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PNB fraud case: CBI arrests three, including bank's former deputy manager Gokulnath Shetty and Nirav Modi companies' signatory

The investigating agency arrested Gokulnath Shetty, who was a deputy manager at Punjab National Bank, and Manoj Kharat, who was described by the source as a "single window operator" at the lender.

Published: 17th February 2018 12:32 PM  |   Last Updated: 18th February 2018 04:37 AM   |  A+A-

People wait in a queue outside a Punjab National Bank ATM in New Delhi, India, February 16, 2018. | Reuters

Express News Service

NEW DELHI: The Central Bureau of Investigation (CBI) on Saturday arrested two PNB officials and an aide of beleaguered diamond czar Nirav Modi and family in connection with the Rs 11,400 crore bank loan fraud cases.

The arrested persons were the then Deputy Manager (now retired) Gokulnath Shetty and Single Window Operator (SWO) Manoj Kharat, both named accused in two CBI cases of loan fraud, and authorised signatory of the Nirav Modi Group of Firms Hemant Bhat. They were produced before a designated Mumbai court that granted 14-day police remand of the trio till March 3, a CBI spokesperson said. The CBI will now subject them to custodial interrogation to unravel the larger conspiracy and modus operandi adopted to defraud the bank at the behest of Modi’s aide.

ALSO READ: Three accused sent in CBI custody, more officials could be involved

In addition, the CBI searched PNB’s branch at Brady House Fort, Mumbai, which seems to be at the centre of the scam. “The searches are continuing and six PNB officials are being examined,” the spokesperson added.

The CBI seized documents, including those relating to the acquisition of properties and banking instruments like fixed deposit receipts, from the premises of the two accused PNB officials and said fresh cases of disproportionate assets would be booked soon. The tax department said Indian banks could take a hit of over $3 billion from loans and corporate guarantees provided in the case, according to reports.

The CVC will also summon officials from Allahabad Bank and Union Bank of India.

Punjab National Bank fraud case: Developments so far

“Investigation in both the cases and examination of others is continuing,” a CBI spokesperson said.
The modus operandi adopted by the accused bank officials was that they deliberately omitted making entries of LoUs purportedly issued on behalf of the accused companies in the Core Banking System (CBS) of the bank to avoid detection.

“The funds raised through the LoUs were meant to be used for payment of import bills of the accused companies, whereas it was dishonestly and fraudulently utilised for discharging the earlier liabilities on account of Buyer’s Credit Facility allowed by the overseas branches of Indian banks,” says the second FIR in connection with 143 LoUs and Letters of Credit worth `4886.72 crore ($754.92 million) issued to Mehul Choksi-promoted Gitanjali, Gili and Nakshatra.

The modus operandi with regard to the Foreign Letters of Credit (FLCs) was that they were opened initially for smaller amounts by creating purported entries in CBS System and sending the relevant FLCs through SWIFT messages.

“The accused bank officials, pursuant to the conspiracy unauthorisedly and dishonestly enhanced the value of the FLCs manifold and issued amendments to the FLCs through SWIFT messages without recording the same in the CBS System, whereby the overseas branches of Indian banks discounted the Bills submitted by the beneficiary suppliers,” reads the second FIR against Choksi and three firms promoted by him.

The Enforcement Directorate (ED) on Thursday launched a nationwide raid on the offices, showrooms and workshops of billionaire diamond trader Nirav Modi.

The multi-pronged action came a day after the Punjab National Bank admitted to unearthing a fraud of Rs 11,515 crore involving Nirav Modi's companies and certain other accounts with the bank's flagship branch (Brady House Branch) in Mumbai and its second largest lending window in India.

The fraud, which includes money-laundering among others, concerns the Firestar Diamonds group in which the CBI last week booked Modi, his wife Ami, brother Nishal Modi and their uncle Mehul Choksi.

(With IANS inputs)

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