PNB Fraud: Mehul Choksi Pleas Cancellation of the Non-Bailable Warrant

One of the co-accused in the Punjab National Bank (PNB) fraud, Mehul Choksi, applied to the Sessions Court, Greater Bombay on July 23, for cancellation of the Non-Bailable Warrant (NBW) issued against him. His plea was on the grounds that he could not return to India due to his bad health and that his passport had been impounded. His application further stated that he feared for his safety as he might be lynched by a mob.

Read More: The Nirav Modi Scandal

In the PNB fraud that took place over several years, the Nariman Point branch of PNB granted loans to Nirav Modi and Mehul Choksi without any collateral other than a glorified IOU in the form of letters of undertaking (LOU). Over time, the LOUs continued being issued even though the original loans never being realised. The two fraudsters and their families left the country with Rs 13,700 crore debt in their wake.

On the one hand, damage was done to the bank. On the other hand, all the employees of the entities owned by the duo were left in a lurch. Salaries were unpaid as all the assets had been seized. Other than the employees, several creditors – both in the production as well as the retail side of their operations – were left high and dry.

Choksi's application raised ten grounds on which the NBW should be quashed:

The Prevention of Money Laundering Act, 2002 (PMLA) contains provisions for a warrant to be issued, hence the Sessions Court should not have issued one.
Mehul Choksi's passport had been revoked in contravention to the provisions of the Passports Act, 1967.
Choksi had always responded to the summons he received from the Enforcement Directorate or any other investigating agency.
Due to his health, Choksi is unable to travel.
He fears that he may be lynched.
Allegations that the prosecuting agencies are prejudiced against him.
The procedure laid down in law has not been followed when dealing with the other accused in the case.
The ex parteOrder passed by the National Company Law Tribunal led to Choksi's assets being frozen, hence he was unable to make any payments.
The investigation violated the Delhi Special Police Establishment Act, 1946.
The present case could not have proceeded in view of the Companies Act, 2013.

On the first ground, the application mentioned that the authority mentioned under the PMLA has the powers of a civil court, and hence could have issued the warrant on its own. The Sessions Court, thus, should not have issued a warrant. The application further states that a NBW is not envisaged under section 174 of the Indian Penal Code for enforcing the appearance of an accused. The application further alleged that no notice was issued prior to the NBW, and hence it was improper to issue an NBW.

Regarding his passport being impounded, the application stated that the reason was that he was a security threat to India under section 10(3)(c). With his passport impounded, he was unable to travel to India to appear before the court. He has also challenged the tag of 'security threat' which in common parlance would indicate that he was likely to carry out violent activities. However, what is interesting is that under section 10(3)(c), another more probable ground is mentioned, i.e. 'in the interests of the general public'. Whether labelling him a 'security threat' was deliberate or not cannot be ascertained. However, it is clear that impounding his passport in the greater public interest is a more probable reason as those affected by the PNB fraud are the tax-paying people, who will have to shoulder his debt.

The application also contended that he had, in fact, sent email communication to the ED, however, he did not get a response and the NBW was issued. At this point, one can wonder whether his emails were ignored out of departmental incompetence, whether he had sent an email to the wrong address, or even whether the emails were deliberately ignored so that the NBW could be issued to assuage an outraged public.

Choksi has also claimed that he suffers from heart problems, and was hence undergoing medical treatment overseas. The application raises the fear that he may not receive adequate medical assistance upon his arrest.

On the fear of being a victim of mob lynching, Choksi referred to several instances reported in the Indian media including those when the accused was taken out of the lock-up by a mob and lynched. He also provided a list of persons who may want to lynch him:

the existing employees whose salaries and dues have not been paid because of freezing of the accounts,
the families of detained employees who have been arrested without any rhyme or reason,
the landlords whose premises the companies had taken on rent, who have not been paid their dues,
the customers whose jewellery in showroom have been taken away by the Enforcement Directorate,
the creditors of supplies and services, who have not been paid their dues.

He also expressed fear of being attacked by other inmates as well as being extorted and harassed by the jail staff. However, it is more likely that he would receive a five-star cell with home cooked meals if he ever entered the lock-up.

The application claims that the Central Bureau of Investigation (CBI) had named him in the initial First Information Report (FIR) despite him having no role whatsoever. However, it is not unheard of the investigating authorities to name several persons in connection to an offence and that their roles in the offence to be revealed upon further investigation. He also alleged that by sealing his server, the CBI rendered him defenceless, as all transactions and emails had to be processed through the server. He also mentioned that the complainant, PNB, had written to the CBI to prevent him from leaving the country, 'which is very abnormal'. Whether, this corresponds to a biased investigation or not is something for the court to decide.

However, the allegations that the investigating agencies did not adhere to the procedure laid down in law in relation to the other co-accused may support his claim for a biased investigation. He alleged that Hemant Bhatt was denied access to a legal counsel during his interrogation. Kavita Manikar was allegedly arrested after sunset by a male police officer. This is in clear violation of the Indian Penal Code, which lays down that a woman cannot be arrested at sundown, and if an arrest has to be effected, the arresting officer too must be a woman. Aniyath Shivraman was allegedly remanded to police custody despite being produced before the Magistrate after 24 hours. This is another violation of the IPC.

The application also challenges the Order of the NCLT which led to all of his assets being frozen. This, he alleged, made it impossible for him to repay his debts.

The final two grounds raised, however, make it appear as if there has been an attempt to frustrate his prosecution. Firstly, he has alleged that the consent of the state government was never obtained in order for the CBI to investigate. Under the Delhi Special Police Establishment Act, section 6 makes the state governments' assent a requirement for an investigation to be carried out by the CBI. The other ground raised is that by virtue of section 212 of the Companies Act, if the Union Government hands the investigation over to the Serious Fraud Investigation Office (SFIO), then no other agency can investigate the offence.

Thus, the very fate of the investigation could be compromised only because the procedure laid down in law has not been adhered to by the investigators and the Union Government. It will depend on the Sessions Court to determine which agency should investigate and prosecute him for the fraud, let alone what action should be taken for the alleged procedural lapses.

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