THE PNB SCAM
THE PNB SCAM
Another scam happened. Another loss crept on as a baggage on the deeply pocketed banking and financial systems of our country. And it is just a tip of the iceberg for other scams such as Rotomac Scam of around Rs. 3695 crores where Rotomac Global Pvt Ltd was given bank loans worth Rs 2,919 crore from 2008 onwards by a consortium of banks led by Bank of India. And many more to follow.
The questions that are lurking around is that is it really a case of immediate findings of a bad loan by our government authorities? Is it a politically influenced fraud or is it only the work of a group of money minded people who think that they can work their way out of the investment and banking laws of foreign and domestic banks? Moreover, who’ll pay this dazzling sum of ₹14,000 crore? The taxpayers or the lenders of PNB or the bank itself?
Hari Prasad, a Bangalore based entrepreneur, had written a letter to the Prime Minister’s Office about being allegedly duped by Mehul Choksi, managing director, Gitanjali Gems and business partner of Nirav Modi, of Rs 130 million, after opening a retail story of the Gitanjali brand. The said letter was sent to the PMO on 26th July 2016 and in response, he got the acknowledgement letter too from the PMO’s office which indicated that they’ll take a stringent action against the alleged. And then, the reality struck hard after two years. Where’s the ED and CBI for conducting raids at that time instead of now?
Under Section 143 (12) of the Companies Act of 2013, “if an auditor of a company has reasons to believe that an offence involving fraud is being or has been committed against the company by officers or employees of the company, he shall immediately report the matter to the central government.”
Deloitte Haskins & Sells in its audit of Firestar International Ltd. , the flagship firm of Nirav Modi, had flagged off concerns that the company did not have an appropriate internal control system for credit evaluation and setting credit limits for customers, which could potentially result in the respective companies recognising revenue without establishing reasonable certainty of ultimate collection. And till now, there’s no case which is been filed against the auditors of Deloitte Haskins & Sells. Are the auditors not liable as per to section 143 of the Companies Act?
Letter of Undertakings (LOUs) was issued via SWIFT in favour of Nirav Modi. A LoU is a bank guarantee from PNB (or any other bank) on the basis of which the overseas banks grant loans. The PNB employees reportedly shared the swift password with Modi’s aide, allowing fraudulent authorisation of transactions. Moreover, the mandatory reporting of SWIFT transactions probably didn’t happen in the Modi case. Officials at PNB had said that its SWIFT system isn’t linked to the core banking system (CBS), a centralised database of all transactions. Therefore, these transactions were going unnoticed.
PNB admits in its report, post-PNB scam, that “the last audit done by RBI was on 31.03. 2009.” As per the norm, the RBI has to has to audit scheduled banks every year.
It’s amusing that a famous green peace activist Priya Pillai, who was an allegedly absconding criminal in 2016, could be stopped from taking flight to London on the airport but in the case of Nirav Modi, the government had given a sufficient time for him to flew off the country despite the defrauding was still going on. It’s amusing to see a renowned jewellery designer of India addressing millions in the Indian business delegation at Davos, in the World Economic Forum meeting, 2018, accompanied with the PM himself, while no one, including the PM, knows where he went just after a week or two.
The questions are in multiples but the answers keep on blotting the poor governance of the government administration, the statutes of banking and insurance laws and the government’s political agendas to safeguard people like Vijay Mallya and now his successor too.