Non-bailable warrants (NBW) were issued against diamantaire Nirav Modi and his uncle Mehul Choksi on Sunday. (File)
The Central Bureau of Investigation (CBI) probing the alleged Rs 13,400-crore fraud involving diamantaires Nirav Modi and his uncle Mehul Choksi has named 25 accused including Usha Ananthasubramanian, MD & CEO of Allahabad Bank, who was a former CEO of PNB; two Executive Directors of PNB Brahmaji Rao and Sanjeev Sharan, and a General Manager, Nehal Ahad, besides Nirav Modi’s three firms Stellar Diamonds, Solar Exports and Diamond R’ US in its chargesheet filed in the CBI Special Court on Monday.
Nirav Modi and his brother Nishal have been shown as wanted accused in the chargesheet. The CBI chargesheet has focused on Letters of Undertakings or LOUs and Foreign Letters of Credit or FLCs of close to Rs 500 crore of the total alleged Rs 6498-crore loss caused to PNB by Modi, sources said.
In its chargesheet, the CBI has relied on over 80 witnesses, digital evidence and documents that the agency recovered during the course of the probe. Responding to the chargesheet, the government said it has initiated action to remove Ananthasubramanian and the PNB board divested its two executive directors Rao and Saran, of all financial and executive powers, Financial Services Secretary Rajiv Kumar said.
Kumar said the Allahabad Bank board — likely to meet soon — has been asked to divest Ananthasubramanian of all powers and initiate further action. She was managing director of PNB until May 5 last year. The government holds a little over 62 per cent stake in PNB and close to 65 per cent in Allahabad Bank.
Enforcement Directorate sleuths at one of Nirav Modi’s showroom in New Delhi on Thursday. (Express Photo: Tashi Tobgyal)
The government has asked the Banks Board Bureau to search for replacement for these positions. Kumar said the government had issued a show cause notice to the senior officers about 10 days backs to seek their response.
Sources said Usha Ananthasubramanian has been named in the chargesheet as in her role as MD she allegedly failed to take cognisance of the fraud during her tenure in 2016 when the Indian Overseas Bank (IOB) was defrauded of Rs 321 crore allegedly by misusing the letter of comfort on which buyer’s credit was issued. The PNB’s Dubai branch was among the banks which had issued the buyer’s credit.
“In 2016, a fraud of a similar nature was detected where the accused persons in criminal conspiracy with the branch officials siphoned off the bank funds under the garb of letter of comfort in favour of a Hong Kong-based company purportedly issued by the Chandigarh branch of IOB to the overseas branches of two other nationalised banks including PNB. Based on these fraudulently issued letters of comfort, these foreign banks issued buyers’ credit to the account of the accused companies abroad. After the fraud was detected, banks including PNB were advised by RBI to maintain due diligence and reconcile their Central Banking System (CBS) and also report if there were any such fraud detected at their bank. GM Ahad allegedly on the advice of Ananthasubramanian wrote back to RBI stating that there was no such fraud reported at any of the branches of their bank,” said an official.
The court allowed the Enforcement Directorate to issue Letters of Rogatory to six countries to identify and seize properties of diamantaire Nirav Modi.
One key reason why the scam went undetected at PNB was that its SWIFT messaging platform was not integrated with the Core Banking Solution (CBS). Jeweller Modi allegedly used fake LoUs to defraud PNB of over Rs 13,000 crore in connivance with bank officials by exploiting this loophole.
“The bank failed to reconcile its CBS despite reminders from RBI because of which the main accused, former Deputy manager of Brady House branch of PNB, Gokulnath Shetty managed to issued fraudulent LoUs for seven years,” the source said. While the chargesheet says there was negligence on the part of four senior officials, it is silent on whether there was any quid pro quo involved. “Those aspects will be dealt with in the supplementary chargesheet that will be filed in the due course. The other angle we are looking at is how the credit limit of Modi and Choksi was increased and if the senior management was in the know,” said the official.
No bailable warrant has been issued against Choksi and Nirav Modi.
Meanwhile, the CBI has sought sanction to prosecute the bank officials. On the role of Vipul Ambani, President (finance) of Firestar International, sources said that Ambani was aware of the alleged irregularities and also helped in moving the documents from his office to different places after the scam was unearthed. “Realising that the CBI would come looking for the documents pertaining to the issuance of LoUs, Vipul Ambani allegedly moved crucial documents including the original applications and the photocopies returned by arrested accused Shetty. These were recovered during searches conducted at a Kalbadevi apartment rented to an employee of Choksi and an advocacy firm,” said the official.
This is first of the two chargesheets which the agency plans to file in the case. The next chargesheet against Choksi, his firms and the arrested accused is likely to be filed on Wednesday, sources said. “In order to deter prospects of the accused seeking bail on the ground that the probe agency failed to file its chargesheet in the stipulated time, the two chargesheets are being filed this week as the 90-day period to file a chargesheet comes to an end,” said another source.
Between January and March, the CBI filed three FIRs in the case: against Nirav Modi, Mehul Choksi and Modi’s Firestar Diamonds. The agency has also been able to piece together how funds raised through LoUs and FLCs were routed through off-shore firms which were shown as ‘importers” but are suspected to be shell companies floated by the uncle-nephew duo to reroute it to back to India either to square off the old LoUs or buy properties.
When asked whether the government will also seek the dismissal of the bank officers, Secretary Kumar said the process has been initiated for that. “For the removal and dismissal there is a set procedure, one notice of explanation was issued 10 days back…This is the clear message that we have to be responsible for what we do, we will only take action whenever there is substantial proof not that one start on rumours. So we have sufficient time to understand to investigate who is responsible.”
He said this is part of the cleanup in PSU banks. “The worst that way is over. NPA recognised, provisions made, losses booked, capitalisation did, so worst is over and it’s only the positive, clean lending which can take place. It’s part of the overall script which is unfurling in pieces. Today I have tried to stitch many pieces together,” Kumar said.
Last month, the CBI had booked Syndicate Bank MD and CEO Melwyn Rego, who was Deputy Managing Director of IDBI, along with several others in the Rs 6000-crore IDBI loan default case. The CBI has also booked former IDBI CMD Kishor Kharat, at present MD and CEO of Indian Bank, in the loan fraud case.