Bombay high court upholds look out circular against HK-based diamond trader

A division bench dismissed a petition filed by Chaitya Shah, after it was informed that the non-resident Indian was linked to Gitanjali Gems Ltd of fugitive diamond trader Mehul Choksi

The Bombay high court on Wednesday dismissed a petition filed by a Hong Kong-based diamond trader questioning a look out circular issued against him by the Serious Fraud Investigation Office (SFIO) as a result of which he was prevented from flying back to Hong Kong.

The Bombay high court has upheld a look out circular against Hong Kong-based diamond trader Chaitya Shah. (HT archives/ Representational image)

A division bench of justice Nitin Jamdar and justice Sarang Kotwal dismissed the petition filed by Chaitya Shah, after it was informed that the non-resident Indian was linked to Gitanjali Gems Ltd of fugitive diamond trader Mehul Choksi, who is accused of defrauding Punjab National Bank of ₹7080.86 crore and also owes additional ₹5099.74 crore to a consortium of 32 banks.

Shah, who has been residing in Hong Kong along with his family for the past nine years, had moved the Bombay high court stating that on September 10, 2020, when he and his family were leaving New Delhi for Hong Kong, he was stopped at the airport’s immigration check.

He said the immigration officer put a stamp that read “cancelled without prejudice” on his passport and didn’t allow him to board the flight.

He added that the next day, he received summons and was required to attend the Mumbai zonal office of the SFIO, which was probing the affairs of Choksi’s Gitanjali Gems.

He said he was a bona fide investor who had purchased 6,802,896 convertible warrants of Gitanjali Gems worth ₹49.25 crore between January 2015 and August 2016.

Subsequently, the warrants were converted into equity shares, which he sold in 2017 for ₹50.51 crore.

Maintaining that the transactions were conducted through banking channels and had nothing to do with Choksi personally, Shah said his family and his Hong Kong-based diamond trading entity Chaitya Private Ltd had been suffering as he was not allowed to return to Hong Kong.

He questioned the look out circular arguing that his liberty was curtailed because of the SFIO’s action and that he was illegally prevented from going out of the country.

It was argued on his behalf that several persons who face prosecutions in India can travel abroad, but not the petitioner, although he hadn’t been accused of any offence.

The Bombay high court, however, held that Shah’s presence in India was necessary for the probe into the affairs of Gitanjali Gems. The bench said the recourse to the look out circular was not unfounded as Shah had a connection with the SFIO investigation since he was directly involved and was concerned with considerable share-holding of Choksi’s Gitanjali Gems.

“It involves a huge amount of almost ₹50 crore that requires serious explanation from the petitioner in the background of the allegations that the money belonged to Mr. Mehul Choksi, who has left India and has not returned. This transaction is an important part of the entire fraud involving a huge amount,” said the bench.