Court refuses CBI’s plea for custody of Mehul Choksi’s top executive

The investigation by the central agency revealed that the accused had caused wrongful loss of around ₹7,080.86 crore ($952.75 million) to PNB through 165 unauthorised or fraudulent Letters of Undertakings and unauthorised or fraudulent amendments made in 58 Foreign Letters of Credit

PNB Fraud/ Gitanjali Group’s business head’s bail extended (shoulder)

Mehul Choksi (HT photo)

MUMBAI: A special court on Saturday refused a plea for custody remand of Sunil Varma, the former international business head of fugitive diamond merchant Mehul Choksi’s Gitanjali Group, filed by the Central Bureau of Investigation (CBI) in connection with the ₹13,850 crore alleged fraud at the Punjab National Bank.

The special CBI court, instead, extended the interim bail granted to Varma till Tuesday, when the matter will be taken up for hearing again.

The CBI had on February 15, 2018, registered an FIR against Choksi, his Gitanjali Group companies, and several others, including officials of Punjab National Bank for defrauding the public sector bank.

The investigation by the central agency revealed that the accused had caused the wrongful loss of around ₹7,080.86 crore ($952.75 million) to the state-run bank through 165 unauthorised or fraudulent Letters of Undertakings and unauthorised or fraudulent amendments made in 58 Foreign Letters of Credit against which 311 bills were discounted from January 2017 to May 2017.

The Enforcement Directorate (ED) has also taken up a money laundering investigation into the cases registered against Choksi and Nirav Modi and has named Varma as an accused in the PNB bank fraud case. In the CBI case, a non-bailable warrant was issued against him in July 2021.

In April, Varma had moved the Bombay High Court seeking cancellation of his warrant in the CBI case. Pursuant to the high court orders, earlier this month a special PMLA court had suspended the non-bailable warrant issued against Varma in the ED case. In this backdrop, Varma appeared before the special CBI court on July 18 for the first time -over six-and-half years after the FIR was registered in the case.

After he appeared before the special court, CBI had filed a plea seeking his custody remand for 14 days. Special prosecutor A Limosin pointed out that Varma had played an important role in the alleged fraud as he was second in command in the Gitanjali Group, only next to Choksi himself, and had established dummy companies overseas and controlled their activities.

The central agency’s remand plea stated that Varma was actively involved in circular trade transactions between Hong Kong based entities and Gitanjali Group companies in India and used to pass instructions to the dummy directors of those companies at the behest of Choksi, and since he was also managing entire business of Gitanjali Group, his custodial interrogation was necessary.

Apart from PNB, the entities controlled by Choksi have also duped a consortium of banks to the tune of ₹5,100 crores. According to the CBI, these entities enjoyed credit exposure from the consortium of 32 banks, which have reported outstanding balance with respect to those entities to the tune of around ₹5,100 crore as on December 31, 2017.

In a parallel fraud, Choksi’s nephew Nirav Modi has allegedly duped Punjab National Bank of ₹6,805.24 crore, using similar modus operandi of fraudulent LoIs and FLCs. Investigation by CBI revealed that between 2011 and 2017, in all 1,214 LoUs of $3731110331 ( ₹23,780 crore) were fraudulently issued to Modi’s firms - Diamonds R US, Stellar Diamonds and Solar Exports, out of which, 150 LoUs remained outstanding – totaling to ₹6,498.20 crore and resulting in loss of ₹6,805.24 crore to the nationalised bank.