Nirav Modi PNB Bank Fraud Case

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This article is written by Sharon, a BBA.LL.B (Hons) student from the department of law , Sathyabama institute of science and technology.

Background :

There have been many dishonest behaviors in the businesses of various professions which impacted society at large. The majority of the scams and frauds are done by influential individuals of the society and thus, have an great impact. These scams and frauds by influential individuals form a part of White collar crimes. White collar crimes as ‘crimes committed by people of high social status throughout their occupation or business.’ These crimes includes frauds, infringement of patents, copyrights, trademarks, money laundering etc . India’s biggest-ever banking scam shook the actual center of the financial sector in India. The country has witnessed the biggest scam of the decade, one of them is the Nirav Modi scam of Rs 11,400 crores (around 1.8 billion dollars). The scam done by Nirav Modi is further discussed in detail in the article.

History of Nirav Modi and his business :

Nirav Modi was born in Palanpur, Gujarat, and raised in Antwerp, Belgium. His family has been in the diamond business for a few ages. However Nirav Modi will stand out forever as a scamster, he was undoubtedly, an effective and visionary businessn man.

In 1999, Nirav Modi established the Firestar Diamond International Company practicing principally high – end jewellery. Further, in 2014 ‘NIRAV MODI’ the brand was brought into the world with its most memorable store opening in New Delhi, India. In 2015, Nirav Modi opened stores in Mumbai, Madison Avenue – New York, and Hong Kong.

The PNB scam Is basically an instance of financial fraud that was committed by Nirav Modi and his partners who colluded with senior Punjab National Bank representatives. The Punjab National Bank (PNB), one of country’s largest public sector lenders, found itself in the middle of a ₹11,400 crore transaction fraud case in February 2018 .

Nirav Modi PNB Scam story :

In the year 2017, it was observed that PNB was engaged with a huge scam of around 11,000 Cr Rupees by giving false bank guarantee in a dishonest way to a business head Mr. Nirav Modi. He is a man managing the matter of diamond jewels along his uncle Mehul Choksi. To import diamond from foreign nations, he moved toward PNB for the buyer’s credit. Against the buyer’s s credit according to the RBI rules the banks should request for collateral securities. But in this case, two employees of PNB controlled the information and without taking any collateral securities gave the LOU which is the Letter of Undertaking gave by the Indian bank which is used by the merchant to import merchandise from the outside nations by getting a credit from the Indian banks present in the foreign nations. It suggests in the event that the merchant neglects to reimburse the credit , then the Indian bank who has given the LOU will be considered answerable for the installment. For this situation the advances were taken in 8 different ways during the time of six years beginning from the year 2011 to 2017. The unfamiliar banks engaged with this case are really Indian overseas banks, for example, Allahabad bank and Axis Bank.

For the beyond seven years, two workers of PNB were sending unapproved LOUs. This was until one of them resigned and another employee participated in his place. In January, when Nirav Modi’s firm requested a new guarantee , the new employee demanded collateral. The delegates from Firestar (Nirav Modi and co) answered by saying that they had never been requested an assurance before. This set off an examination which prompted the falling and the reality of the deceitful LOUs becoming visible.

On fourteenth February 2018, the Punjab National Bank, the second-biggest Public sector Bank defenselessly answered to stock trades, the Central Bureau of Investigation (CBI), Reserve Bank of India (RBI) and people in general in regards to fraudulent exchanges of a stunning worth of 1.8 billion dollars (roughly) and the Nirav Modi scam hit the headlines.

Nirav Modi is being investigated in the $2 billion Punjab National Bank (PNB) fraud case. Firstly, the area was investigated by the Central Bureau of Investigation (CBI) and secondly, the scam was investigated by the Enforcement Directorate (ED). He was charged by the Indian government for criminal conspiracy, criminal breach of trust, cheating, corruption, illegal tax avoidance, fraud , misappropriation and breach of contract in August 2018 in the PNB scam case.

Legal parts of the Nirav Modi PNB scam :

The point by point legal aspects of the PNB scams and the charges Nirav Modi is facing can be analysed as follows:

Criminal conspiracy under section 120B of Indian Penal Code.
Criminal breach of trust by public servant, banker, merchant ,or agent under section 409 of Indian Penal Code.
Cheating and dishonestly inducing delivery of property under Section 420 of Indian Penal Code .
Causing the disappearance of evidence under section 201 of Indian Penal Code.
Corruption charges under Section 7A and section 8 of Prevention of Corruption Act .
Money laundering charges under Section 3 and Section 4 of Prevention of Money Laundering Act.

Outcome of the PNB scam :

The Nirav Modi PNB scam shook the whole monetary sector in India and what followed behind is as per the following:

On march 13, 2018, about a month from the scam hitting titles, RBI gave a notification restricting banks from giving guarantee as Letters of Undertaking (LOU) to forestall any further abuse of this office with immediate effect. In this way, the course of issuance of LoUs for exchange related credits for imports India got suspended by business keeps money with quick impact according to the request for RBI.
RBI additionally requested the linkage of the SWIFT system with the banks’ record-keeping framework for example the Core Banking System (CBS) inside the specified deadline.
To check the hazard of guilty parties getting away to foreign nations and staying away from prosecution, the Indian Government established the Fugitive Economic Offender’s Act (2018) w.e.f. 21st April, 2018. Any individual who has committed offenses like duplicating government stamps or cash, cheque dishonour ,tax evasion, transaction defrauding and different offenses under this Act adding up to Rs. 100 crores or more and has passed on India to stay away from prosecution and won’t return can be proclaimed as a criminal economic wrongdoer. Additionally, every one of his properties (counting benami properties) can be seized by the
central government and every such right and titles of the properties will vest with the Indian government with no encumbrances

Current status of Nirav Modi :

A UK court, on February 25, 2021, permitted the extradition of Modi to India. UK’s Home Secretary Priti Patel signed the extradition request, making the way for his extradition. Modi has appealed the court request charging he will not get a fair trial in India. Right now, Modi is in prison at the Wandsworth Jail in south-west London.

Conclusion :

White Collar Crimes are the most risky crimes in the current period as they influence individuals on the loose as well as effects the economy of a country generally. India has seen many such scam, a portion of these are fodder scam, satyam scam, hawala scam and etc .. Nirav Modi scam is one more illustration of such scams.

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