Indian agency seize Rs51-bn assets of jeweller Nirav Modi

Nirav Modi, who allegedly looted millions of taxpayers’ money by defrauding a leading bank, has fled the country, officials confirmed on Thursday.

Hours after the announcement, Enforcement Directorate (ED) officials seized diamonds, jewellery and gold worth Rs51 billion during raids on Modi’s business outlets across the country.

ED said five properties belonging to Modi and the other accused in Mumbai were sealed by the agency. It also wrote to external affairs ministry to revoke passports of Modi and his partner Mehul Choksi.

Before the raid, ED registered a case against Modi under the Prevention of Money Laundering Act.

Addressing media in the afternoon, chief executive of Punjab National Bank (PNB), which fell victim to India’s biggest loan fraud, said steps are being taken to recover $1.77 billion (Rs11,400 crore) from Modi.

The day’s revelations sparked a political blame game between Congress and the ruling Bharatiya Janata Party (BJP).

‘Niravgate’ explained

The 47-year-old Modi began his illegal activities in 2011 when the Congress-led UPA government was in power. He came under ED’s radar in 2014, a year after the government changed and he first appeared on the Forbes billionaire list.

It all began with diamond firms approaching PNB for opening letters of credit (LCs) for import of rough stones. According to the terms of the LC, PNB would pay the overseas suppliers of rough stones on behalf of Modi’s firms within three months and recover the money from him. LC is extended even if the client, Modi, is unable to pay the money at the end of its tenure.

PNB’s troubles began when two junior officers of one of its Mumbai branches began to issue fake letter of undertakings (LoUs).

Using these LoUs, foreign branches of some banks like Axis and Allahabad Bank gave dollar loans to PNB. With fake LoUs, the PNB employees misused the SWIFT messaging network to seek fund requirement from Allahabad Bank and Axis Bank.

While following the procedures using SWIFT passwords, the employees did not record the transactions in the bank’s core system to keep the management in the dark.

The suppliers of rough stones are not named and it is likely that they may be related to Modi. His father Deepak Modi has set up shop in Antwerp, Belgium, the world’s diamond capital. Modi’s family members have left India by January 6.

Addressing the media, PNB’s chief executive Sunil Mehta said the bank will take steps to book the culprits and protect its financial interests. The bank has asked Modi to come up with a repayment plan.

PNB first notified India’s Central Bureau of Investigation (CBI) of the fraud on January 29. But Modi had left India on January 1.

A group photo of Indian CEOs showing Modi along with Prime Minister Narendra Modi at Davos World Economic Forum on January 23 sparked a war of words between BJP and rival parties on Thursday. The photo was taken six days before PNB sent its first complaint against the jeweller to the CBI.

Posting the group photo on Twitter, Communist party leader Sitaram Yechury tweeted: “If this person (Nirav Modi) had fled India before the FIR on Jan 31, then he is here, photographed at Davos with PM, a week before the FIR, after having escaped from India? Modi govt must clarify.”

Federal Law Minister Ravi Shankar Prasad said Nirav Modi did not meet PM Modi at Davos. Nirav Modi had arrived in Davos on his own and was present at CII group photo event.

Addressing the jeweller as ‘Chhota Modi’, a Congress spokesman wondered if he was tipped off by someone within the government about the PNB complaint as in the case of business tycoon Vijay Mallya.