After PNB scam, another Choksi loan haunts banks

As efforts are being made to bring back bank fraud accused Nirav Modi and Mehul Choksi, one more huge loan raised by Gitanjali Gems Ltd is under scanner.

After the Punjab National Bank scam (Rs 12,600 crore) and the loan by a consortium of banks with ICICI Bank as the lead bank (Rs 3,810 crore), a loan of Rs 5,280 crore from a consortium of banks led by Allahabad Bank is the new conundrum.

AllBank Finance Ltd, a wholly-owned subsidiary of the state-run Allahabad Bank, is the security trustee of this loan. The other banks in the consortium include Vijaya Bank, State Bank of Mauritius Ltd, Catholic Syrian Bank, Jammu and Kashmir Bank and Oriental Bank of Commerce. This is the second highest loan obtained by Gitanjali Gems Ltd and there are more reasons why these banks have a reason to worry, for the chances of repayment of this loan too look grim.

The guarantor companies in the loan are subsidiary firms of Gitanjali Gems Ltd. The supplement of mortgage deed and charge and guarantee, the documents of which are with DH, names Gitanjali Gems Ltd as the borrower; two companies — Decent Securities and Finance Private Limited and Eureka Fine Stock Private Limited — as the first and second mortgagor and guarantor, while Mehul Choksi himself has represented as the third mortgagor and guarantor.

A close look at the shareholding pattern of Decent Securities and Finance Private Limited and Eureka Fine Stock Private Limited reveals that close to 99% of the shares in both the companies are held by Gitanjali Gems Ltd. And with Mehul Choksi, the third and personal guarantor for the loan, on the run, there is not even a remote chance for these banks to proceed against any of the guarantors.

The documents accessed by DH revealed that the loan amount is still due, as on 2017-18. The last mortgage deed was executed on August 2013 to raise the overall limit to Rs 5,280 crore. The first agreement was executed in November 2010, and the second in August 2011. Till the second deed, the loan amount stood at Rs 3,610 crore.

No response

The security trustee agreement between the obligator (Gitanjali Gems) and security trustee (All Bank Finance Ltd) and consortium members (banks) explained the modalities of repayment in case of default by borrower. During investigation into the PNB scam, the CBI found that Gitanjali Gems had pledged several of the same brands and immovable assets for the Rs 5,280-crore loan that it had pledged for loans with the PNB.

DH sent questions on the action taken so far in connection with the loan to Allbank Finance Ltd, the lead bank Allahabad Bank and to the Reserve Bank of India’s Communication department. However, none replied to questions such as the present stage of recovery of loan amount due, action taken against the borrower and the status of the security pledged for the loan.

Other loan

The situation is no different in the other huge loan obtained by Gitanjali Gems Ltd. A consortium of 24 banks, led by ICICI Bank and IDBI trusteeship as the trustee, has lent a loan of Rs 3,810 crore. The parties involved in the agreement are: Gitanjali Gems Ltd and IDBI trusteeship services Ltd, acting as a trustee. The loan agreement/mortgage deed executed on April 17, 2015, has just one guarantor — Nashik Multi Services SEZ Ltd, again an umbrella company linked to Gitanjali.