Fugitive diamond jeweller Mehul Choksi has been detained in Belgium after Indian authorities submitted an extradition request in connection with the PNB scam. Choksi is accused of being involved in the ₹13,000 crore Punjab National Bank(PNB) loan fraud, making him the second key suspect in the case after his nephew, Nirav Modi.
Extradition Efforts
Since escaping India in 2018, Choksi settled in Antigua but went to Belgium last year for health reasons. Although an Interpol Red Notice against him was removed earlier, Indian agencies pursued his extradition through legal channels. Two arrest warrants issued by a Mumbai court in 2018 and 2021 were shared with Belgian authorities as part of the process. Authorities are wrapping up procedures, but Choksi might request bail due to medical issues.
Details of the PNB Fraud
The scam involved the fraudulent issuance of Letters of Undertaking (LoUs) and Foreign Letters of Credit (FLCs) at PNB’s Brady House branch in Mumbai. These guarantees allowed Choksi’s companies to borrow money from foreign banks without proper approval or security deposits. Between March and April 2017, PNB issued 165 LoUs and 58 FLCs to Choksi’s firms without recording them in its central banking system, thus avoiding detection.
Foreign banks like SBI Mauritius, Axis Bank Hong Kong, and others lent money based on these fraudulent guarantees. When Choksi’s companies failed to repay, PNB had to cover the losses, amounting to ₹6,344.97 crore, including interest.
Legal Actions Taken
The CBI has submitted two legal filings against Choksi, and the ED has lodged three separate cases. The ED has frozen or taken assets worth ₹2,565.90 crore owned by Choksi and got the court’s nod to auction them off.
Meanwhile, Nirav Modi, arrested in 2019 and fighting extradition to India, remains in a London jail. Choksi and Modi are accused of orchestrating one of India’s largest banking frauds.
What Are LoUs?
Letters of Undertaking (LoUs) are guarantees issued by a bank on behalf of its client to a foreign bank for short-term credit. If the client fails to repay the foreign bank, the issuing bank becomes liable for the amount.
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