10 questions that the ED, CBI, EOW, and RBI must answer


PNB Nirav Modi scam

Citizens are feeling bemused due to some unusual claims made by the investigative agencies. 

Nirav Modi scam is being looked upon as India’s biggest bank fraud. Both, Congress as well as the BJP are busy blaming each other while the common man is feeling bemused due to some unusual claims made by the country’s investigative agencies.

Here’re ten questions drafted by Advocate Sanjiv Punalekar that agencies like the Enforcement Directorate (ED), CBI, EOW, and the RBI must answer honestly in front of the taxpayers’.

i. The Official website of Ministry of Corporate Affairs (MCA) shows that Mehul Choksi and Nirav Modi are directors of a large number of companies and partners of a large number of LLPs(List furnished at the end of this Article). These entities have availed loans from banking sector to the extent of more than Rs. Ten Thousand Crores as evident from the website of MCA. The diamonds and precious stones seized by ED are actually the security for these loans. The why the ED is falsely claiming that security worth Rs. 5100 Crores is available for the scam amount relating to Punjab National Bank (PNB) when in fact PNB’s exposure is completely unsecured?

ii. Why is ED inflating the value of the seized articles? – Enforcement Directorate (ED) does not have the expertise to evaluate diamonds and precious stones. It has accepted the value as quoted by the paid employees of Nirav Modi. Persons associated with diamond trade know that the total stocks seized by ED are not even worth Rs. 200 Crores as opposed to ED’s tall claim of Rs. 5100 Crores. It is a known secret that the “seized” articles would remain in sealed cover and true value would be known only after 7-8 years. Is there any proposal to put up the diamonds for auction? Why and how ED officials accepted the valuation as told to them by employees of Nirav Modi?

iii. As many as 25 banks including Union Bank of India, Exim Bank, Allahabad Bank, Syndicate Bank, AXIS Bank, Jammu & Kashmir Bank have lent amounts to the companies directly and indirectly controlled by Nirav Modi & Mehul Choksi. Now when the inflated value of securities (?) is clearly shown to be short of the total exposure, why RBI is not advising all these banks to make a provision of bad debt before 31.3.2018 so as to ensure transparency in balance sheets?

iv. While the government may save public sector banks by infusing capital, what is the fate of private banks whose entire net worth is eroded? Why is no moratorium being announced by RBI against their operations? Who would protect the depositors of the private banks whose names are available on the website of MCA and which are bound to collapse in a short duration?

v. Letter of Undertaking is a product which was introduced “subject to compliance with guidelines and regulations of RBI”. RBI never issued any guidelines governing the diligence to be exercised by the bank in LOUs. Should heads not roll for such grave lapse? Why only Gokulnath Shetty and Manoj Kharat be booked and all past Governors of RBI be allowed to go scot-free when they have all connived in this scam?

vi. The circulars available on RBI website prescribe a reporting procedure. Who was monitoring the reports within RBI? Would these officials be arrested and booked along with Gokulnath Shetty and Manoj Kharat?

vii. The messages about the unauthorized LOUs were sent through “SWIFT” and there was no mechanism to link the data in SWIFT with the CBS data. If this serious lacuna has allowed the officials to commit a fraud, what is the accountability of the company which developed a defective software for the banks? Thousands of crores of rupees were spent on software. Will this amount be recovered? Would the head of the software company who supplied such defective software be booked under criminal law?

viii. Everyone is talking about the last few LOUs. From 2011 onwards there were series of LOUs. It is now established that what Nirav Modi was doing was a “kite-flying” operation. The debt arising out of previous LOUs was being closed by arranging fresh LOUs. If the quantum of total turnover is crystallized, the same would be more than Rs. 9 to 10 lacs of crores (and not merely 11600 Crores). Where were the funds created through this fraud utilized? Would the beneficiaries of such amounts created through fraud be booked under Prevention of Money Laundering Act?

ix. Why ED and RBI are reluctant to order the audit of the discrepancies between the data as per SWIFT and data as per CBS for all banks? Probably there is large number of such unauthorized LOUs not only within PNB but in a number of banks. If the amount is running into few lacs of crores, should people of India not know the same? There is every probability that the scam is not confined to PNB but has spread to many banks. Then why ED & RBI are trying to play down the whole thing?

x. Whether ED, CBI, EOW would book the heads of private banks and the officials in foreign branches of Indian banks who are involved in the scam or merely make a scapegoat of Gokulnath Shetty and Manoj Kharat?

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