had used the facility before. When the bank started investigating, it discovered fraud Letters of Undertaking – a bank guarantee issued for overseas import payments. These letters were cashed overseas from different banks.
It took the state-run bank another fortnight to discover the size of the staggering fraud.
The first case was registered by the CBI on January 31 and a lookout notice issued against the star diamond jewellery designer counted among India’s richest.
Nirav Modi, recently seen in a group photo in Davos with Prime Minister Narendra Modi, had left India much before the scandal was discovered.
But the photo has been cited by the opposition to attack the ruling BJP and Prime Minister Narendra Modi.
“Who is protecting Nirav Modi,” the Congress had questioned, accusing the government of allowing big fish to get away without answering for crores in public money and build a narrative that points fingers at the ruling alliance. It was to reinforce this perception that the Congress had called Nirav Modi “Chhota Modi”, but was promptly reprimanded by law minister Ravi Shankar Prasad, who condemned the insinuation.
It is also in this context that central agencies have gone on an overdrive against the diamond billionaire to demonstrate how the company, which had its origins when the Congress was in power, was being penalised.
Law Minister Prasad had earlier also suggested that the seizures would go a long way to minimise the liability of the government. Yesterday, Union Education Minister Prakash Javadekar counted the foreign ministry suspending Nirav Modi’s passport as evidence of the strong action being taken by the government.