Mehul Choksi arrested: What is the fugitive crime that attacks Indian banking industry
Diamantaire, a fugitive who has been running since 2018, has been accused of participating in a Punjab National Bank (PNB) loan scam of more than Rs 1.3 billion.
The arrest follows an extradition request from the Indian investigative agency, the Central Bureau of Investigation (CBI) and the Law Enforcement Bureau (ED), which have been working tirelessly to bring Choksi back to face the trial as he plays an alleged role in one of India’s biggest financial scandals.
The so-called PNB scam
The PNB fraud scandal debuted in early 2018 and involved Choksi, his nephew Nirav Modi and many accomplices, including some PNB officials.
The two merchants allegedly colluded with bank staff to obtain a letter of commitment (LOU) and a foreign letter of credit (FLC) by bypassing prescribed procedures. The letters were basically sent by PNB and used by Choksi’s company Gitanjali Gems to obtain loans from foreign banks.
However, the loans are allegedly fraudulent because they are issued without approved limits or cash profits and there are no entries in the PNB’s central banking system to avoid scrutiny.
The fraudulent activity caused the bank to lose Rs 63.44 crore and, according to these fraudulent documents, the money was lent by international banks such as the National Bank of India, Axis Bank, etc.
According to the Reserve Bank of India (RBI) guidelines, once fraud is reported, the full loan amount must be cancelled. Therefore, the PNB must book the entire $2 billion exposure from the Nirav Modi’s group company, Lous, for the non-performing assets (NPA).
Escape
Choksi’s journey as a fugitive began in January 2018, and the PNB scam was soon revealed. He cited medical reasons and fled India to the United States, eventually settling in Antigua.
He obtained citizenship in Antigua in 2017 months before his departure. His escape was carefully planned as he moved strategically to several countries to escape the Indian authorities.
His nephew Nirav Modi was arrested in the UK in 2019 and has been extraditioned to India since then.
Choksi, on the other hand, continued his stay in Antigua, where he lived for several years before fleeing to Cuba in 2021. He was detained in Dominica, where his legal team claimed he was kidnapped but was eventually expelled back to Antigua.
Afterward, he reportedly traveled to Belgium under the guise of seeking treatment for blood cancer.
Belgium arrested
Choksi’s recent arrest in Belgium marks a significant development in a long-running case.
Belgian authorities provided evidence in Indian institutions and demanded detention under two open arrest warrants issued by the Mumbai Court in 2018 and 2021.
The request comes after Choksi confirmed that he was present in Belgium where he was receiving treatment.
Indian authorities, including CBI and ED, have been working hard to bring him back to India.
Choksi’s arrest could pave the way for his extradition, although the legal process is expected to be complex and durable.
Choksi’s legal team is ready to challenge the extradition request, citing his health as the main reason for opposing his return to India.
Future legal struggles
Given the high-profile nature of the case, Choksi’s extradition war could last for some time.
His defense team made it clear that they would fight the move by citing medical reasons. They believe his chronic lymphocytic leukemia and lymphoma make his travel dangerous, which may delay his extradition process.
In the past, this was a consistent argument he used in the past, including during his time in Antigua that his medical condition prevented him from returning to India.
Legal strategies will be multi-layered. It is reported that businessmen will not only oppose extradition, but may also attempt to obtain bail in Belgium.
However, Indian authorities are expected to strongly oppose his release and point to the need to bring him back to India to face charges.
The next few months may see a complex source of law, while Choksi’s team tried to postpone his extradition while Indian authorities urged him to return.
Financial impact
In addition to extradition work, there are also significant financial implications related to Choksi’s alleged crime. The Enforcement Bureau (ED) has been working to recover assets related to fraudulent activities.
The agency has attached assets worth Rs 25,650 crore, including properties, bank accounts, jewelry and vehicles related to Choksi and its companies.
In addition, investigations are being conducted to track and recover the proceeds of criminal proceeds held by Choksi abroad.
ED has identified multiple properties Choksi owns in countries such as Thailand, Dubai, Japan and the United States and is working with authorities in these regions to capture and return these assets.
Hopefully getting the recovery of these funds will help mitigate the losses of victim fraud, mainly Indian banks cheated in the scam.
(with proxy input)
