Digging Diamonds From Banks: The Untold Story of Fugitive Diamantaire Jatin Mehta - 2

Gurugram/London/Bengaluru: In 2018, the Congress party had alleged that the Narendra Modi government had turned a blind eye to Jatin Mehta’s alleged misdemeanours, allowing him to leave India and delaying the filing of cases against him. It had asked whether the “protection” for him had anything to do with his “close relationship with an industrial house closest to Narendra Modi through marriage of his son”. This industrial house is, of course, the Adani Group.

In Part 1 of this two-part series of articles, we saw how a legal battle in the United Kingdom has brought the Jatin Mehta affair back into the spotlight. In this, the second part, we shall highlight how the connection between Mehta and the Adani family goes well beyond the marriage of his son to Gautam Adani’s niece.

The Man Behind the Winsome Diamonds Group

Jatin Rajnikant Mehta had been formally associated with Winsome Diamonds from 1985, when he established Su-Raj Diamonds (India) Limited that was later renamed Winsome Diamonds. He stepped down from the position of the company’s managing director in April 2011 and thereafter continued as its non-executive director. He resigned from the board of Forever Precious Diamonds in August 2012 and submitted his resignation as chairman and director of Winsome Diamonds in November that year. He then founded a company in the United Arab Emirates (UAE) by the name of Pride Jewellery FZE, to trade in gold and diamonds.

He has been absconding from India since 2013. In 2014, he and his wife, Sonia Mehta, took up citizenship of St Kitts & Nevis in the Caribbean Islands. The Indian government does not have an extradition treaty with St Kitts.

In 2012, Jatin Mehta’s son Suraj married Krupa, daughter of Vinod Adani, older brother of Gautam Adani.

On March 1, 2018, the Congress party conducted a press conference during which it was alleged that the Modi government had connived with Mehta in “facilitating his escape from India.” It was claimed that despite several FIRs filed by the Central Bureau of Investigation (CBI) three years earlier and the complaints made by various banks to the CBI and the Economic Offences Wing of the Mumbai Police in February 2014, Mehta had been allowed to take up citizenship of St Kitts.

The Congress alleged that the Ministry of Home Affairs had allowed Mehta and his wife to renounce their Indian citizenship under Section 8 and Section 23 of the Citizenship Act, 1955, despite complaints pending with the CBI and the Enforcement Directorate. Moreover, the government had not issued a Red Corner Notice against them through Interpol. The spokesperson of the opposition political party Randeep Singh Surjewala wondered if the Modi government was protecting Mehta because of his ties with the Adani family.

More Adani links

In July 2021, Ravi Nair wrote for AdaniWatch.org that Chaim Even-Zohar, a reputed Israeli investigative journalist who tracks the diamond industry, wrote a detailed article on Jatin Mehta’s businesses, his offshore companies and its connections with various other entities in different offshore jurisdictions and tax havens. In the article titled “Smoking Gun: Winsome Case Evidence Buried in Lloyd’s Insurance Policy,” Even-Zohar wrote: “Suraj Mehta’s father-in-law, Vinod Adani, uses (the) same address for their respective offshore companies as used by JRD International. But more than that, they share several directors. In one instance, we have found a shareholding link between Adani companies and JRD International.”

JRD international Ltd, based in Dubai, is reportedly the holding company of many of the entities registered by the Mehta family in jurisdictions such as the British Virgin Islands, the Bahamas, Hong Kong and Singapore.

This reporting was further supported by the Hindenburg Research report released on January 24, 2023.

The report pointed out a link between Jatin Mehta and a group of companies under the Monterosa name. The report said: “Alastair Guggenbühl-Even, Monterosa’s Chairman and CEO, has significant past connections with a notorious Indian fugitive diamond merchant, Jatin Rajnikant Mehta. The report listed three companies in which Jatin Mehta and Alastair Guggenbühl-Even served as director together:

1. Forever Precious Jewellery & Diamonds Limited
2. Carbon Accessories Limited
3. Revah Corporation Limited

Monterosa group has been identified by Nair in his article for AdaniWatch as the ultimate owner of five Mauritius based entities – allegedly “shell” companies – that have invested heavily into the Adani Group’s listed companies. These investments have come under intense scrutiny in recent months, as it is alleged that these are “related party” transactions, with Mauritius-based entities that are ultimately linked ultimately to Vinod Adani.

Concerns Raised by the CAG

In a wider context, the Comptroller and Auditor General of India – in its Performance Audit Report No. 06 of 2016 on the jewellery sector for the period from 2010-15 that was tabled in Parliament in April 2016 – pointed out that nearly two-third (63%) of India’s exports of jewellery went to the United Arab Emirates and Hong Kong. The report pointed out: “Evidently, trade with UAE involving re-export did not create major economic activity while inflating the total value of the trade. It necessitated a detailed examination to distinguish imports and exports tied to the real economy through value addition and creation of economic growth, rather than from the re-exports simply passing through the trade accounting and bank financing channels.”

The period analysed by the CAG coincides with the time the alleged fraud by Winsome Diamonds occurred, and this aspect of the trade seems to have been overlooked by Indian banks while extending SBLCs (or Standby Letters of Credit) and letters of undertaking (LoUs) to jewellery firms.

The credit limit extended to Winsome Diamonds by a consortium of 13 banks in 2009 had stood at Rs 2,790 crore and went up to Rs 3,420 crore the following year, and one more bank was added to the consortium. In November 2011, the limit was further enhanced to Rs 4,614 crore, or a jump of over 65% in two years. This points towards a lax attitude of the banks in dealing with the company.

Litigation in the UK

On October 8, 2022, one of the authors of this two-part series of articles (Danish Khan) wrote in the MoneyControl.com portal that Jatin Mehta, his wife Sonia Mehta and their sons Vishal and Suraj had launched proceedings in the high court in London to be discharged of a May 2022 Worldwide Freezing Order (WFO) for $932.5 million. A WFO is an interim injunction restraining an individual and/or an entity from removing assets from England and Wales. The Mehtas claimed that the WFO was obtained through a private hearing without notice to them and that they had no opportunity to argue their case.

The Mehtas are being legally proceeded against to restrain them from removing the assets of seven entities they once owned/controlled in the UK and Ireland that were allegedly used to transfer proceeds of the fraud and were then placed into voluntary liquidation. “These seven companies, which have been restored to the Register of Companies, are, along with two independent liquidators, the claimants in the big-ticket case which has over two dozen counsels crowding the courtroom,” the report in MoneyControl.com stated.

The court was told that the Mehtas were complicit in a $1 billion fraud whereby banking facilities advanced to Winsome Diamonds and Forever Precious Diamonds were misappropriated and laundered through companies where the ultimate beneficiaries were the Mehta family. The court was told that a British Virgin Island-registered company Marengo Investment Group Limited which was accepted by the Mehtas as their “family owned company” received £163 million, while Al-Noora FZE based in the UAE received $650 million. Both Al Noora and Marengo were subsequently dissolved.

It has been alleged that $162 million was transferred from Marengo to Oriental Expressions DMCC, which was owned by Sonia Mehta. A further $15,000 of Marengo’s receipts were paid into her bank account in the UAE. However, in submissions made before the court, the Mehtas denied any relationship with Al Noora, which they say belonged to Jordanian national Haytham Salman Ali Abu Obaidah, a former business associate, whose whereabouts are still not known.

It is alleged that $162 million were transferred from Marengo to Oriental Expressions DMCC, which was owned by Sonia Mehta. A further $15,000 of Marengo’s receipts were paid into her bank account in the UAE. However, in submissions made before the court, the Mehtas deny any relationship with Al Noora, which they say belonged to Obaidah.

It is a “good arguable case that the Mehta family were also behind this company,” the claimants said in submissions to the court. “Like other companies involved in the laundering process, Al Noora was established by Jatin Mehta before being transferred into the name of Mr Obaidah.” The Mehtas, represented by Justin Higgo, King’s Counsel, denied that Al Noora was owned or controlled by the Mehta family.

The other companies that allegedly received the proceeds of fraud are: IIA Technologies, based in Singapore, which received $8.42 million; Polishing Technologies, Singapore, which received $ 7.42 million; PDC Limited, based in Hong Kong which received $7.33 million; Su-Raj India which received $5.58 million; JRD International based in the Bahamas which received $4.5 million.

Khan’s report added that another set of UK and Ireland registered companies were used to allegedly launder the fraud proceeds, adding further complexity to the legal dispute. The members of the Mehta family are seeking to quash the freezing order, which has, among other restrictions, put a cap on their spending, by arguing that the court has not been given proper and complete disclosures.

Higgo told the court that the alleged fraud was known at least since 2013 and pointed out that it has taken too long to bring proceedings against the Mehtas. He also pointed out that there was mischaracterisation in what the court was told.

The Mehtas have only disclosed assets worth $146 million, while facing allegations of a fraud amounting to $1 billion. The liquidators said that disclosures received from banks where the Mehtas have their accounts present a different picture. They cited a bank in Singapore which disclosed documents from 2013, showing Sonia Mehta’s estimated wealth at $425 million. The liquidators sought to impress upon the court that the Mehtas need to make proper disclosures about their assets.

“There is a strong prima-facie case of fraud. There is a body of evidence before the court,” said Ewan McQuater, KC (or King’s Counsel), representing the liquidators. A huge thrust of McQuater’s submission was that there was no element of non-disclosure. “Full and frank disclosure does not extend to detailed analysis of every point,” said McQuater.

The MoneyControl.com report stated that this could be “just the beginning of a long and complex process of litigation that will make the rounds of the courts in London.” As already mentioned, the dispute has its genesis in the credit facilities provided by the Standard Chartered Bank to Winsome Diamonds that were entered into in October 2008.

Winsome Diamonds and Forever Precious Jewellery, which owed $720 million and $388 million, respectively to banks, were ultimately placed into liquidation in September 2020. Here is an incomplete list of the companies that the claimants alleged were ultimately controlled by the Mehtas where the proceeds of the alleged fraud found its way:

The Mehtas have stoutly denied any fraud and maintain that court rulings in the UK including the WFO order do not establish any guilt or wrongdoing. They have also consistently held that the claimants have failed to establish exactly how the alleged fraud and the money laundering took place.

A Royal Side-Show

On December 11, 2022, Danish Khan published another article in MoneyControl.com in which he pointed out that during the proceedings in the court in UK that ruled against the Mehtas challenge to the English court’s jurisdiction on grounds of forum non conveniens (inconvenient forum), references were made to another case originating in the late-1960s involving the Maharani of Baroda and an international French art dealer. In 1972, a court of appeal in London served a writ petition to art dealer Daniel Wildenstein while he was in England just for a day at the Ascot horse races. Just like the Mehtas, Wildenstein had resisted the efforts to “Anglicise” the case, characterising it as oppressive and vexatious, but ultimately the Maharani of Baroda had triumphed.

In 1965, the Maharani of Baroda, who resided in France, bought a highly-sought-after painting from Wildenstein for £32,920. The painting was supposedly that of a female allegorical figure “La Poesie” by the 18th century artist Francois Boucher. The painting he sold to the Maharani was certified by his London office to be authentic and valuable. The painting was brought to London to be sold in an auction by Sotheby’s. To the Maharani’s surprise, the auction house said it was worth £750 as it was not by Boucher but from someone else in his circle. She approached a UK court seeking return of her money together with damages. Wildenstein argued that France and not England was the correct jurisdiction. A court of appeal ruled in favour of the Maharani in 1972. The Maharani reportedly led a colourful life travelling across the Indian sub-continent, Europe and the US. In 1943, she married Pratap Singh Gaekwad, the Maharaja of Baroda, after divorcing her first husband.

According to Khan, there is near unanimity among law scholars that the Baroda case is the starkest example of “forum shopping” or choosing a particular jurisdiction where a favourable outcome is likely. He wrote that lawyers for Grant Thornton had point out that the case against the Mehtas is not the one like the “classic case of Maharanee of Baroda v Wildenstein,” that the Mehta family have made a life for themselves in England for a number of visits. “A decade after the default, the Mehtas are now feeling the heat, but are hoping that the English court rules in their favour, just like it did for the Maharani of Baroda 50 years ago, although the relief sought by them is opposite to what was sought by the vivacious princess,” he added. The Mehtas were not as lucky as the Maharani of Baroda, as the report noted earlier that they lost on the jurisdiction challenge.

Concluding Questions

When the news of the default of bank loans by the Winsome Diamonds Group broke in 2013, the consortium of banks realised they would have a tough task recovering their dues. It became clear to them that this was not a case of business transactions going bad, but a deliberate attempt at defrauding them.
 
Is the Indian government keen on bringing back Jatin Mehta and family members from St. Kitts to India? Or will his “connections” ensure that the country’s law-enforcing agencies act in a desultory manner?

(End of Part 2, the final part of the two-part series of articles.)

The authors are independent journalists. Research assistance was provided by a person who chose anonymity.