A warning ignored

At a Nirav Modi jewellery showroom in New Delhi.

IN hindsight, it seems like a scandal foretold. On July 26, 2016, an online complaint sent by the Bengaluru-based businessman Hari Prasad S.V. to the Prime Minister’s Office (PMO) stated: “I would like to bring to your notice a major financial scam similar to that of Mr Vijay Mallya of Kingfisher group from Bangalore, Subroto Roy of Sahara Group—Calcutta or Ramalingaraju of Satyam Group—Hyderabad. This scam and fraud [has been] done by [a] person/company based in Mumbai involving loss of Rs.1000s of crores of Indian public money…[sic]”

This was not inflated talk. Claiming that the “scam” was still under way, the complainant proceeded to provide “details of the fraudster” and his purported financial dealings with some of India’s biggest banks. The complaint claimed that the “fraudster”, Mehul C. Choksi, chairman and managing director of Gitanjali Gems Limited, had “siphoned out thousands of crores out of India”. The businessman appealed to the PMO to look into the financial dealings of the company “and do [the] needful before it is too late”, that is, before Choksi “escapes from the country like… Mr Vijay Mallya….”

Choksi is a business partner and maternal uncle of Nirav Modi, the diamantaire who grabbed national headlines after fraudulent transactions worth Rs.11,400 crore at Punjab National Bank became public knowledge in mid February. Inexplicably, popular attention towards Nirav Modi overshadowed the controversial business record of Choksi, who was at the centre of Hari Prasad’s complaint. According to the Central Bureau of Investigation (CBI), the fraud by Nirav Modi’s firms were worth over Rs.6,000 crore and that by Choksi’s firms totalled Rs.4,886.72 crore. Clearly then, Choksi’s alleged role in the scam is significant.

Hari Prasad told Frontline that he once enjoyed a good business relationship with Choksi. The ties soured after Choksi allegedly cheated him; he owes him Rs.13 crore. Hari Prasad said his concern was not purely personal. He was worried about the impact of Choksi’s alleged fraud on the functioning of the banking system and the economy as a whole. That is the reason why he teamed up with other “victims of Gitanjali”. He wrote the complaint after unsuccessful attempts at getting other institutions to act. It was also written on behalf of other victims. Hari Prasad made it clear that after having “failed to get the attention of any serious investigating authority, we have finally come to your door [PMO] for justice”.

In what seemed like strong references to a select bunch of controversial rich Indian businessmen, Hari Prasad said he wished to save the country from “huge losses of approximately Rs.10,000 crore looted by such white-collar thugs”.

He described several aspects of the finances of Choksi’s companies and pointed out the purported “deficiencies in the balance sheets”. He presented a list of 31 banks that had extended loans to Choksi’s group and warned that since multi-crore loans had been given despite the group having meagre assets, the loans were “definitely going to become NPA [non-performing assets] soon”. The complaint also pointed to “tax liabilities increasing year by year” and warned that since the company was supposedly not paying tax dues, “chances of him defaulting on payment are increasing by the year”.

Claiming that “his [Choksi’s] tangible assets are very small”, the complainant also called the balance sheet of Choksi’s firm “fictitious” and asserted that “there is something fishy with his company and its activities”. Hari Prasad said “(Choksi) could have managed the banks by some means”.

Hari Prasad wrote: “Most of the India subsidiaries are in losses and foreign subsidiaries in profit… Choksi has siphoned out Indian money abroad.” Having made his case, he said: “I hope you will take due note of the above and do your bit to save the country from another Subroto Roy (Sahara Group) and Vijay Mallya (Kingfisher Group) and may [prevent] such kind of white- collar thugs from looting public money and stashing it out of India. I hope you will do your best quickly to depute the right person to investigate this fraud and save the country from losing thousands of crores.”

The PMO forwarded the complaint to the Registrar of Companies, which did not take any action.

Hari Prasad told Frontline in late February: “PM sir has already established such good relationship with so many countries, I don’t think it’s going to be difficult to get them back provided there is a strong will. Seeing what has happened in the case of Lalit Modi, Vijay Mallya, Jatin Mehta, etc., people’s confidence in the authorities is going down. The government must get these fraudsters back to India and punish them severely. Only then it can uphold people’s faith in the government as its credibility is at stake now.”