Date: 15 December, 2020
by Shwas Bajaj, UILS, Panjab University
1. PNB SCAM
ABOUT THE SCAM
The Punjab National Bank scam relates to fraudulent Letters of Undertaking worth Rs 10,000 crore issued by the bank. PNB scam has been dubbed as the biggest fraud in India's banking history.
The key accused in the case were jeweller and designer Nirav Modi, his maternal uncle Mehul Choksi, and other relatives and some PNB employees. Nirav Modi and his relatives escaped India in early 2018, days before the news of the scam became public.
Bankers used fake Letters of Undertakings (LoUs) at PNB's Brady House branch in Fort, Mumbai. The LoUs were opened in favour of branches of Indian banks for import of pearls for a period of one year, for which Reserve Bank of India guidelines lay out a total time period of 90 days from the date of shipment.
This guideline was ignored by overseas branches of Indian banks. They failed to share any document/information with PNB, which were made available to them by the firms at the time of availing credit from them.
The Enforcement Directorate (ED) recovered bank token devices of the foreign dummy companies used by the fugitive diamond trader to transfer the fraudulent funds.
The probe agency found that Nehal Modi, brother of Nirav Modi had destroyed the devices and had even secured a server located in the United Arab Emirates (UAE) soon after the scam broke out. These dummy firms had been receiving the fraudulent PNB LoUs and were based out in British Virgin Island and other tax havens.
The scam has ballooned to over Rs 14,000 crore.
2. VIJAY MALLYA SCAM
Vijay Mallya has become the very first businessman to be announced as Fugitive Economic Offender (FEO) under the provisions of the new Fugitive Economic Offenders Act, which came into existence recently.
Kingfisher or Vijay Mallya were not able to make profits even after flying internationally and acquiring Deccan Air. In 2010, the company was in heavy losses as it wasn't able to keep up with its expenses.
To run this business of aviation, Mallya kept on taking loans from banks. He took loans of 9000 crores from 17 banks, and although SBI has declared Mallya as bankrupt, other banks continued to lend him loans. His company also-held service tax of passengers, PF and Income Tax of Employees. But he did not submit these amounts to the PF or IT authorities.
The company did not pay the salary of its employees and eventually ran out of cash. In 2012, Kingfisher had to shut down its operations as no further funds were available to run the business. Also, Vijay Mallya gave up paying the loans.
On 2 March 2016, Mallya exited to Britain after allegedly being warned that he was about to be arrested. However, he claims that the trip to London came out as part of a normal lifestyle and business pattern.
The authorities petitioned a warrant against Mallya for the crimes that came under the Money Laundering Prevention Act, 2002. Vijay Mallya was thereafter imprisoned by the Metropolitan Police on an international warrant and hearings on request from the side of India, for him to survive penalties of fraud and money laundering that started in December 2017.
A special court in Mumbai announced absconding liquor tycoon Vijay Mallya, a fugitive economic offender (FEO) on the request of the Enforcement Directorate.
3. ROTOMAC SCAM
This scam involved Vikram Kothari, promoter and Managing Director of the Rotomac Global Pvt. Ltd. who had been arrested by the CBI (Central Bureau of Investigation) for fraudulently cheating 7 banks with Rs. 3695 Crore.
A loan of Rs. 2919 was misappropriated by him and inclusive of interest the outstanding amount due to him is Rs. 3695 Crore. Rotomac deceived a consortium of banks by siphoning off loans that had been sanctioned to Kothari’s company for the export of wheat and other products.
The case had been registered after the CBI received the complaint from Bank of Baroda against Kanpur based Rotomac Global Pvt Ltd, the director of the company, his wife and son that is Vikram Kothari, Sadhana Kothari and Rahul Kothari respectively.
At first, the scam was estimated to be of Rs. 800 Crore, but after the investigation was carried out into the accounts of the company by the CBI, it was discovered that the company had taken loans from various banks amounting to around Rs. 3000 crore.
4. ALLAHABAD BANK SCAM
Allahabad Bank at Kolkata claimed disclosure of Rs. 2363 Crore in the PNB scam. The Allahabad Bank had however still stressed that it was sure that it would recover the amount as the money lent was fully secured by the documents under the Letter of Undertaking (LoU).
Through the overseas branch of Allahabad Bank in Hong Kong, the Allahabad Bank had been taking exposure with PNB as counterparty under various Letters of Undertakings issued through verified SWIFT messages.
SWIFT is a network of messaging that is used by financial institutions to transmit instructions and information securely by a standardized system of codes. In this case to accomplish the scam the internal employees of the Allahabad Bank had misused the SWIFT (Society for Worldwide Interbank Financial Telecommunications) technique of the Bank. Allahabad Bank’s internal banking system was not connected to SWIFT and thus, the transactions escaped from being mentioned in the books of account of the bank. Thus, no record of the transaction was found between Nirav Modi and Punjab National Bank.