by Harish Gupta, National Editor, Lokmat Group


Diamond King Neerav Modi flees India
Rs 11000 Crores fraud detected by PNB, Mumbai Branch
CBI probing biggest ever scam after Kingfisher
Vijay Mallya and Sandesaras also fled the country

Harish Gupta
New Delhi, Feb 14
Even as the Modi government was grappling with the Rs 9000 crores money laundering case against Vijay Mallya of Kingfisher fame and Rs 5000 crore scam of Sterling Biotech, another massive scam involving a sum of Rs 11000 crores surfaced.

The magnitude of the scam shook the banking industry as it involved several Public Sector Banks including the lead banker PNB. The PNB lodged two complaints with the CBI which swung into action as it involved billionaire diamond jeweller Nirav Modi and some of his firms in connection with a Rs 11,000 crore fraud case.

Highly placed sources told Lokmat today that the wanted billionaire diamond trader, had fled the country a couple of days ago when the CBI had registered its first case of cheating of Rs 280 crores against him on February 5.


If Vijay Mallya fled the country in 2016, the two Gujrat-based brothers who own Sterling biotech, also fled the country last year. It transpires that the Sandesara who were highly politically connected fled after the CBI registered cases against them. The diaries of the Sterling Biotech is said to be the root cause of the trouble which named high and mighty people. Now these sources claim that even Neerav Modi has fled the country right under the nose of the government. It was rather surprising how could Neerav Modi flee when the Income tax department had raided his premises in January and other agencies were after him.

Sources in the CBI refused to comment on the development and said that it is probing the case as PNB detected fraudulent transactions worth $1,771.7 million (over Rs11, 000 crore) in its Mumbai branch.

On February 5, CBI had booked Modi, his wife Ami Modi, brother Nishal Modi and his maternal uncle Pune-based Mehul Choksi in connection with an alleged Rs 280-crore cheating case after it received a complaint from PNB on January 29. The CBI FIR said a few public servants “committed abuse of official position to cause pecuniary advantage to Diamond R US, Solar Exports, Stellar Diamonds and wrongful loss of Rs 280.70 crore to Punjab National Bank during 2017”. Modi, his wife, brother and Choksi are all partners of these three firms, the FIR said. The case has been booked under IPC sections related to criminal conspiracy, cheating and provisions of Prevention of Corruption Act.

The PNB said in BSE filing, “The bank has detected some fraudulent and unauthorised transactions (messages) in one of its branches in Mumbai for the benefit of a few select account holders with their apparent connivance. Based on these transactions, other banks appear to have advanced money to these customers abroad,” said PNB.

The Modus operandi was simple as two employees of the PNB “fraudulently ” issued eight letters of undertakings (LOUs) and “transmitted SWIFT instructions to the overseas branches of Indian Banks” to raise buyers credit of at least Rs 280 crore for Modi’s firms without “making entries in the bank system”.

The bank alleged that it was making an “in depth” inquiry to find outstanding LOUs that have not been detected in its system. The bank also alleged that a fraudulent issuance of LoUs took place on January 16, 2018 for and on behalf of the accused firms, which approached the bank and presented a set of import documents with a request to allow buyers’ credit for making payment to overseas suppliers. The bank officials requested the firms to furnish 100 per cent cash margin for LoUs for raising buyers’ credit. The firms contested this, saying they availed of the facility in the past also, the complaint has alleged. It was at this juncture that inquiries were ordered to look into past record.


The Neerav Modi establishments across the country were raided by the income tax department and seized cash, jewellery and several documents that allegedly revealed tax evasion by his firms.

Other kings of good times

by Harish Gupta, National Editor, Lokmat Group

Why did you let Vijay Mallya escape even though he never paid back the nine thousand crore rupees he owed the banks, thundered Congress vice president Rahul Gandhi ? "You began it all", BJP finance minister Arun Jaitley reminded him, "when your government allowed Ottavio Quattrocchi to flee the country". Jaitley then softened his tone and explained to the younger Congress leader that the act of the Gandhi family-friend in 1993 had come at a time when the Swiss authorities named Quattrocchi as a recipient of the Bofors slush money. The CBI had even written to the then (Congress) government to impound his passport. "That makes Quattrocchi's escape a criminal act", Jaitley went on to pontificate. Mallya's case falls in a different category, he argued. He said neither the lending banks had demanded that he be prevented from flying out nor was there any request from the Enforcement Directorate, investigating possible money laundering cases against Mallya, to desist him from leaving the country. It's a different matter that the CBI had to apologize for its own folly in the case later in a press statement.

Parliament: The coming gridlock

by Harish Gupta, National Editor, Lokmat Group

With winter session of the Parliament a couple of days away, everyone who has a stake in the national economy — be it as job seeker or investor — is keeping his fingers crossed for the long-awaited clearance of a slew of pro-reform bills. There is little hope, though, that what the BJP-majority Lok Sabha proposes will not be disposed as before in the Rajya Sabha where the ruling party is in utter minority. However, one must be a daring gambler to place bet on even a temporary truce between the treasury benches and the opposition any time soon, if at all. "Reform for me", tweeted Prime Minister Narendra Modi, "is just a way station on the long journey to the destination. The destination is the transformation of India". While it remains unclear as to how does he intend to transform India, and into what, one thing that is clear is the rising disenchantment in the country with Modi's last year's election promise that achhe din, better days, are round the corner. The engine that moves a democratic government is the Parliament has predictably been brought to a grinding halt.

The previous monsoon session was indeed a wash-out in the midst of persistent demand from the Congress for resignation of BJP functionaries involved in the government allegedly winking at fugitive cricket entrepreneur Lalit Modi evading prosecution in India. The outlook of the coming session seems no better. Most opposition parties, particularly the Congress, have been greatly energised by the BJP's rout in Bihar. Their agenda for the Parliament has been set by the outcry against "intolerance". Congress vice president Rahul Gandhi seems having become particularly aggressive after his party's nominal electoral success in Bihar. BJP, on the other hand, has kept escalating its attack on the Congress, with its ideological brother Subramaniam Swamy having initiated a web of corruption charges against both Rahul and his mother Sonia Gandhi, Congress president. It is certainly not the atmosphere suited to bipartisan lawmaking. Which is a pity, as it will push away once again the possibility of having a Goods and Services Tax (GST).

Much of India's future ability to attract investment depends on having a law like GST as it levels the states' uneven tax rates, thus giving the national economy the tax uniformity that distinguishes the European Union. The GST council may settle for a steep rate of around 25 per cent, which is potentially inflationary, and yet exclude items like petrol and petroleum products, not to speak of alcoholic beverages etc. Still, a GST in some form is better than having none. But that's exactly how things seem to be now poised. After having opposed GST during its long stint as the main opposition party, BJP, on assuming power, suddenly turned its supporter. But instead of putting the relevant Constitution amendment before the Standing Committee, the Modi government got it passed straight in the lower House. Congress and its allies returned the compliment by blocking it in the Rajya Sabha.

Furthermore, logjam in the Parliament may put in the no-go area yet another crucial legislation concerning bankruptcy. Finance Minister Arun Jaitley is hopeful of putting into effect a new law that may set a swift deadline of 180 days for passing final verdict on a sick firm and allow it another 90 days if creditors agree. According to a World Bank estimate, it takes 4.3 years on an average for a bankruptcy dispute to be resolved in India. In a recent article, The Economist magazine reported that the recovery rate of debts in India is just about 25.7 per cent which, as it said, is one of the worst rates in developing countries. The classic case of mega-default is Kingfisher Airlines which was grounded in 2012 after leaving a debt of US $1.5 billion. If the law is passed, many sick firms can be revived instead of being left to die slowly. Besides, the banking sector, reeling under stressed loans which have gone up five times to US $133 billion since 2011, can also breathe freely.

It is not that the economy is growing so impressively that the government can remain unfazed by the parliamentary gridlock faced by its efforts at reform. It's not so easy to look the other way. RBI governor Raghuram Rajan has recently commented on the potential harm from lack of private and public investment, and if the government has no fund to raise investment, the private firms too are running 30 per cent below capacity. Judging from Prime Minister Modi's relentless foreign visits, it is obvious that he wants to make up for the shortfall in domestic investment with foreign investment. It worked in the first half of this year, with US $19.4 billion FDI rolling in during the period. But the roadblock to pass laws has hit the headlines all over, and investors have become cautious. For the first time since September 2013,  when Modi’s name was aired for the first time as a possible PM and foreign institutional investors began to buy Indian stocks, there was no net outgo of foreign fund from the Indian bourses, till very recently. A possible increase in the US Fed rate, combined with failure of the NDA government to pass GST and bankruptcy laws, may cause bloodbath in the stock market, not to speak of its bizarre backwash on the economy.

There is not much time left, therefore, for Modi’s grandiose project to “transform” India. The more urgent task for him is to stop thinking that the Opposition can be bullied into submission. Instead, he must instill into his adversaries the comforting feeling that they will get an equal share of credit if jobs and investment figures begin to look decent again and growth comes automatically instead of being puffed up with slick numbers. If a pragmatic Modi can adopt Aadhar, MANREGA and other UPA schemes, what’s the problem in taking the Opposition along the GST, Bankruptcy law to transform India.