Punjab National Bank has dismissed a settlement offer from jeweller Nirav Modi, accused of perpetrating a Rs 12,600-crore fraud on the state-owned lender, and asked him to pay the entire amount owed it immediately. It has also denied charges that by moving against him legally it has diminished the value of his brand.
In a February 26 e-mail, Modi, as first reported by HT, offered jewellery worth Rs 2,000 crore, current account deposits of Rs 200 crore and immovable properties of Rs 50 crore to settle part of his liabilities. The bank responded strongly last week through an e-mail that has been seen by HT.
“You are aware of the amount of fraud committed by you and yet you propose to pay a paltry amount with no proposal or ability to pay the remaining amount. Your recent alleged proposal to repay some amount is vague and only an effort to gain time by adopting delaying tactics,” PNB general manager Ashwini Vats wrote in a response to Modi.
Modi, his maternal uncle Mehul Choksi, and their companies and associates are accused of perpetrating a fraud on PNB by conspiring with venal bank employees to get letters of undertaking (a sort of bank guarantee) issued. According to the Central Bureau of Investigation, they used these to borrow money overseas, ostensibly to buy diamonds and pearls. It isn’t clear what the money was used for; when the loans became due, Modi and Choksi got fresh letters of undertaking issued, and borrowed more against these, part of which they used to settle their old loans. The cycle snapped when the employee facilitating these letters retired, and the new PNB employee refused to issue them. The banks owed money overseas subsequently started pushing PNB for the payment when it became due. The exact modus operandi will become clear only after Modi and Choksi are questioned by the agency.
The bank also told Modi that he hasn’t disclosed the details of immovable properties, fixed deposits accounts and current accounts that will be used to clear part of his dues. “Your proposal lacks bonafides, genuineness and even credibility,” wrote Vats.
In his e-mail, Modi also asked the bank to take over management of his companies in order to clear liabilities of his employees but the bank said in its response that this is his problem, not its.
“The payment of the statutory dues and the salaries of your employees continues to be solely your obligation.”
The bank also denied the charge that by reporting the fraud to the RBI and CBI it diminished the value of Modi’s business and brand. The CBI has registered three FIRs in the matter alleging that Modi and Choksi defrauded the PNB. “Your own illegal and fraudulent actions of obtaining fake LOUs and defrauding our bank are causes and you alone are to be blamed for the same. In fact, you have built your eponymous brand from the illegal money that you fraudulently got from our bank,” said the bank in its response.
“Having committed a serious fraud on our bank for several years… you cannot expect the bank not to take its legal recourse. All these years, while committing the fraud, you wrongly used the bank’s money and failed to repay the same despite several opportunities.”