NIRAV MODI-PNB SCAM: Unfolds once more how this corrupt capitalist system fosters, aids and abets reckless swindling of public money




Yet another skeleton has tumbled out of the cupboard. This time it is a glaring revelation of how bank money is swindled by the big industrialists and business tycoons by giving rules and regulations a slip. One would recall that way back in 1992, Harshad Mehta, a Mumbai broker, shrewdly used a loophole in the banking system and then manipulatively used bank funds to amass fabulous wealth by way of artificially stimulating speculative stock market. Now it is Nirav Modi, a luxury diamond jewellery merchant who was ranked 57 in the Forbes list of India’s billionaires in 2017, Mehul Choksi, his uncle, other relatives and associates, who are owners of four top diamond companies in the country have defrauded Punjab National Bank (PNB), a leading public sector bank, to the tune of Rs 11,300 crores by simply tampering with the system. Informed sources say that the amount could well be over Rs 20,000 crores. And within days, Vikram Kothari, owner of Rotomac Global Pvt., a luxury pen manufacturer,  was found to have cheated a consortium of seven banks by siphoning off bank loans to the tune Rs 3,695 crore.  Revelation, thereafter, has been that there are more than 9,000 such accounts involving default of Rs 26, 000 crores belonging to top 11 debtor groups. While the BJP and the Congress, the two most trusted representatives of the ruling monopolists, are busy trading charges against each other in a ceremonious slugfest to prove who is cleaner than whom in abetting such mega-crimes holding toiling millions to ransom, those who intend to have a truthful insight into the whole episode from the perspective of safeguarding people’s interest need to consider certain facts and aspects in sequence and perspective.


How has this large scale swindling taken place?

One thing is obvious at the outset that even after Harshad Mehta scam a quarter century ago and a slew of incidents of misappropriation of bank funds thereafter, government after government have done precious little in insulating these banks and the taxpayers’ money from systematic loot and plunder.  In the last five years, there have been as many as 8670 cases of bank fraud involving Rs 61, 260 crore. Now, the way the lid has been pulled off the PNB fraud points to the incontrovertible fact that the Indian banking industry continues to be a leaking bucket for the scamsters and fraudsters camouflaged as businessmen or industrialists. In fact, these fraudsters, from Harshad Mehta to Nirav Modi, go on finding newer ways of robbing the banks. The modus operandi of Nirav Modi and his accomplices has been crafty tinkering with the Letter of Undertaking (LOU) route. A common mode of transaction in international trade is obtaining bank credit for paying merchants, suppliers etc.  For that purpose, businessmen or business firms seek LOUs from a bank mostly in the home country for raising credit from banks in overseas locations. Under LOU, a bank allows its customer to raise money from another Indian bank’s foreign branch in the form of a short term credit. The LOU serves the purpose of a bank guarantee. But to be able to raise the LOU, the businessmen or business firms are supposed to pay margin money to the bank issuing the LOU and accordingly, they are granted a credit limit. But Nirav Modi allegedly procured such LOUs from the Brady Road branch of Punjab National Bank (PNB) in Mumbai in the name of his diamond firms with neither a credit limit nor any margin money. Then based on those LOUs which, conspicuously, did not feature in the records of PNB, Nirav, his close relatives, associates, business partners and firms went on raising loans from overseas branches of India-based banks like Allahabad Bank and Axis Bank. In normal case, the firms of Nirav Modi and his accomplices were supposed to repay the loans with interest. But so far, all these loans have allegedly been rolled over because the loaners pleaded to have no money for repayment. In such a scenario where the borrower fails to make the repayment, the LOU-issuing bank (PNB in this case) is duty-bound to honour the commitments on behalf of its customers. So, PNB has to pay back Allahabad bank, Axis Bank and others the amount of loan availed of by Nirav Gandhi and his accomplices along with all due interest and penalty, if any.

The fraud was unearthed when Nirav Modi’s firm requested further LOUs for paying its overseas suppliers. Some of the PNB officials turned down the request on the ground that Nirav’s firm need to keep 100% collateral for the same. The Nirav’s firm argued that no such money was kept ‘on margin’ in the past and hence any such stipulation should be waived. To verify that, the concerned bank officials scanned the records only to discover that there was no trace of any such transaction. This implies that the guarantees/ undertakings were issued fraudulently and unauthorisedly bypassing the rules. It is inexplicable how could this fraud not have been detected despite several audits, including internal and concurrent ones, by both PNB’s internal audit wing as well as external statutory audit firms.  It is also a mystery how it could escape the notice of the regulatory bodies like the RBI as well.

Even if we assume that the LOUs issued to Nirav Modi and his accomplices were forged, then how is that no alarm was raised? Who does not know that such forging is a criminal offence? However, if one has to buy the arguments of the PNB authorities, no one knew about the scam despite so many checkpoints. It is paradoxical that when a gang of fraudsters were robbing the bank in broad daylight, brick by brick, the PNB authorities were being awarded for their excellence in vigilance.


Frauds and scams are aided and abetted by the power that be

Could such large scale fraud over such a long period be possible without connivance of high-ups in various seats of power? Even a school-going child would say, ‘no, it could not’. But, the investigating authorities in the country feel otherwise. Earlier also, whenever any such mega scams or financial frauds came to light, not a single person in the top brass was touched. Even if someone, in an exceptional circumstance, was hauled up, he or she was soon exonerated or the charges were neatly hushed up. The investigating agencies ended their responsibilities by taking some small fries into custody and then boasted to have cracked down on the crime. At best, some customary punitive measures were taken against these scapegoats—just pawns in the ploy —to prove how the ‘in the eyes of law, everybody is equal and how law takes its own course to give justice’. It would then be highlighted as ‘triumph of democracy’. Why so? Because, the scamsters and fraudsters have been bosom pals of the ruling party. They merely finance the ruling party leaders, look after their comfort, ensure their status and seats of power, build up their coffers of wealth and help them cross the Stygian ferry of election. This fact about the source of colossal funding of the bourgeois parties is known even to a school-going child today. This spectacle is common for the entire capitalist world.

In the instant case also, the BJP-led central government and the top bureaucracy pretend to have become wiser after the event. As usual, the CBI has found some scapegoats in the PNB while the real culprits are shielded and protected by the corrupt capitalist rulers. Here lies the eyewash. Most importantly, the governments, the ministers including the Prime Ministers, irrespective of whether they belonged to the Congress or the BJP plead themselves to be ‘rank innocents’ unaware of such large scale theft, robbery, pilferage, embezzlement of public money, corruption, and bending of rules continuing under their noses, unbridled and relentlessly.  We had seen this in all past cases. We find an exact re-enactment of the past in the present case also.


Pretence of ‘rank innocence’ by the BJP and its government

Is it that BJP and its government had no inkling of the crime? First of all, it is showing inexplicable amnesty to the wilful defaulters of bank loans in various ways.  Wilful default means loan amount has been diverted for purposes other than the specific purpose of finance or simply siphoned off or assets provided as collateral for securing loan has been disposed of. Bad loans or NPAs have crossed Rs 11 lakh crores. Two-third of impaired loans relates to just 24 big companies owned by the top monopolists of the country. And wilful defaults, as per official admission, have quadrupled during the BJP rule. But, when the annual budget for 2018-19 was placed in the parliament, neither did the Finance Minister nor the Prime Minister, busy as they were in self-eulogy over spurious claims of development, utter a word about this menacing rise in bad debts. Instead, the Finance Minister spoke of the necessity of recapitalizing the ailing banks, meaning compensating them for the loss by drawing into public exchequer. Does he mean to say that neither he nor his Prime Minister has any knowledge of such wilful defaults as also advancing renewed favours to the defaulters? Would anybody having least of intelligence endorse such “rank innocence” of theirs?

Secondly, both the Prime Minister and the Finance Minister had observed code of silence for the first few days of revelation of Nirav Modi scam as if nothing had happened. But afterwards, sensing public mood, they fielded other cabinet ministers for damage control by arguing that the scam started in 2011 when the Congress was in power. As if that would allow them going unscathed. But as details show, all the 293 LOUs under the scanner have been issued in the past two years. Most important is the fact that as per media report, the government, including the Prime Minister’s Office, was repeatedly alerted about the ongoing fraud. In the first instance, a complaint was submitted on 7 May 2015 to the Ministry of Corporate Affairs by one Vaibhav Khuraniya & R.M. Green Solution Private Limited. A copy was also sent to the Prime Minister’s Office, Enforcement Directorate, and Serious Fraud Investigation Office. But no action was taken. Another person named Digvijaysing Jadeja filed an FIR in the Ahmedabad Economic Offences Wing in Gujarat against Mehul Choksi and others for defrauding him. Jadeja also filed an affidavit on 20 July 2016 pointing out that Choksi and others owed Rs 9,872 crore to banks, and were likely to escape from India. But no case was registered. In a third instance, Hari Prasad, a Bangalore-based entrepreneur had written a complaint letter indicating the subject to be “Complaint lodged at PMO and CIC against Gitanjali Gems Ltd and its MD Mehul C. Choksi”. It stated: “We wish to bring to the government’s notice, a major financial scam, similar to that of Vijay Mallya, Subrata Roy of Sahara group or Ramalingaraju of Satyam group… This scam and fraud has been done by the person based in Mumbai involving loss of Rs 1,000 crore of Indian public money.” It accused Gitanjali Gems and Choksi of siphoning off thousands of crores through subsidiary companies floated in India, and fictitious companies abroad. The complainant also enclosed copies of complaints by franchisee victims against Mehul Choksi and various firms linked to him. However, no action was taken. In 2015, the Directorate of Revenue Intelligence (DRI) raided Mehul’s diamond jewellery designing unit in Sachin SEZ of Gujarat. The raid revealed that Nirav Modi group had illegally diverted Rs 1,216 crore of diamonds meant for export from the SEZ to the domestic market for sale. By way of this round-tripping of diamonds to misusing benefits from government schemes, the firm of Nirav Modi allegedly cheated the government of Rs 900 crore.  But, a fine of just Rs 37 crore was slapped on Nirav Modi. On the other hand, Nirav Modi was part of the delegation of Indian businessmen and corporate leaders at the World Economic Forum in Davos last month. He features in a group photo with Prime Minister Narendra Modi there. He was also part of the 2016 delegation to Davos led by Finance Minister Arun Jaitley. Not only that.  Many affected persons lodged a complaint in 2015 that Mehul Choksi had cheated them by alluring them to invest in a kind of cheat fund operated by him. But the Gujarat police refused to have any FIR registered against him. Mehul had also received a wide publicity in the so called “Vibrant Gujarat” campaign of Narendra Modi. Many prominent BJP leaders and their relatives are reported to have participated in the publicity of Mehul’s firm ‘Gitanjali’. Mehul Choksi was even invited to a programme at the Prime Minister’s Office in November 2015, where Narendra Modi is reported to have addressed him in the customary Gujarati style – “Mehulbhai” praising him for his remarkable business in jewellery. It is also alleged that a close associate of FM who unsuccessfully contested Punjab Lok Sabha election as a BJP candidate was inducted in the PNB board. Most remarkably, Nirav Modi who is now hiding at an anonymous place abroad writes a letter to PNB counter-alleging that the Bank’s actions had destroyed his brand and business and restricted his ability to pay all dues. His lawyer claims that there has been no irregularity on the part of his client as all transactions are documented and PNB had regularly levied fees on its dealings with the firms of Nirav and his associates. And finally, he straightway refuses to appear before the Enforcement Directorate (ED) and CBI and flatly refuses to repay the money.  Audacity unparalleled! Could Nirav and his accomplices dare to ignore official summon of the ED and CBI and refuse to pay back loans so bluntly unless they have “connections” strong enough to help them flee the claws of the law and escape unhurt? Is it not that they were tipped well in advance and then allowed a safe passage to foreign countries and then became so fugitive as to elude all extended arms of law? Are we to gulp the story of the Finance Minister that only a few middle-level PNB officials in connivance with the audit firm are guilty of allowing this fraud to take place? Are we to accept that the BJP leaders have no relationship with Nirav Modi, Mehul Choksi and their accomplices nor have they been indulgent onlookers to this ongoing crime?


How clean is the slate of the BJP and its government?

One would recall that Narendra Modi after taking over as the country’s Prime Minister promised that he would neither “embezzle public money nor allow someone to do it” (na khaunga na khane dunga). Obviously, his target was the Congress in whose regime a slew of mega scams like the 2G, Coalgate, IPL and others had unfolded. But now it is an open secret that there is no rein whatsoever on cornering public money through illegal and corrupt means. Nirav Modi scam came into the open close on the heels of unravelling of the controversial Rafale jet deal (where the government is accused of jacking up purchase price of Rafale fighter jets arbitrarily and inexplicably to a whopping Rs 1,611 crore as against originally quoted price of Rs 526 crore per unit). All these show how the BJP’s rule is no different from the erstwhile Congress regime in so far as perpetration of mega-financial scandals involving public money is concerned. Now these two principal ruling parties subservient to bourgeois class interest are taking jibes at each other attesting to the proverbial saying that ‘the pot calls the kettle black’. Narendra Modi, the BJP Prime Minister, often arrogates to himself the credit for administering the country with “More of governance and less of government”. His close aide, Finance Minister Arun Jaitley boasts that they are providing the countrymen the regale in “imandari ka utsav” (festival of honesty). But facts show that the blood-sucking capitalists, drooling to intensify their plunder of the poor countrymen are merrily using the BJP rule to their maximum gain and advantage. Now, ASSOCHAM and FICCI, two main organizations of the ruling Indian monopolists, are advocating privatisation of the public sector banks (PSBs) for taking them out of woes. The fact they have cleverly suppressed is that as many as 736 private banks had either failed or ceased to function or were amalgamated with PSBs. If privatization was the panacea why were they closed down or merged with others? What prompted ruling capitalism and its obedient Congress government to opt for nationalization of banks on the plea that the funds of privately owned banks were being uncontrollably utilized by the individual industrialists in their narrow sectarian personal as well as commercial interests? Was it not a fact that these private sector banks did inch to precipice of bankruptcy, not because of any large scale default by small debtors but because of virtual loot by the big business houses? Is it not that many of the promoters of these banks had siphoned out bank funds for their own business and other uses?  How prudent it is to think that banks in the private sector are free from corruption? So, if the PSBs are now handed over to such wanton looters and plunderers, would the public money deposited with the banks be secured or periled much more? Nirav Modi episode and allied developments have thus brazenly exposed the hideous and hypocritical underbelly of the self-attributed applauds of the Prime Minister and other BJP ministers and leaders. It also shows the global and domestic corporate overlords wholeheartedly backed Narendra Modi to rule India so that they could use his rule turn the country into yet more a haven for their rampant loot and plunder.


A definite design is discernable

If one observes carefully, it would be revealed that the BJP government as an obedient servant of ruling capitalism has been pursuing a definite design to reach out undue benefits to the big industrial houses and corporate giants in the name of so called economic reforms. First was the stunt of demonetization to detect black money. But it had instead helped whatever little black cash was in circulation to be converted into white because today capitalism generates, protects and feasts over black money. Secondly, the common people were forced to deposit even the last farthing they possessed with the banks so that the likes of Ambanis-Adanis-Nirav Modis could rejoice in reckless plunder of people’s money. On the other hand, common toiling people—the poor peasants, daily wagers-casual labourers—hawkers-small shop owners and even middle level businessmen are devastated. Then, on the plea of making cheap bank loans available to the capitalist owners for setting up ‘industries’, interest on bank savings are being progressively lowered. Even interests on national saving schemes are regularly reduced putting common people in extreme hardship.

The question that obviously arises after unfolding of cases after cases of illegal fraudulent sourcing of funds is whether these loan-taking firms or organizations fall under the category of real industries or are shell companies or dubious entities used as conduit for draining  off people’s money to fill the coffers of the capitalist owners and their servitors? Then, in the name of tax simplification and prevention of tax evasion, GST was introduced. It goes without saying that the capitalist-imperialist rulers, their political managers and caretaker governments, would only formulate laws, impose regulations and revamp procedures simply to serve the vested interest of the monopolists and corporates, both domestic and foreign, and operationalize the agenda of more and more concentration, consolidation and centralization of economic power along with political powers in the hands of the capitalist-imperialist state. To shield this heinous objective, the ruling party leaders and ministers indulge in a slew of false promises and assurances as well as make all kinds of radical postures. Exactly that has been the case with GST also. Neither has it simplified the procedure nor could it check tax evasion. Now, GST benefits are, as expected, usurped by the capitalist owners while the common people are ending up bearing the entire burden loaded on the end-price of items of use including essential commodities. Then was announced introduction of the ‘Financial Resolution and Deposit Insurance Bill, 2017 (FRDI Bill) aimed at embezzlement of people’s hard earned savings in the banks to bail out the banks artificially that had turned insolvent because of wanton and alacritous default of bank loans by large industrial houses and corporate tycoons, as well as swindling of people’s money by crooks like Nirav Modi and others of that ilk. So it is the common toiling people who are at the receiving end in every respect, fleeced and robbed to the core. Their life is at stake; their livelihood is in peril. Their purchasing power is falling rapidly because of spiralling price line and fast abolition of means of earning. Their hard earned savings kept in the banks for rainy days is being misappropriated by the unscrupulous big business with the government-administration in tow. If a peasant defaults bank loan because of crop failure or denial of remunerative prices for his produce, his movable or immovable property, if any, is confiscated and he is turned into a beggar overnight. Unable to bear with the ignominy and starvation, the hapless peasant even takes the extreme step of committing suicide. First of all, any ordinary citizen can hardly think of availing bank loans  because of procedural hazards and stipulation of stringent conditions. Even if anyone manages to secure, say a consumer loan from a bank and defaults two EMIs (Equated Monthly Instalments), he faces harassment, persecution, threat and even is physically assaulted by the hirelings appointed by the bank. But if any Ambani-Adani-Mittal-Jindal-Kothari default loans, they are favoured with waivers, write-offs and even sanction of fresh loans. This is the spectacle of capitalist India. The very attitude, approach, outlook and steps of the government are making it clear who is running it for whose interest—the common people or the plundering bourgeoisie. The parties like the BJP and the Congress are simply agents and managers of the ruling capitalists, acting at their behest, paving way for their loot and plunder by waiving, twisting or overriding the laws. This is the sinister design being avidly pursued by these parties of the establishment. So called “ease of doing business” trumpetted by the BJP Prime Minister is, in fact, a euphemism for the licence to bring down such ferocious economic onslaughts on the people by the capitalists-imperialists and their servitors. In fact, the BJP, the Congress and other bourgeois parties are surviving on such scams and frauds.


Corruption, fraud, swindling are the features of dying capitalism

It would be fallacious to view this fraud merely as a malaise in the Indian banking system or the handiwork of a few crooks. If one looks at the capitalist world, it would be found that corruption, fraud, swindling of funds, scam and all such crimes and aberrations have become part and parcel of the capitalist system. During the rising period of capitalism, the banks were viewed as facilitators of economic activity by pooling the resources from the people and then channelizing those funds to productive investment by way of granting loans to then sprawling industries and business and in turn benefitting the common people in the form of earning reasonable return on their savings. But today, when capitalism following inexorable course of history has long exhausted its progressive role, is rotting and turned utterly reactionary, the banks and financial institutions have become conduits to finance all sorts of speculations, covert smuggling and such other immoral activities.  Capitalism today is trampling underfoot all rules, norms, principles, ethics, morality, scruples and values to corrupt the entire system pending which it cannot prolong its oppressive, obsolete rule. Among all acts of corruption, financial corruption has become most dominant. Stricken by growing acute insolvable market crisis created by the very laws of capitalism, the imperialist-capitalist rulers find no scope for profit maximization through productive investment in basic and core manufacturing industries. So, surplus capital in their hands is being diverted to speculation, smuggling and all such other shady activities. In fact, the whole capitalist economy has now been turned into a punter’s den. For fuelling large scale speculation and inflating individual purses, additional funds are sourced from the banks through various routes, both permissible as well as impermissible. In fact, the prime job of the banks has now been to supply such funds in gross violation of the fiduciary responsibility incumbent on them. In fact, the banks have now become appendage to an utterly corrupt nexus of big industrialists-dubious traders-crooked business-men-dishonest bureaucracy-avaricious ruling party leaders. A glaring example of that was the sub-prime crisis that broke out in 2008 in USA and shook the global capitalist economy. In order to embezzle bank funds, this corrupt nexus works in tow with the pliant government and breaks rules with alacrity. The ruling parties which are anointed in power and both financially and politically nurtured by the ruling bourgeoisie oblige their mentor by allowing reckless pilferage of public money with impunity. Hence the ruling bourgeois parties, whether it is the BJP or the Congress in India or the Democratic or Republican Party in USA, silently abet such frauds and crimes. Only when any such fraud or scam is leaked and there is a commotion, a show of corrective action is orchestrated in the form of cosmetic raids, token arrests and surfeit of counterfeit promises of ‘strong action’ against the culprits. But, once the din and bustle subsides, all hyper-activism vanishes. The culprits go not just unscathed but make fortunes with the stolen people’s money. The capitalist state protects them. The ruling bourgeois parties who source their election funds from these frauds and smugglers and thrive on their ‘benevolence’ shield them in all possible ways. It ought not to be forgotten that all these malaises, aberrations, corruption and crimes are bred by capitalism, reared by capitalism, protected by capitalism and shielded by capitalism.


What can stem the rot?

Would the suffering common people go on feeling helpless in such a circumstance?  Should such scams and frauds be allowed to go on unabated? No, that cannot be. People must confront the issue based on correct understanding and correct approach. If they do that, there would be some check on this seamless and systematic loot and plunder and consequent savage economic assault on them. During the days of freedom movement and also for a good period after independence when there was spurt of powerful people’s movement with a pre-dominant leftist outlook, such assault on the people in newer and newer forms was not in sight. But today when people’s protest and resistance movements have been considerably enfeebled—thanks to the compromising policies of the pseudo-Marxists and leftists now in frantic pursuit of pelf and power—one after another severe economic attacks are brought down on them by the ruling capitalist class and its servitors. The more slackened is people’s organized protest and resistance, the more unbridled and desperate are the capitalist rulers, their hirelings and subservient thugs, criminals and burglars. So, people must close their ranks based on this realization and spearhead resurgen-ce of the desired surge of powerful movements under correct leadership in right earnest to stem the rot.

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