Nirav Modi: Diamond traders say fraud suspects Nirav Modi, Mehul Choksi didn’t follow code
SURAT: Some diamond retailers in India’s largest centre for buying and selling the dear gems say that they had stopped coping with Nirav Modi and his uncle Mehul Choksi – two billionaire jewellers accused of PNB fraud – as a result of they have been usually gradual to pay dues.
The monetary sector was surprised when Punjab Nationwide Financial institution stated in mid-February it was the sufferer of a $1.77 billion fraud – a determine that has since risen to just about $2 billion. The second-largest state financial institution blamed Nirav Modi and Choksi, accusing them of conspiring with financial institution workers to acquire fraudulent credit score abroad. Each deny any involvement.
Nirav Modi, who runs eponymously branded high-end jewelry shops that stretch from New York to Hong Kong, and Choksi, who heads Gitanjali Gems and operates shops below banners together with Gili, Nakshatra and Asmi, each belong to the Jain group from Gujarat.
The Jain and Patel communities dominate the diamond reducing and sprucing enterprise centred on the Gujarati metropolis of Surat. Merchants there who spoke to Reuters stated the 2 jewellers had acquired a repute for not following the business’s unwritten code of enterprise ethics.
“Nirav Modi and Gitanjali’s enterprise mannequin wasn’t convincing to us,” says Seventilal Shah, chairman of Venus Jewel, who stated he had stopped coping with both enterprise some years in the past.
“In the event that they take items on two months credit score, and there may be one month’s delay it’s high-quality. However whether it is common episodes of delays, then there’s something unsuitable. That was the case with these guys.”
Representatives for each Nirav Modi and Mehul Choksi didn’t reply to a number of requests for remark. Indian authorities say each males left the nation in early January and their whereabouts are unknown.
Within the tight-knit Jain and Patel gem buying and selling fraternities, the place many wrestle to get financial institution credit score, most enterprise is finished informally, with money lent and items superior with out collateral or paperwork.
“Mehul did not perceive the significance of belief,” stated one Surat-based diamond exporter, who has been within the enterprise for practically 5 a long time and requested to not be named.
“As soon as we offered him polished diamonds and we needed to chase him for fee virtually each month for six months. Each time he used to present some excuse, then we determined to cease doing enterprise with him altogether.”
Eight merchants in Surat, the place roughly 80 per cent of the world’s diamonds are lower and polished, complained of comparable points of their dealings with each Nirav Modi and Mehul Choksi.
“That is why many retailers stopped coping with Gitanjali or Nirav Modi’s firm lengthy again,” stated Dinesh Navadiya, former president of Surat Diamond Affiliation, who runs a small diamond enterprise within the metropolis.
Gitanjali, in a inventory alternate submitting, has denied any involvement within the alleged fraud. Choksi, in an open letter to workers on Feb. 23, protested his innocence however suggested them to search for different jobs, as his property had been seized and he was unable to pay their salaries.
In a letter to Punjab Nationwide Financial institution (PNB), which says it found the alleged fraud at one among its Mumbai branches, Nirav Modi disputed the financial institution’s allegations, arguing the sums he owes PNB are far smaller than these outlined by the financial institution. Nirav Modi’s lawyer has additionally denied the allegations.
Each males have had minor brushes with authorities up to now.
In 2015, Nirav was fined Rs 480 million for exporting and importing the identical diamonds via Surat’s Particular Financial Zone to inflate export numbers, an official with the Directorate of Income Intelligence stated.
In July 2013 market regulator SEBI had barred Choksi from buying and selling for six months for manipulating Gitanjali’s share worth.
Neither case drew a lot consideration on the time and each males continued to increase their companies, tapping Bollywood stars to advertise their manufacturers.
Choksi’s Gitanjali adopted a franchise mannequin to open new retail shops, however two franchisees who spoke to Reuters stated it didn’t ship on guarantees made.
Hari Prasad stated he invested roughly Rs 100 million ($1.5 million) to arrange a Gitanjali retailer in Bengaluru in 2012. Gitanjali promised to handle operations together with stock, workers recruitment, salaries, lease and electrical energy payments, he stated.
However he alleges Gitanjali charged him inflated costs for previous or inferior inventory he couldn’t promote for a revenue, and he closed the shop in 2014.
Choksi and officers of Gitanjali Gems weren’t reachable for remark.
In 2016, Prasad and 6 different franchisees collectively wrote a letter to Prime Minister Narendra Modi’s workplace accusing Choksi of fraud.
The prime minister’s workplace (PMO) forwarded his criticism to the Registrar of Firms, which closed the case, stated Prasad, who confirmed Reuters copies of the correspondence.
The PMO and the Registrar of Firms didn’t reply to requests for remark.
“I needed to imagine him (Choksi) as he was managing director and chairman of such a giant group, which is publicly-listed and has a model picture,” stated Prasad. “If you happen to go to do enterprise with such varieties of individuals, you’ll imagine them.”