Mehul Choksi and 13 other entities, including eight individuals and five companies, have been charged under Prevention of Money Laundering Act.
The Enforcement Directorate (ED) filed charge sheet against Gitanjali Group and its owner Mehul Choksi in a money laundering case related to Punjab National Bank (PNB) scam. The total proceeds of crime in this case is Rs 6,097.63 crore.
ED filed prosecution complaint equivalent charge sheet before a Special Court in Mumbai. Mehul Choksi and 13 other entities, including eight individuals and five companies, have been charged under Prevention of Money Laundering Act.
The agency had filed a money laundering case against Choksi and other on February 16 on the basis of FIR registered by the CBI. It was alleged that Choksi and others had committed cheating in connivance with certain bank officials by fraudulently getting the Letters of Undertaking (LOUs) and Foreign Letters of Credit (FLCs) issued without following prescribed procedure and caused a wrongful loss to the bank.
In this case, three companies of Choksi — Gitanjali Gems Ltd, Gili India Ltd and Nakshatra Brand Ltd — got fraudulently issued LOUs to the tune of Rs 3,011.39 crore and fraudulently got the credit limits of FLCs enhanced to the tune of Rs 3,086.24 crore making that total proceeds of crime Rs 6,097.63 crore.
During the investigation, it is revealed that funds of LOUs obtained fraudulently were siphoned off through their alleged overseas suppliers namely 4C's Diamonds Distributors Hong Kong, Shanyang Gong SI Limited Hong Kong, Asian Diamonds and Jewellery FZE, United Arab Emirates, Gitanjali Ventures DMCC, United Arab Emirates and Abbeycrest (Thailand) Limited, Thailand.
On receipts of FLC application, bank paid enhanced funds to overseas companies -- 4 C's Diamond Distributors and Crown Aim Limited (both located in Hong Kong) -- which are actually controlled by Choksi.
In addition, there are several other dummy companies controlled by Choksi in Dubai and Hong Kong which were used for layering and rotation of such funds. These companies are having directors, who were mere employees and dummies and ultimate decision making always remained with Choksi. Most of these companies had no genuine business and were only paper companies used for rotation of funds.
Proceeds of crime was also remitted to Gitanjali Group Companies in India in guise of Export-Import transactions.
It has also been found that though the goods being exported from India were of abysmally low quality but the value was highly inflated. The valuation of the export and import goods was used to be decided by Choksi. It has come on record that the diamond studded jewelry in semi finished form and of very poor quality were exported from India to the overseas dummy firms. These were then dismantled by dummy entities and diamonds and precious stones were removed. The gold and silver so obtained, after removing the diamonds was melted at the local melting unit and converted into bullion. The bullion so obtained and the diamond and precious stones were exported as raw material to India, completing the cycle.
"Books of Gitanjali Group were also manipulated by using third party remittance system and fabricated debtors were used to be created in order to enhance the drawing power for continuation and enhancement of credit limits," the charge sheet stated. During probe it has also come into light that funds were also diverted from Dubai to several overseas subsidiary of Gitanjali Group in guise of loan repayment, loan and advances.
Choksi indirectly used the fraudulently availed funds from LOUs and FLCs to invest in his companies in India through individuals/companies and in one case he transferred the funds from Eternity Jewels FZE, a shell company of Choksi to Rakesh Gajera in guise of loan. These funds were later used to purchase the equity of Gitanjali Gems Ltd.
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