Mehul Choksi, a fugitive diamond trader, has been arrested in Belgium after being on the run since 2018. He is accused of masterminding one of the largest banking scams in India's history—the Rs 13,850 crore Punjab National Bank (PNB) fraud case. Choksi's arrest, which took place on April 12, followed a request from Indian investigative agencies, including the Central Bureau of Investigation (CBI) and the Enforcement Directorate (ED). Belgian authorities detained him while he was receiving medical treatment in a hospital.
Who is Mehul Choksi?
Mehul Choksi, born in 1959, is an Indian businessman and former head of the Gitanjali Group, a well-known jewellery firm. He gained prominence in the diamond industry but saw his reputation plummet after being named in the PNB fraud case. Before the fraud was revealed, Choksi left India in January 2018, initially traveling to the United States before settling in Antigua and Barbuda, where he obtained citizenship in 2017. Since then, Indian authorities have been attempting to extradite him to face trial.
The PNB Scam: How it Unfolded
The PNB scam, involving Mehul Choksi and his nephew Nirav Modi, allowed them to fraudulently acquire loans from foreign banks using Letters of Undertaking (LoUs) issued by PNB’s Brady House branch in Mumbai. An LoU acts as a guarantee from a bank that enables customers to obtain short-term credit from overseas banks.
From 2011 to 2018, Choksi, Modi, and their companies exploited the LoU system by bypassing standard procedures, with the help of some PNB officials who issued LoUs without recording them in the bank's main system. This allowed the fraud to go undetected for several years. The funds, which were supposed to be used for importing goods, were largely not returned. Instead, new LoUs were used to pay off earlier ones, and the money was misused for personal and business expenses.
The total value of the fraud amounted to Rs 13,850 crore. Choksi's Gitanjali Group was linked to Rs 6,097 crore, while Nirav Modi's companies were associated with Rs 6,498 crore. The remaining amount includes interest and other charges.
Investigations and Response
Once the scam came to light in 2018, the CBI and ED launched investigations, which resulted in the halting of operations at Gitanjali Gems and its related companies. Authorities raided offices, froze bank accounts, and seized assets.
The ED discovered that a significant portion of the embezzled funds had been sent abroad through shell companies, which were set up to conceal the destinations of the money and launder it.
In September 2024, the ED, in collaboration with PNB and ICICI Bank, received approval from the Special PMLA Court in Mumbai to sell assets worth Rs 2,565 crore owned by the Gitanjali Group. The funds from the auction will be held in fixed deposits under the banks’ names.
The Role of Priti Choksi
Priti Choksi, Mehul Choksi’s wife, has also come under scrutiny. Reports suggest that she played a direct role in hiding the illicit money. In 2013, Priti, along with CD Shah of Magus Consultancy, established three offshore companies—Charing Cross Holdings Ltd, Colindale Holdings Ltd, and Hillingdon Holdings Ltd. These companies were registered in jurisdictions with minimal ownership transparency.
Among these, Hillingdon Holdings became the sole shareholder of Goldhawk DMCC, a company based in the UAE that owned three high-value properties in Dubai’s Almas Tower. These properties, valued at over Rs 22.5 crore, were purchased with money from the scam.
Further investigation into the money trail revealed that in November 2014, AED 600,000 was transferred from Asian Diamonds and Jewellery FZE, a part of the Gitanjali Group in the UAE, to Hillingdon Holdings. This transaction helped authorities trace the illicit funds.
The ED seized these Dubai-based properties in 2019, but they remain listed under the name of an old company, Diminico DMCC.
The arrest of Mehul Choksi marks a significant development in the investigation into one of India’s largest financial scandals. As authorities continue to probe deeper into the scam and the roles of all those involved, the international efforts to bring Choksi back to face trial are intensifying.
