PNB fraud: IT attaches 9 bank accounts of Mehul Choksi, Gitanjali Gems

On February 21, 2018, the Income Tax department attached nine bank accounts associated with Gitanjali Gems and a jewellery store owner. The action followed disclosures by Punjab National Bank (PNB) regarding a major financial fraud. On February 14, PNB reported detecting fraudulent transactions with financial implications estimated at approximately Rs 11,346 crore, leading the bank to refer the matter to law enforcement agencies for recovery.

According to an Income Tax report, the bank account attachments were executed in anticipation of significant financial demands expected to arise from ongoing assessment proceedings. These proceedings targeted the jeweller, family members, and associated group concerns. Following PNB’s announcement that it had been defrauded of about Rs 11,400 crore by the jeweller, his relatives, and their companies, shares of Gitanjali Gems fell 18 percent to Rs 48.05. PNB’s own shares also experienced sharp declines over multiple trading sessions.

The fraudulent transactions reportedly involved letters of undertaking issued by PNB to provide guarantees on behalf of the companies. Prior to these disclosures, Gitanjali Gems had faced other legal and financial complaints. First information reports filed in Karnataka in 2015 indicated that a franchisee had a Rs 1.7 crore cheque from Gitanjali bounce, while another individual failed to receive Rs 5 crore in rental payments for a showroom.

A complaint filed by the unpaid landlord alleged that the jewellery company was siphoning off thousands of crores of public funds through domestic subsidiaries and fictitious overseas entities.