Bombay HC paves the way to declare Mehul Choksi a fugitive economic offender

By, Mumbai
Sep 22, 2023 12:43 AM IST

Diamond trader Mehul Choksi is accused, along with his nephew Nirav Modi, of involvement in a $1.8bn fraud at Punjab National Bank

The Bombay high court on Thursday rejected a plea filed by absconding diamond trader Mehul Choksi seeking dismissal of the Enforcement Directorate (ED) proceedings against him under the Fugitive Economic Offenders (FEO) Act, 2018. Choksi and his nephew, Nirav Modi, are accused in the 13,886.1-crore fraud at Punjab National Bank (PNB).

Mumbai - 10 April 2014 - Mehul Choksi, Chairman Geetanjali group - The fundraiser in support of Swades Foundation at Palladium Hotel, Lower parel - Freelancer Photo by Prodip Guha (Hindustan Times)
Mumbai - 10 April 2014 - Mehul Choksi, Chairman Geetanjali group - The fundraiser in support of Swades Foundation at Palladium Hotel, Lower parel - Freelancer Photo by Prodip Guha (Hindustan Times)

A single-judge bench of justice Sarang Kotwal also vacated an interim order, which was passed in January 2020 by another single-judge bench, restraining a special court from deciding on the agency’s application that sought to declare Choksi a fugitive economic offender.

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The special PMLA (Prevention of Money Laundering Act) court had on August 30, 2019, rejected his plea against the ED application. Choksi then approached the high court challenging the order.

Choksi’s counsel, Vijay Aggarwal and Rahul Agarwal, told the HC that section 16 of the FEO Act put burden on the director (of the ED) or the officer authorised by him to establish that an individual was an offender or that the properties involved in the proceedings were proceeds of crime or the individual had an interest in the properties and therefore the application must be supported by a proper affidavit, as contemplated under the Criminal Procedure Code (CrPC).

However, in Choksi’s case, the verification clause on the ED’s application was not proper and the requirements of section 297 of the CrPC and the high court manual – regarding filing of an affidavit – were not complied with and therefore the proceedings were liable to be dropped, they claimed.

Justice Kotwal, however, found nothing wrong with the verification. Instead, the bench acknowledged the force in arguments put forward by advocate Hiten Venegaonkar for the ED that section 4 of the FEO Act required the application to be filed in a particular format and the application was indeed filed in the prescribed format.

About Choksi’s argument about compliance with section 297 of the CrPC, the HC accepted Venegaonkar’s contention that the special procedure provided under a special enactment was required to be followed and that would not be affected by the general provisions contained in the CrPC.

With Thursday’s verdict, the HC authorised the special PMLA court to take a call on the ED’s application.

The ED’s proceedings are based on an FIR registered by the Central Bureau of Investigation (CBI) on February 15, 2018, against Choksi and his Gitanjali group of companies for allegedly defrauding PNB of 7,080.86 crore through fraudulently obtained letters of undertaking and foreign letters of credit from the bank.

According to the CBI, the entities controlled by Choksi were enjoying credit exposure from a consortium of 32 banks and these banks had reported an outstanding balance with respect to those entities to the tune of 5,099.74 crore as on December 31, 2017. Modi has been booked in a separate case for allegedly duping PNB of 6,805.24 crore.

The ED took note of the CBI case and registered an Enforcement Case Information Report against Choksi, his Gitanjali group and several others. On July 10, 2018, the agency filed an application before the special PMLA court to declare Choksi a fugitive economic offender.

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