In the ongoing probe into the Rs 13,000-crore scam involving billionaire diamond czar Nirav Modi and Punjab National Bank, the ED (Enforcement Directorate) is now probing if the proposed IPOs of Mehul Choksi-run Gitanjali Gems unit, Nakshatra World and Firestar International in 2017 were planned with the intention of repaying the LOUs, CNBC TV18 reported citing an unidentified official. The proposed initial public offering of Nakshatra World didn’t take place in 2017, as it didn’t receive SEBI approval. Firestar IPO also could not take off. Delay by the Securities and Exchanges Board of India in approving the listings spoiled Nirav Modi and Mehul Choksi’s game, the report said citing an ED official.
The report added that ED has found evidence that Mehul Choksi and Nirav Modi had indeed diverted money from the near Rs 13,000-crore PNB fraud to related companies. The ED has also found that payments were made to clear LoUs between 2010-17. The ED will probe the role of Nakshatra World IPO and Firestar International IPO in connection with the fraud, said the report.
Interestingly, Nakshatra World IPO had got final observations from the Securities and Exchange Board of India in June 2017. However, the IPO didn’t come through. According to the company’s prospectus, Mr Mehul Choksi had already received two show-cause notices dated January 13, 2017 and January 18, 2017 from the Employees State Insurance Corporation for recovery of damages and delayed contribution for Rs 6,164 crore. Further, the prospectus had mentioned of a criminal complaint against Chairman and Managing Director Mehul Choksi and others for alleged cheating and criminal breach of trust.
As a major domino effect of the biggest banking scam in India, banks have become extremely cautious in issuing credit for trade finance activities, according to a PTI report. Top bankers reportedly told the agency the lending premium has climbed by 10-50 bps on LoUs.
In the major scam, retired PNB deputy manager Gokulnath Shetty, who had been posted in Mumbai’s Brady House branch of the Punjab National Bank for eight years, reportedly issued 293 Letters of Undertaking to companies of prime accused Nirav Modi and his family worth over Rs 11,400 crore to Punjab National Bank. The bank’s employees had failed to make entries into the bank’s systems, due to which the fraud went undetected for a period of more than seven years.