One of the main allegations against Mehul Choksi-owned Gitanjali group is that it defrauded the PNB to the tune of Rs 4,886.72 crore (or more) in the matter of issuance of unauthorised and fraudulent Letters of Undertakings (LoUs) and Foreign Letters of Credit (FLCs) in favour of foreign suppliers of the accused companies.
To avoid detection, the accused bank officials, the Gitanjali group companies and its directors deliberately omitted making entries of the LoUs in the core banking system (CBS) of the bank.
The funds raised through LoUs and FLCs were meant to be used for payment of import bills of the accused companies, whereas it was dishonestly and fraudulently utilised to pay for earlier liabilities on account of buyer's credit allowed by the overseas branches of Indian banks.
Taking note of the alleged fraud, the Central Bureau of Investigation (CBI) and Enforcement Directorate (ED) filed its FIR and ECIR against Gitanjali's group companies i.e. Gitanjali Gems Ltd, Gili India Ltd and Nakshatra Brands Ltd.
Between 2015-2017, fraudulent LoUs and FLCs of around Rs 3,032 crore and Rs 1,799 crore (Rs 4831 crore) were issued against three companies.
"The PNB was thereby put to a wrongful loss of an aggregate amount of Rs 4,886.72 crore and corresponding wrongful gains to the accused companies, its directors and unknown others", the source within the investigative agency said.
Of late, the FLCs amount has increased from Rs 1,799 crore to Rs 3,106 crore during further investigation (now total stands at Rs 6,138 crore). The total defrauded amount of all the said three companies appear to be in the range of Rs 4,831 crore - Rs 6,138 crore.
Nepalia exposes Choksi
Indiatoday.in has accessed crucial statement of Avneesh Nepalia, the complainer and former official of the Punjab National Bank (PNB), given to ED team. In his recorded statement, he has explained the modus operandi which Choksi and his team strategised to defraud the bank.
The CBI FIR dated January 31, 2018 was based on a complaint filed by Avneesh Nepalia, the Deputy General Manager at Punjab National Bank.
According to Nepalia, Gitanjali group companies approached the bank with the request to send an LoU on their behalf to the overseas branch of Indian branches, against certain import documents raised by the overseas supplier.
"The officer of Brady House branch fraudulently and by cheating the bank, in connivance with the said three companies, without proper sanction/ cash margin etc., and without taking any import documents, bypassed the CBS accounting system of the bank and sent LoUs to the overseas branch of the Indian banks with request to fund the Bank's Nostro account", Nepalia stated.
The money received by the Bank in the Nostro account was supposed to be used for making a facility to the overseas supplier in retirement of the underlying import bills.
On the other hand, original FLCs were issued for small amount within the sanctioned limit. Once FLC number was generated, same number was used for enhancement of amount by 4-5 times higher than the value of the original FLC amount.
All such amendments were done outside the value of the original FLC amount and outside the CBS, thus, the transactions were not captured in the books of bank.
"Brady House branch is holding documents of original FLC amount and no import documents of such increased amount were found in the branch", Nepalia stated.
In effect, most of the transactions were for extinguishing the existing buyer's credit liabilities, availed earlier from Indian banks branches abroad.
On scrutiny of the said details, it was found that Rs 2,484 crore were utilized for settling earlier buyer's credit by the said three entities.
These buyers were: Abu Dhabi Commercial Bank, Abu Dhabi; Bank of India, Antwerp; Canara Bank, Manama; State Bank of India, Frankfurt; UCO Bank, Hong Kong and Union bank of India, Hong Kong.
In terms of FLC, investigation revealed that Rs 3,092 crore were paid to the alleged overseas suppliers, but before that it was issued in favour of overseas banks i.e. UCO Bank, Hong Kong and Union Bank of India, Hong Kong. The suppliers were: 4c's Diamonds Distributors and Crown Aim Ltd (both registered at Hong Kong).
As per the details, in 2015 - 118 LoUs worth Rs 1,399.93 crore, in 2016 - 116 LoUs worth Rs 1410.68 crore and in 2017 - 141 LoUs worth Rs 3014 crore were issued. Out of 375 LoUs worth Rs 5,824 crore, Rs 2,818 crore was utilised by three group companies i.e. Gitanjali, Gili and Nakshatra; and Rs 3006 crore were used for repayment of earlier dues of the banks.
The overseas entities which received the payments from three group companies are: 4c's Diamonds Distributors, Asian Diamond and Jewellery FZE (UAE), Gitanjali Ventures DMCC (Dubai), Shanyao Gong Si Ltd (Hong Kong) and Abbeycrest Ltd (Thailand) ltd, Thailand.
"Probe conducted so far revealed that many of these companies are having Indian directors, against whom probe is on", the investigator said. For instance Mayank Shah and Arvind Jadhav are the directors of 4c's Diamonds Distributors and Deepak Kulkarni is director of Shanyao Gong Si Ltd, Hong Kong.
Investigations are being conducted to ascertain the details of these companies which have received the funds through fraudulent modes.