RAKING THE TRUTH BEHIND CYRIL AMARCHAND MANGALDAS’s ROLE IN PNB FRAUD CASE
An Insight Into The Biggest Fraud In The Banking Sector In India
Dubbed as the biggest fraud in Indian banking history, the Punjab National Bank [PNB] scam is about the fraudulent ‘letter of undertaking’ [LoU] worth Rs. 10000 crore issued by the bank. The prime accused of this biggest scam is Nirav Modi, a diamond jeweler and designer, Mehul Choksi, uncle of Nirav Modi, and few other people including certain employees of the PNB. Foreign dummy companies were used by the fugitive, Nirav Modi, to transfer the fraudulent funds from PNB. As per the RBI guidelines, which were ignored by the overseas banks, LoUs can be issued for the import of pearls to India within 90 days of its shipment; however, Modi could safely secure the shipment for one whole year. For more than 6 six years, Modi and his accomplices managed to get 1212 fraudulent guarantees from PNB.
This scam was finally unfolded on 29th January, 2018 when PNB lodged an FIR with the CBI, claiming that fraudulent LoUs worth Rs 2.8 billion (Rs 280.7 crore) was first issued on 16 January. In its statement, PNB mentioned three diamond firms to have been involvedDiamonds R Us, Solar Exports, and Stellar Diamonds (all of which were owned by Nirav Modi). For all these years when the scam was brooding behind the screen, PNB was unaware that some of its employees who were an accomplice to Modi and Choksi, misused the SWIFT network to communicate with the Allahabad bank and Axis bank for fund requirement. Due to this, the transactions were never recorded in the PNB’s core system.
Piercing The Corporate Veil of CAM In CBI’s Investigation Against PNB Fraud Case
In February 2018, Nirav Modi had transferred around Rs. 2.12 crore to Cyril Amarchand Mangaldas’s [CAM] account. Federal agents are now investigating CAM for a 2 billion fraud in the PNB scam.in furtherance of this, CAM has been found in possession of several documents that belong to Nirav Modi’s diamond firms. Back then, right before the biggest scam unraveled, few accomplices of Nirav Modi have been reported for transferring cartons of documents from the diamond firms to the CAM office in Mumbai. Following this incident, the CBI team had raided CAM’s premises. The documents were found in one of their meeting rooms, raising more suspicion among the investigating officials. In the first charge sheet that was filed by the CBI, it was only revealed that “incriminating documents/articles relevant to the case” were discovered being concealed in CAM’s premises. However, no charges were filed against the law firm. As commented by K. Raghavacharyulu, a prosecution lawyer in the Modi case- since CAM wasn’t handling Modi’s case, it couldn’t claim attorney-client privilege in the given circumstances. At least one of CAM’s junior lawyers was summoned and questioned by the police about Nirav Modi’s PNB fraud case. When K. Raghavacharyulu was questioned if filing charges against CAM has been ruled out, his response was in the negative. To this, he further stated that the CBI might either bring in CAM as a witness against Nirav Modi or could file charges for aiding in the concealment of documents for Nirav Modi.
From an unprejudiced lens of the society, what raises more concerns in this scam is the rendezvous between Vipul Ambani and Nehal Modi (two of the accused in the PNB scam) and CAM’s Managing Partner Cyril Shroff and Partner Shaneen Parikh, that took place before the documents were transferred. While CAM has chosen to remain silent upon being questioned about this act, questions don’t stop pouring out. Shaneen Parikh’s statement in the FIR reads as-
“She [Parikh] termed the conduct of Nirav Modi as treacherous and reprehensible and mentioned that their firm may initiate legal proceedings at an appropriate time for his (Nirav Modi) improper conduct.”
But then why did CAM not produce the documents to the CBI when the biggest scam was reported in the news? If CAM had no vested interest in the sub-judice matter, then why did it wait for the CBI to direct its firm into turning in the documents? There’s a likelihood that CAM could have helped in gauging through the seriousness of the issue, which is what explains the prior meeting between the firm and Modi’s accomplices. Yet, the matter is still unclear.
What Awaits PNB’s and Nirav Modi’s Fate!
The most-wanted accused of PNB fraud case, Nirav Modi, has been in prison since his arrest on March 19, 2019. His arrest was executed by Scotland Yard on an extradition warrant. Modi’s defense team led by Clare Montgomery filed the latest application for his bail in October 2020. However, District Judge Samuel Goozee, by turning down Modi’s 7th bail application too, set the date for the final hearing of the extradition case via video on 5th February 2021. It has been observed that the exceptional coordination between the CBI, the Ministry of External Affairs and Crown Prosecution Service of the United Kingdom is the reason for such a careful assessment of the fraud and laundering case.
Interestingly, in one of the earlier bail applications filed, the defense team had argued for Modi’s case to be assessed akin to Julian Assange’s case. The defense furthered its reasoning to state that given the deteriorating health conditions of Modi, it is in his best interest to not extradite him to India (considering the living conditions in the Indian jails), and that a house-arrest with strict measures can be a substitute for prison in London. The defense had also cited that “the conditions at Barrack 12 in Arthur Road Jail in Mumbai, where Modi is to be held on being extradited, do not meet the UK court’s human rights criteria”.
The Crown Prosecution Service [CPS] is representing the Indian Authorities. The CPS barrister, Helen Malcolm, highlighted the substantial factual difference between Modi’s case and Assange’s case, thereby invalidating the latter’s correspondence in the dispute.
Contrary to the concerns tabled by the defense counsel before the High Court of UK, Justice Ian Dove opined that Modi’s transfer to a house-arrest will only invite more reasons for him to evade the law, yet again!
As reported by an investigator, the entire operation of the PNB scam was a cartel. Two officials of PNB, VP Singh and GS Agarwal, who were posted in Hong Kong and Dubai, became aware of the scam in early 2017; however, finally decided to disclose the matter when the water was over the bridge.
With the social distancing norms in operation, in-person legal and evidentiary hearings have been difficult to conduct. However, given the circumstances of the case involved, authorities have finally decided to hear Modi’s extradition case for one last time, in a remote hearing. It is the seriousness of the issue, apparent from the large number of “irregularities involved in granting of loans without due diligence”, that is pushing the authorities towards correcting the grievous wrong.
In light of these developments, the final outcome is much awaited to ascertain the liability of the accused, Nirav Modi and his accomplices, and CAM’s role in execution of the biggest fraud and money laundering act in Indian banking history.
By-
Sneha Rath
Student Reporter, INBA