Why Are the Diamond Scamsters Getting Away?
Moneylife Digital Team 21 February 2019
While the effort at extraditing Vijay Mallya is being pursued with all earnestness, there seems to be no urgency to go after the three major daimantaires who have together caused far bigger losses to the Indian banking system.
 
The only visible effort is that of tracking the residual Indian assets of Nirav Modi and Mehul Choksi of Gitanjali Gems. Nirav Modi’s illegally constructed bungalow at Alibaug (in the millionaire row of this distant suburb of Mumbai), is being bull-dozed on court orders, apparently without any thought to extracting value out of the valuables, paintings and artefacts in it. Meanwhile large tracts of illegal land holding of Mehul Choksi, ostensibly worth Rs300 crore, have been traced.  However, the effort to have the duo extradited to India appears to be going nowhere. 
 
On the other hand, there is little effort to bring back Jatin Mehta and family of Winsome Diamonds (formerly Suraj Diamonds) who have fled India after duping Indian banks of a massive Rs7,000 crore. Details available in the public domain reveal that the investigation agencies have been dragging their feet over tracking Mr Mehta and six cases were registered only 2017, although the fact that he has fled abroad was known since 2013.
 
The dates become significant in the politically charged environment of today, because it is important to establish who knew about the fraud and failed to act.
 
Moneylife has copies of Central Bank of India’s auditors report from the zonal auditor office (1398, Chandni Chowk, Delhi 110006) dated 26th October, which details specific bad loans from the region. The corporate governance review signed by DS Dahiya on bad loans of Rs5 crore and above has Winsome Diamonds and its sister concern Forever Precious Jewellery at the top of the list.
 
On 30 June 2013, Winsome Diamonds owed Rs710.71 crore to the Central Bank of India and here is what the audit noted: “Consortium is proceeding for legal action for recovery of dues. Our bank is not having sufficient security to fall back upon. The promoter–director of the Group is reported to have shifted abroad and not responding to bank calls.”
 
The report has exactly the same remark about Forever Precious Jewellery, which owed the bank Rs255.62 crore even then.
 
The Bank filed a complaint with the Central Bureau of Investigation (CBI) and the Economic Offences Wing (EOW) in 2014. The Reserve Bank of India (RBI) had also conducted a specific investigation into Winsome Diamonds and its group companies and discovered a massive fraud.  
 
According to reports, the March 2014 financial statement of the company admitted to a notice from the EOW of the police, even though the promoters were absconding since 2013. 
 
Media reports later revealed that six months before Central Bank admitted to Mr Mehta having vanished, the company seems to have removed hard disks from computers to hide evidence about its activities by feigning an income-tax raid on the office. It had already begun to default on its loans by then. According to media reports, this is the reason why the CBI (which apparently began to investigate the company in 2014) had not found any evidence. 
 
Astonishingly, the CBI only booked six cases against the group in April 2017. There is however, no action on the RBI (Reserve Bank of India) report or a serious effort to bring Mr Mehta and his family to justice. Like Nirav Modi and Mehul Choksi, they too have obtained citizenship of Saint Kitts and Nevis, a tax haven in the Caribbean. 
 
The delay in initiating action is especially scandalous because the modus operandi of Winsome Diamonds was similar to that of Nirav Modi, where Indian banks ended up holding the baby by providing guarantees based on a standby letter of credit.
 
Had the RBI and investigators gone public with their action against Jatin Mehta, Nirav Modi and Mehul Choksi scams could have been avoided. On the other hand, one could argue that top management of banks were shockingly negligent about the diamond business, despite having been duped in such a big way by Jatin Mehta. In the Nirav Modi case, top management of Punjab National Bank (PNB) remained careless, despite a specific query from the RBI.
 
It is also interesting that the government of India, while hot on the heels of beleaguered industrialist Vijay Mallya, who lives in London, has done precious nothing about Mr Mehta, who has reportedly incorporated a company called ‘Diamond Distribution Co (UK) Ltd’ listing a London address on Bell Street in August 2016.
 
Jatin Mehta also has a blog, where last post was written on 15 November 2016 about Winsome Diamonds receiving payment from Al Razin Jewellery FZE and Al Faheem Jewellery FZE, as per ruling by a Sharjah court. On the blog, he also has provided links to his Twitter and Facebook accounts. He joined Twitter in October 2016, but has not tweeted even once. On Facebook, his last post is dated 31 January 2017. There is a contact number on this page, https://www.facebook.com/jatinmehta.uk/, but it cannot be verified. However, the website jatinmehta.com as mentioned on the Facebook page leads to a page written in Chinese language.   
 
According to media reports, PNB, which suffered the heaviest losses due to Jatin Mehta’s shady operations, is also reported to have discovered a scam in 2013.  But then, this bank’s officials were again complicit with Nirav Modi, raising some serious questions about its supervision and oversight. 
It is also a mystery why none of the agencies has sought the RBI’s inspection report, which, according to our sources, had documented how the large overseas operations in the United Arab Emirates (UAE), claimed by the Mehta group, to justify massive export credit were nothing by jewellery kiosks.
 
All this raises serious questions about whether there is a deliberate reluctance to go after Jatin Mehta, who owes over Rs7,000 crore to 15 public sector banks which are repeatedly capitalised at public expense. 
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