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PNB Fraud Fully Exposes the Malicious Intent Of Nirav Modi

For the past seven years, Nirav Modi’s three firms-Diamond R Us, Solar Exports and Stellar Diamonds-were in the process of procuring the LoU's from the Punjab National Bank (PNB)

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Nirav Modi's stamped his name in India’s top corporates with growing global prestige with his fame and affluence.
Nirav Modi's stamped his name in India’s top corporates with growing global prestige with his fame and affluence. Facebook
  • Nirav Modi is India’s one of the better- known diamantaires
  • Since 2013, Nirav Modi has been a regular on the lists of rich and famous Indians
  • Nirav Modi and his firms exploited the loopholes in the banking system to the fullest by seeking letters of undertaking

Who Is Nirav Modi

Nirav Modi is India’s one of the better- known diamantaires. Hewas born in a diamond-dealing family and spent his childhood in Antwerp, Belgium. At an early age of 19, he set sail for Mumbai. After spending nine years down the lane, he came up with his own company named Firestar Diamond Ltd. Initially, Nirav Modi started with selling loose stones and employed the only handful of people. But after attaining staggering success in his business till last year, the number of employees was more than two thousand.

As per the Firestar Group figures, the company’s revenue jumped over three years from 103 billion rupees to some 147 billion rupees by the 2016-17 fiscal year. Since 2013, Nirav Modi has been a regular on the lists of rich and famous Indians. According to Forbes magazine rankings, Nirav Modi’s net worth ranges to some $1.8 billion which itself explains the lavish lifestyle of the business tycoon.

Also Read: Biggest Bank Frauds Which Shook The Indian Economy

Nirav Modi’s stamped his name in India’s top corporates with growing global prestige with his fame and affluence. The Bollywood star and former Miss World, Priyanka Chopra also adorned with Modi’s jewels. From Hollywood’s red carpets to the Bollywood awards, his diamonds have sparkled on the bodies of actors and models like Kate Winslet, Dakota Johnson and Priyanka Chopra.

Last month, Nirav Modi was spotted at the World Economic Forum in Davos. A group photograph with Prime Minister Narendra Modi in the foreground and Nirav Modi in between rows of Indian business leaders have come under fire from the Congress party and notably carried out by the Indian media. Some political parties have taken a direct shot at Prime Minister for facilitating the run of Nirav Modi. In one of its tweet, Rahul Gandhi blamed Narendra Modi for this blunder.

Nirav Modi and his firms exploited the loopholes in the banking system to the fullest by seeking letters of undertaking (LOU) and thus raised credit from foreign banks to pay to its merchants. In simple words, LOU is a bank guarantee issued for overseas import payments. The scandal is termed as India’s biggest banking scams in ages.

For the past seven years, Nirav Modi’s three firms-Diamond R Us, Solar Exports and Stellar Diamonds-were in the process of procuring the LOU’s from the Punjab National Bank (PNB). Through these bank guarantees, Nirav Modi was able to raise the short-term loans from foreign branches of Indian banks to pay to its suppliers of raw material for his business.

A criminal complaint with the CBI was filed on January 29 accusing Nirav Modi and others of defrauding the bank and causing it a loss of Rs. 280 crore.
A criminal complaint with the CBI was filed on January 29 accusing Nirav Modi and others of defrauding the bank and causing it a loss of Rs. 280 crore. Wikimedia Commons

Due to the recent setback to the Punjab National Bank, its shares closed 2% lower at Rs. 125.65 against the previous day’s closing on BSE.

The CBI (Central Bureau of Investigation) booked the billionaire jewellery designer on January 31, along with his wife Ami, brother Nishal and business partner Mehul Choksi. The Nirav Modi’s wife is a U.S. citizen and said to be equally involved in the billion dollar fraud. The charges levelled against them were of allegedly cheating state-run Punjab National Bank to the tune of Rs. 280 crore. Within a fortnight of the first complaint by the Punjab National Bank, CBI was taken into the loop.

Also Read: 16 Indian origin people indicted for running a scam in the United States

Nirav Modi and his brother Nishal, who is a Belgian citizen, left India on January 1. However, it is still not known if they travelled together or separately. Meanwhile, Nirav Modi’s wife Ami, who is a US citizen, left India on January 6. Following the footsteps of his business associates, Mehul Choksi, the promoter of Gitanjali jewellery chain, left on January 4, the officials said.

After the exposure of the scam, CBI and the Enforcement Directorate moved to the External Affairs Ministry in order to get revoked the passports of Nirav Modi and his associates. Hence, the passports of Nirav Modi and Mehul Choksi got suspended for four weeks.

The last nail is struck by CBI as it has asked Interpol for help to arrest celebrity jeweller Nirav Modi, who is being investigated for one of the biggest bank frauds of the country.

Due to the recent setback to the Punjab National Bank, its shares closed 2% lower at Rs. 125.65 against the previous day's closing on BSE.
Due to the recent setback to the Punjab National Bank, its shares closed 2% lower at Rs. 125.65 against the previous day’s closing on BSE. Wikimedia Commons

The federal investigative agency and the law enforcement officials raided his jewellery stores and other businesses in Mumbai and New Delhi. However, Nirav Modi’s flagship company, Firestar Diamond, has denied any involvement in the case.

Also Read: 5 scams that rocked India in 2015

After this scam, Nirav Modi’s biggest rivals like Tanishq and Gitanjali Gems must be having a heave of sigh in terms of competition. As per the NDTV’s report, Nirav Modi is holed up at New York’s JW Marriott Essex House at 160 Central Park South, which includes both a hotel and apartments. The place is situated in a premier location overlooking New York’s well known Central Park.

In the following paragraph, thePNB’s swoop of Rs. 11,300 Crore is explained as it is:

  • There is a system of bank guarantee called a letter of undertaking (LOU). Under this a bank allows its customer to raise money from another Indian bank’s foreign branch in the form of a short-term credit. So basically, the LOU serves the purpose of a bank guarantee.
  • In order to avail LOU, the customer or organization is expected to pay margin money to the LOU issuing bank and hence the credit limit is granted. But in the Nirav Modi’s fraud case, he didn’t pay up any margin money and on the top of that, no credit limit was set up for him.
  • On a regular basis, Nirav Modi managed to pay to its suppliers of rough stones for his three firms. The money was paid through the loans by banks including Axis Bank, and Allahabad Bank. It was done by Nirav Modi’s firms on showing the letters of undertakings issued by the Punjab National Bank.
  • Early this year, Punjab National Bank discovered that there was no official record of such letters of the undertaking before reporting the matter to the CBI.
  • In this case, Nirav Modi and his firms were supposed to repay the loans but till now, all these loans have allegedly been rolled over for want of funds. Incidentally, when the borrower fails to make the repayment, the bank which has issued the LOU is constrained to honour the commitments on the behalf of its customers.
  • On February 15, the RBI (Reserve Bank of India), the central finance body of India reportedly directed the Punjab National Bank to pay all these banks that gave loans to Modi’s firm on the basis of guarantees issued by the state lender.
  • So virtually, Indian bank’s foreign branches were making payments on behalf of Nirav Modi’s to its suppliers in the form of loans.
  • The hell broke out in January when Modi’s firm requested further LOUs for paying the overseas suppliers. The bank officials straightforwardly refused to entertain the request on the ground that Modi’s firm needs to keep 100% collateral for the same. On this, Modi’s firm argued that no such money was kept ‘on margin’ in the past either and this led to an investigation by the bank officials who scanned the records only to discover that there was no trace of any such transaction. Lately, it was known that the guarantees/ undertakings were issued by bypassing the rules in collusion with some Punjab National Bank
  • The violation of the Punjab National Bank’s end was a too glaring blunder to ignore. Hence, a criminal complaint with the CBI was filed on January 29 accusing Nirav Modi and others of defrauding the bank and causing it a loss of Rs. 280 crore.The complaint included Nirav Modi and Mehul Choksi, managing director of Gitanjali Gems. But later on, Nirav Modi’s brother and his wife were also found to be included in this startling scam.

Next Story

Congress To Use Tribal Card to Regain Power in the Country

Congress to use tribal card to improve countrywide position

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Congress Chhattisgarh
Congress will be using the tribal card to regain dominance and their plan of action will begin from Chhattisgarh. Wikimedia Commons

BY SANDEEP PAURANIK

In order to regain dominance in the country, the Congress is mulling using the tribal card. This plan of action is to be first implemented in Chhattisgarh.

Riding on the success of the Assembly and urban body elections, the Congress feels that it can increase it base through tribals as they constitute 8 per cent of the total population.

The Bharatiya Janata Party (BJP) in the first three Assembly elections in the state, after its formation in 2000, recorded huge victories and came to power. But after the Assembly elections held last year, the scenario changed. After registering a victory in the Assembly elections and then in the urban body polls, the Congress showed that it still dominates the tribal areas.

Rahul Gandhi Congress
Former President of Congress Rahul Gandhi gave an important message while innaugrating the National Tribal Dance Festival in Raipur. Wikimedia Commons

The Congress gave the responsibility of the tribal areas to the tribal leader of Madhya Pradesh Umang Singhar which eventually helped the party. Now, the party is planning to spread out nationwide through Chhattisgarh.

Former party president Rahul Gandhi, while inaugurating the National Tribal Dance Festival in Raipur, gave a message to the tribals who are here to participate in the festival that the Chhattisgarh government is working for all the sections and this is the reason why there has been a downward trend in naxal attacks and the state economy has also improved.

The Congress is planning to publicise the improvements in Chhattisgarh throughout the country because the tribal population in the state is 32 per cent.

BJP media panellist Sandeep Sharma, however, claims that the party’s base has not shrunk. He said till Madhya Pradesh and Chhattisgarh were not divided, the Congress was strong in the area but in the elections held after three years of the bifurcation, the BJP won the Assembly elections and was in power for 15 years. Though we faced defeat in the 2018 elections, the only reason was that people wanted a change but they were not angry with the BJP, he claimed.

The BJP won in the Lok Sabha elections and the margin in the urban body elections was also not much. So, it would be inappropriate to say that the BJP’s base has shrunk, he said adding that in one year the Congress’ base has declined by 9 per cent whereas in Assembly elections it got 12 per cent more votes and in urban body elections the margin was 3 per cent.

Congress
The Congress is planning to publicise the improvements in Chhattisgarh throughout the country. Wikimedia Commons

Analysing the political landscape of the state, political analyst Rudra Awasthi said, “When it was Madhya Pradesh then the Congress had stronghold in Chhattisgarh. Several big leaders were also from the state but after the formation of Chhattisgarh since Ajit Jogi was accused of being a fake tribal the Congress lost its stronghold over the tribals. Though it continued to dominate in some of the areas which helped it in regaining the power.

“As of now, the Congress has started including the tribals with the backward class. First Bhupesh Baghel was the state chief of the party and he was replaced by Mohan Markam as he became the Chief Minister. During the Assembly elections, the Congress talked about the identity of the tribals which helped the party. After winning the elections, the decisions of the Congress government were in favour of the tribals which helped the party in the urban body elections,” said Awasthi.

Also Read- Unity in Diversity is the Strength of the Country: Rahul Gandhi

The Congress is mulling over spreading its message to the tribals across the country through the three-day festival going on here. For this several senior leaders of the party will attend the festival and share the government’s schemes while giving the message that the Congress government in the state has brought a positive and a significant change in the lives of the tribals. (IANS)