Court Rejects Mehul Choksi’s Plea to Recall Notice in PNB Bank Fraud Case
A special court on Friday dismissed a plea by absconding diamond merchant Mehul Choksi to recall a 2018 notice issued against him under the Fugitive Economic Offender (FEO) Act in connection with the Punjab National Bank (PNB) fraud case.
The court, presided over by Special Judge SM Menjoge, stated that it lacked the authority to recall its own order. Choksi had argued that the Enforcement Directorate (ED) had changed its stance on why he should be declared a fugitive economic offender. However, the court found no inconsistency in the ED’s position and noted that Choksi himself had shifted his defense multiple times—from citing medical issues to claiming his passport was suspended.
About Scam
Mehul Choksi, a diamond merchant and the former owner of Gitanjali Gems, is accused of being a key player in one of India’s largest banking frauds. Between 2014 and 2017, Choksi, along with associates and some officials of Punjab National Bank (PNB), fraudulently secured Letters of Undertaking (LoUs) and Foreign Letters of Credit (FLCs). These financial instruments, meant for international trade, were issued without proper due diligence or collateral.
Using these LoUs and FLCs, Choksi accessed large sums of money from overseas branches of Indian banks. The scam caused PNB a massive loss of ₹6097.63 crore. In addition, Choksi also borrowed loans from ICICI Bank, which he failed to repay.
The Escape Plan
Before the fraud came to light, Choksi carefully planned his escape. In November 2017, two months before the case was registered, he acquired citizenship in Antigua and Barbuda. On January 2, 2018, Choksi fled India under suspicious circumstances, just days before an FIR was filed in the PNB fraud case.
The Legal Proceedings
The Enforcement Directorate (ED), which is investigating the case, filed a petition to declare Choksi a Fugitive Economic Offender (FEO under the FEO Act, 2018. This law allows authorities to seize the properties of individuals who evade prosecution in cases involving fraud of ₹100 crore or more.
In July 2018, a special court issued a notice to Choksi under this Act. However, Choksi has repeatedly refused to join the investigation, citing various reasons:
- Health Issues (2019): Choksi claimed he was unable to return due to ill health.
- Mob-Lynching Fears (2018): He alleged that his life would be at risk due to potential mob violence.
- Passport Revocation (2023): Choksi argued that his Indian passport had been suspended in February 2018, making it impossible for him to travel back to India.
The ED countered these claims, stating that Choksi could have used his Antigua and Barbuda passport, obtained in 2017, or sought travel documents from authorities.
Court’s Decision
On Friday, a special court rejected Choksi’s plea to recall the 2018 notice under the FEO Act. Choksi argued that the ED had altered its grounds for declaring him a fugitive, but the court found no evidence of this. Instead, it observed that Choksi himself had changed his defense multiple times.
Special Judge SM Menjoge clarified that the court cannot revoke its own orders and upheld the validity of the notice issued in 2018. The judge stated, “The order was neither based on wrong facts nor a mistaken assumption.”
Current Status
The ED has alleged that Choksi deliberately avoided the investigation and fled India knowing the fraud would soon be exposed. The FEO Act empowers authorities to seize Choksi’s assets if he continues to evade the probe. Meanwhile, Choksi remains in Antigua and Barbuda, resisting extradition efforts by Indian authorities.
The Bigger Picture
The PNB fraud case, involving Mehul Choksi and his nephew Nirav Modi, highlighted vulnerabilities in India’s banking system. It prompted reforms in how LoUs and FLCs are issued, with stricter oversight and guidelines introduced by the Reserve Bank of India (RBI). Despite being on the run, Choksi’s actions have led to greater scrutiny of financial frauds, ensuring tighter regulations to prevent similar scams in the future.
