A special court in Mumbai today remanded three persons arrested in the Punjab National Bank (PNB) scam in a 14-day custody of the Central Bureau of Investigation (CBI), saying the scam has "consequences for the economy of the nation".
The CBI told the court that it suspects the involvement of more PNB officials, and diamond trader Nirav Modi, who is at the centre of the scam, fled the country before the bank could lodge a complaint.
Also, it has yet to unearth the larger conspiracy, exact magnitude of the scam, identity/roles of other accused and the end-use of the public funds diverted in the scam, the agency said.
The scam has "consequences for the economy of the nation," said special CBI judge S R Tamboli, remanding the three in the central agency's custody till March 3. As the offence is very serious, investigation officers must get enough time to probe it, the judge observed.
"Remand report (application filed by the CBI) shows that there is a fraud of Rs 280 crore which may rise to Rs 6,000 crore," the court said.
The CBI today arrested Gokulnath Shetty, then deputy manager (now retired) of PNB; Manoj Kharat, a single window operator of PNB, and Hemant Bhat, authorised signatory of Nirav Modi, the billionaire diamond merchant.
The CBI told the court that beneficiaries of the Rs 280.70 crore fraud (mentioned initially in its FIR), namely, Nirav Modi, his wife Ami, Neeshai Modi, Mehul Choksi (all partners of M/s Diamond R US, Stellar Diamonds and Solar Exports), fled the country in the first week of January before the bank could lodge a complaint.
"It is revealed that Shetty, in conspiracy with Kharat, fraudulently issued LOUs (Letters of Undertaking) without sanction and without having the powers to do so and thereby abused his official position as a public servant," the remand application said.
"No documents or applications for issue of fraudulent LOUs issued by Shetty are available at PNB office," it said.
"The amount of fraudulent LOUs issued are likely to be in the vicinity of around Rs 6,000 crore which is many times more than the amount of Rs 280 crore reported by the Bank," the CBI plea said.
Preliminary investigation revealed that Shetty, in connivance with accused companies, had issued fraudulent SWIFT massages without any authority, which were not entered in the trade finance module of the CBS (Core Banking System) to avoid detection, the Central agency said.
"From the internal investigation reports of PNB, it is revealed that the logs in the SWIFT were used by many officials including Shetty by using passwords in the capacity of maker/verifier/authorizer enabling the fraudulent SWIFT messages," the remand report read.
Involvement of more PNB officials and outsiders cannot be ruled out, the CBI said, adding that Shetty was not cooperating with investigation.
Kharat was Shetty's subordinate and acted upon his directions in making and verifying Swift messages before Shetty authorised and transmitted them during 2017, the CBI told the court.
"Kharat admits that this was happening regularly and many other officers have done this before. But he is not revealing their names," the agency said.
Bhat was Modi's authorised signatory. He and one Kavita Mankikar were authorised to sign account opening forms on behalf of Modi's firms, the CBI said.
"Bhat is also a director of around 15 to 16 companies of Nirav Modi group and is aware about the modus operandi of the entire scam and the involvement/roles of officials of PNB and Nirav Modi Group," the agency said, adding that he was not revealing information about the quid pro quo and the modus operandi of the scam.
It has yet to recover some important documents related to fraudulent LOUs, the CBI added, seeking custody of the three accused for the maximum possible period.
It has yet to unearth the larger conspiracy, exact magnitude of the scam, identity/roles of other accused and the end-use of the public funds diverted in the scam, it said.
Defence lawyers opposed the remand plea, contending that the arrested men were not the beneficiaries, and the real beneficiaries of the scam were somewhere else.
On January 31, the CBI registered an FIR against Nirav Modi, his companies and his uncle Mehul Choski.
Shetty, Kharat and Bhat were arrested in connection with the same case, the CBI said today.
The FIR has listed eight fraudulent transactions worth over Rs 280 crore but based on further complaints from the bank the CBI now says the amount investigated in the first FIR is over Rs 6,498 crore, involving 150 Letters of Understanding allegedly fraudulently issued by Shetty and Kharat.
The remaining 150 fraudulent LOUs worth over Rs 4,886 crore issued for Gitanjali group of companies are part of the second FIR registered yesterday by the agency against Choksi and his companies Gitanjali Gems, Nakshatra Brands and Gili, they said.
All these LOUs were issued or renewed during 2017-18, the officials said.