PNB fraud: Govt tells SFIO to investigate over 50 firms linked to Nirav Modi, Mehul Choksi

Mumbai: The government has ordered the Serious Fraud Investigation Office (SFIO) to probe over 50 firms linked to jewellers Nirav Modi and Mehul Choksi in connection with the Rs11,400-crore fraud at Punjab National Bank (PNB), said two people familiar with the matter.

The Ministry of Corporate Affairs (MCA) has asked SFIO to complete the probe in six months, said an MCA official, one of the two people cited.

“The order has asked the probe agency to go back to 2011 to verify whether these funds were siphoned off or diverted by violating norms of the Companies Act. The probe is initially looking at no less than 50 companies on whether some of these are shell structures for diverting bank funding,” this official said. SFIO will also check three complaints it received in 2015 and 2016, to establish the extent of fraud, this official added.

The MCA order makes SFIO the sixth agency to investigate the PNB scam.

The Reserve Bank of India (RBI), Securities and Exchange Board of India (Sebi), Enforcement Directorate, Institute of Chartered Accountants of India (ICAI) and Chief Vigilance Commission (CVC) are already conducting their own investigations.

The 50 firms that SFIO has been asked to probe are different from the 200 shell firms and benami assets being probed by the income tax department and ED.

The ED and the income tax department found on Saturday that these shell firms in India and abroad were being used to route or receive funds, launder money, and create benami assets. The ED has registered a money-laundering case against the two jewellers. The agency said it has raided 101 locations and seized close to Rs6,000 crore worth of precious gems and jewellery.

The CBI has arrested three people for causing loss to the public sector lender, including two former bank officials and an official signatory of Modi firms. Thirteen officials of PNB and four employees of Modi firms were questioned on Monday. The CVC on Monday also summoned senior PNB officials on alleged vigilance lapses.

The ICAI has formed a high-level panel to look at any audit-related lapses at PNB. The institute on Friday wrote to Sebi, RBI, and PNB to see if the auditors failed in their duty, an ICAI office-bearer said on the condition of anonymity.

“The institute will also make suggestions to the bank on how they can do a better job at audit and prevent such operational laxity in future,” he said.

“A thorough audit could have prevented the loss to PSU lender. If the bank discloses the outstanding Letter of Undertakings (LoUs) as a continent liability, then the auditors should have looked into it,” Rakesh Nangia, founder and managing partner Nangia & Co. Llp, a consulting firm which also does audit work.livemint