Mehul Choksi is a fugitive Indian businessman who, along with his nephew Nirav Modi and some bank employees, orchestrated Rs 13,000 crore Punjab National Bank (PNB) loan fraud – one of the biggest banking scams in India. He has been arrested in Belgium following an extradition request by Indian authorities, the Central Bureau of Investigation (CBI) and the Enforcement Directorate (ED).
The arrest of the 65-year-old was based on two non-bailable arrest warrants issued by a Mumbai court in March 2018 and June 2021, The Economic Times reported. He was reportedly planning to travel to Switzerland to get treatment for blood cancer. Following his arrest, his lawyer said that they will file an appeal against his arrest in Belgium on the grounds of his cancer treatment.
Who is Mehul Choksi?
Mehul Choksi is an Indian businessman who has been on the run from Indian authorities since 2018 after committing PNB fraud with Nirav Modi. He is the owner of the now-defunct Gitanjali Group that once operated around 4,000 stores across India.
Choksi was born to Chinubhai Choksi on May 5, 1959, in Bombay (now Mumbai) and completed his education at GD Modi College in Gujarat. He has a son and two daughters.
He began his career in the gems and jewellery industry in 1975 and took over Gitanjali Gems from his father in 1985. Under his leadership, the company expanded beyond its initial focus on rough and polished diamonds.
His younger brother, Chetan Chinubhai Choksi, ran a diamond firm named Diminco NV, based in Antwerp, Belgium. In 2013, Diminco NV defaulted on a payment of USD 25.8 million to a subsidiary of ICICI Bank, leading to legal action in commercial courts in Belgium and the UK.
What is the Rs 13,000 crore PNB scam and how did it come to light?
The PNB scam came to light in 2018 after Bengaluru-based entrepreneur Hari Prasad SV wrote to the Prime Minister’s office (PMO) about a potential large-scale scam, flagging discrepancies in balance sheets.
Following this, Mehul Choksi, Nirav Modi, and several PNB officials were booked by the ED and CBI after investigations revealed that they colluded with bank staff to fraudulently obtain Letters of Undertaking (LoUs) and manipulated Foreign Letters of Credit (FLCs) without proper due diligence.
On the basis of these letters, which guarantee that PNB will repay the loan on his now-defunct firm, Gitanjali Gems, they secured loans from foreign banks.
However, loans were issued without a sanctioned limit or cash margins. Normally, banks ask for a cash deposit or set a limit before issuing such guarantees. Moreover, no entries were made in PNB’s central banking system, so it didn’t raise red flags or get noticed during audits.
This caused a massive financial loss of Rs 6,344 crore for the state-run bank.
As per Reserve Bank of India (RBI) guidelines, once fraud is reported, the entire loan amount must be written off. In simple terms, the bank has to assume that it will not get the money back and mark it as a loss. As a result, PNB had to book the entire $2 billion exposure from the LoUs issued for Nirav Modi’s group firms as a Non-Performing Asset (NPA). An NPA is basically a loan where the borrower is no longer making interest payments or repaying any of the principal.
Choksi fled India in 2018
Before the scam came to light, both Choksi and Nirav Modi fled the country in 2018. Choksi fled India for the US and then settled in Antigua, for which he had acquired citizenship in 2017. A year after their run, Nirav Modi was arrested by the Metropolitan Police in London and has since been fighting his extradition to India. Although he has exhausted all legal options against extradition, he remains in custody in the UK.
In 2021, Choksi attempted to flee to Cuba but was detained in Dominica, and his legal counsel made explosive claims that he was kidnapped. He was later deported back to Antigua.
Two years later, Interpol revoked the Red Notice against him, even as Indian authorities demanded extradition. A Red Notice is a global alert issued by Interpol, which is an international police organisation. It asks member countries to help locate and arrest a person wanted by another country.
He then travelled to Belgium in the guise of seeking cancer treatment, where he has been living with his wife, Preeti Choksi, a Belgian citizen. Two weeks before his arrest, Choksi obtained Belgium’s F-Residency card based on fake documents and was planning to settle in Geneva, Switzerland.
PNB scam whistleblower on Choksi’s arrest
After Choksi’s arrest, PNB scam whistleblower Hari Prasad celebrated the move but said that his extradition to India would not be easy since his “wallet is full” and he can hire the best lawyers to avoid it, like Vijay Mallya.
“Wow, Mehul Choksi getting arrested in Belgium is great news not only for India but also for all those who got cheated by him. The government must bring him back to India as soon as possible, and justice must be delivered,” ANI quoted him as saying.
He, as per the news agency, added, “Apart from bringing him back, the most important thing is to get back all those billions of dollars he looted from India and stashed anywhere in the world. Hopefully, the Government of India will succeed this time. Great news.”
“Extradition is not an easy task. Choksi’s wallet is full, and he will employ the best lawyers in Europe to avoid the process, like what Vijay Mallya has been doing. I don’t think it is going to be easy for India to get him back,” he further said.