Fugitive Mehul Choksi Spotted in Belgium.

Mehul Choksi, the fugitive diamond merchant was recently spotted in Belgium, the reason being a medical treatment. The Indian Authorities, both CBI and Ed request for extradition.

Who Is Mehul Choksi?

Mehul Choksi was once a popular and respected name in the jewelry market of India. Today his name is on top of the list of fraud cases and dubbed as the biggest banking fraud case in India. It is a clear narrative of the supposed duplicity, global conspiracy and evasion of authorities all around the world.

Background – The Man Behind The Scandal

Born on May 5, 1959, in the cosmopolitan city of Mumbai, India, Mehul Choksi’s life was no less than an adventure into the world of precious stones, a world from which he rose to stand atop the pedestal of glory and fell headlong into disgrace. 

G D Modi College at Palanpur, Gujarat, saw him begin laying down the foundation for what would eventually become his foray into business.

The Choksi family was no newcomer to the gem and jewelry business and the young Mehul was groomed to be at the helm of the family enterprise. When he was 16 years of age, Choksi took his first step in the business world-learning the intricacies of both rough and polished diamonds.

A decade later in 1985, he took over Gitanjali Gems when he formally took over this leadership role from his father Chinubhai Choksi. Under Mehul’s  leadership, Gitanjali Gems expanded rapidly, turning from a small family business into one of the retail jewels empires across India with 4,000 stores.

Industry ties were quite strong for Choksi since he was the maternal uncle of Nirav Modi. He would find himself at the same end of the wrongdoing spectrum as the other scam-tainted figure. Choksi’s daughter is Akash Mehta, an diamond trader based out of Antwerp, which further strengthens the family ties global to the business.

Choksi’s Rise To Fame And Money

But when Gitanjali Gems, led by Choksi, became an everyday household name for ornaments in India, he desired to expand fast into the overseas market and capture more ground .His company was then trading in the Indian Stock exchanges and its market capitalization increased via interest of investors in his business model

The same expansion that brought the name –  Gitanjali Gems to India’s pinnacle of the jewelry industry later drew the spotlight for possible irregularities, amidst several questionable business practices.

The Punjab National Bank Scam

As on February 14, 2018 Punjab National Bank, one of the largest state owned Banks in India reported a fraud case to the central monetary authority in India, the RBI naming the Indian diamantaire Mehul Choksi.

While escaping the country, Choksi and his nephew Nirav Modi were accused of embezzling over Rs 14,000 crore through fraudulent transactions.

The size and audacity of the scam, reportedly as of Indian authorities, was indeed unprecedented and unheard of. It involved issuance of fake Letters of Undertakings (LoUs) by some officials from Brady House branch of PNB in Fort, Mumbai. These LoUs were, in effect, guarantees given by PNB to other banks under which Choksi and Modi’s companies drew short term credit from foreign branches of Indian banks.

How Was The Scam Operated –

1. LoUs were issued by PNB staff  without any record in the core banking system of the bank.
2. Then, these LoUs were sent to Indian overseas branches and these branches further advanced loans to companies owned by Choksi and Nirav Modi.
3. LoUs were issued for extended periods instead of 90 days as per RBI’s regulations. Sometimes even for one year.
4. When those LoUs fell due, fresh LoUs were issued to pay back the earlier ones and the cycle of deceitful transactions continued.

The Fallout and Flight of Choksi

Once the news around the scandal first began surfacing, Mehul Choksi’s perfect world started crumbling. Mehul Choksi was out of India only a few days before the scam by PNB was revealed.

He was flying off to Antigua and Barbuda, a small Caribbean country that has become a hot destination owing to its “Citizenship by Investment” program. Mehul Choksi got his Antigua citizenship in November 2017 by setting up a bank and a resort in that country.

Acquisition of the company’s stocks at such a time makes people wonder whether he had known about the collapse of his business and had arranged to leave through an exit door.

The Indian government was the first to respond positively or was quick in responding to the situation. In March of 2018, non bailable arrest warrants were issued against Choksi, Nirav Modi and his brother Neeshal Modi by a PMLA court. The charges were serious: Criminal conspiracy, criminal breach of trust, cheating and dishonesty especially by committing delivery of property, corruption and money laundering.

While Choksi started finding his new equation in Antigua, the masters at home in India started the rigorous process of making sure that he would not slip past the justice system alive. It finally turned out as a high-profile case of all those complexities that law enforcement agencies come across dealing with cross-border financial crimes and with fugitives who seek shelter in countries with whom India has very limited extradition treaty.

The Dominica Incident

In May 2021, reports began coming in that Choksi had gone missing from the Antigua and Barbuda region, starting a manhunt across the Caribbean. Within days of these reports, he was spotted, mysteriously, in the other Caribbean nation, Dominica.

According to Choksi, he was kidnapped from Antigua, taken to Dominica on a boat, and then beaten. His attorneys argued it as an attempt to evade the protection he had in law courts in Antigua and get him back to India sooner. He was charged with illegal entry into the country by the authorities of the Dominican Republic.

Then the case took a complicated route-cutting across three countries: India, wanting him extradited; Antigua and Barbuda, from where Choksi originated; and Dominica, in which he was imprisoned. A Caribbean court refused to send him back to Dominica and once again the Indian agencies were caught in a labyrinth of International legal battles.

The Ongoing Legal Battle

The extradition cases against him are being fought in the Caribbean, while back home his Indian trial begins. ED has been actively pursuing the case. Under the Prevention of Money Laundering Act, the ED has provisionally attached assets worth crores of rupees belonging to Choksi and his associates.

Related to this news are the multiple court cases Nirav Modi, nephew of Choksi, is fighting himself. Modi was arrested in London last year and continues to be in jail in the UK as Indian authorities are seeking his extradition. His repeated bail applications before the UK courts have failed, signifying that serious allegations against him are being entertained by the international community.

Choksi has continued to maintain that he is innocent of the charges against him. In May 2021, he, through his counsel, filed a petition before a Mumbai court saying it is for reasons “beyond his control” that he cannot return to India. Choksi further argues that he cannot be declared a “fugitive economic offender” as he had left India in January 2018 when the case had already been registered against him by the CBI for medical treatment. Choksi further indicated that Indian authorities suspended his Indian passport, an impossible task to return.

Investigations Remain Incomplete

Fresh allegations against Choksi and his companies came out in 2022 as the CBI registered a fresh FIR against Gitanjali Gems, Choksi and others for alleged cheating of IFCI. The case pertains to a loan taken from IFCI of Rs 25 crore pledging gold and diamond jewelry.

The CBI claimed the pledged jewels and diamonds were of a poor quality – lab-grown, chemical vapor diamonds – even though valuation reports were shown to be inflated and false. Valuers have been brought into the picture in the alleged fraud in this case.

Among the valuers, Pradip Shah is accused of cheating and criminal conspiracy for allegedly furnishing exaggerated valuations that enabled Choksi to get the loan.

Therefore, Shah is dependent upon the tides of fate turn in Gitanjali Gems. He argued that the valuation was held in 2016 when the company could very well be called a luxury brand with great value for the brand. However, by 2018, the company was in disarray financially, and it was facing bankruptcy proceedings. 

The Wider Implication

Choksi’s case has had far-reaching implications for the banking sector in India and India’s fight against financial fraud. It has exposed vulnerabilities and loopholes in the banking system, especially in issues pertaining to the issuance and monitoring of Letters of Undertaking. Indian banks have also taken a relook at their internal controls and oversight mechanisms.

The case further exposed the problems involved in international cooperation when fighting financial crimes. Already, the complexity of jurisdictions, as these include not only India and the UK but also Antigua and Barbuda and Dominica, has thrown light on the apparent urgency for stronger international frameworks to tackle economic offenders who escape across borders.

However, it seems like this case of Mehul Choksi goes a long way in itself, as his case will keep running in multiple jurisdictions. Now, the court needs to pronounce on the allegations posed against him. In that regard, it would only be surmised at this point in time that this instance through the Choksi case becomes a symbol for all the trials India’s financial system undergoes when it’s dealing with high-level financial fraud.

From being the son of a jewelry empire founded by an illustrious businessman to becoming an international fugitive of India’s biggest banking scandal, there is a story to Mehul Choksi containing a cautionary tale that echoes to this very day about points of intersection between business and finance and law enforcement in the globalized world of the 21st century.

 India since continues to strive for justice against Choksi, this case became a wake-up call on proper financial monitoring, international cooperation, and just how economic growth is sustained with financial integrity intact. The last pages of this story remain to be written, but it will surely go down in history with ripples that will echo well into the future in India’s pursuit of forensic policies against economic crimes.