After Nirav Modi, Delhi Jeweller Accused Of Rs 390 Crore Bank Fraud

New Delhi: After the Rs 11,400 crore Punjab National Bank (PNB) scam involving celebrity designer Nirav Modi and his Mehul Choksi, another alleged banking fraud of nearly Rs 390 crore linked to the government-run Oriental Bank of Commerce has surfaced, this time by a Delhi-based diamond jewellery exporter.

The Central Bureau of Investigation (CBI) has filed a case against Dwarka Das Seth International, one of its associate companies and others for an alleged fraud of Rs 389.85 crore.  Although the bank complained to the CBI in August last year, the First Information Report (FIR) was filed two days ago.

In its complaint, the bank said it had issued loans to the tune of crores to the company between 2007 and 2012. This despite the company mortgaging assets worth Rs 2 crore. The company's promoter Sabhya Seth used the bank money to buy gold, process it, and sell it to buyers mostly in the Middle East.

Sabhya Seth claimed they defaulted on repayments because their buyers didn't pay them. When the bank tried to contact the buyers directly, they found the buyers were frauds, set up by the company, the complaint said.

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The CBI says that a company called Freya Trading in the United Arab Emirates, which owed Dwarka Das Seth International Rs 105 crore, was set up and managed by Sabhya Seth himself. The FIR says that Sabhya Seth paid a man called Atul Garg a monthly salary of Rs 50,000 to run Freya trading.

Oriental Bank of Commerce alleges that Dwarka Das Seth International cheated the bank using letters of credit - a facility similar to the one used by companies of Nirav Modi and Mehul Choksi to allegedly defraud PNB. A letter of credit is a written commitment by a bank to make payment if specified criteria are met.

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"The borrowers were utilising this facility for discounting of bills, under letters of credit established by Dubai Bank Kenya, Soleil Chartered Bank, Trade Chartered Bank, TF Bank Kontrakt Inc, Century Bank Corp LCC, etc," the bank's complaint said.

During a forensic audit, Oriental Bank of Commerce said, it was found out that some of the banks that issued letters of credit were poorly rated, and one did not even exist.

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What sets this fraud apart from Modi-Choksi is that Sabhya Seth may have also used foreign banks to siphon off cash.

Oriental Bank of Commerce declared the loan accounts as non-performing assets in 2014 and had reported it to the Reserve Bank of India as suspected fraud for irregularities in foreign exchange transactions. Since then the bank has sold some properties of the company to recover its dues. CBI sources say the whereabouts of the accused are not known.

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The Opposition that has targeted the government over the Nirav Modi banking fraud today renewed its attack. "Under Modi Ji's "Jan Dhan Loot Yojana", another scam! 390 Cr., involving a Delhi based jeweller. Same Modus operandi as Nirav Modi. Fake LOU's. Predictably, like Mallya and Nirav, this promoter too has disappeared while the Govt looked the other way." Congress president Rahul Gandhi tweeted.

On Saturday, Finance Minister Arun Jaitley blamed sloppy bank management and regulators for the PNB fraud. "Unfortunately in the Indian system, we politicians are accountable, the regulators are not," he said at The Economic Times Global Business Summit.