The Securities and Exchange Board of India (SEBI) has ordered the attachments of bank accounts, shares, and market holdings of fugitive diamantaire Mehul Choksi in an effort to recover the amount of ₹2.1 crore owed by him in a case of violation of insider trading rules.
The markets regulator had warned Choksi of asset-attachment on May 15, when it issued a demand notice to Choksi and asked him to make the payment within 15 days. The demand notice came after Choksi failed to pay the fine imposed by SEBI in January 2022 in a case of violation of insider trading rules in the shares of Gitanjali Gems Ltd.
Choksi, who was the chairman and managing director as well as part of promoter group of Gitanjali Gems, is the maternal uncle of Nirav Modi. Both are facing charges of defrauding state-owned Punjab National Bank (PNB) of more than ₹14,000 crore. Both Choksi and Modi fled India after the PNB scam came to light in early 2018.
In April, Choksi was arrested in Belgium following an extradition request by Indian probe agencies after he was located in the country when he got there for getting medical treatment. Before Belgium, he had been staying in Antigua after leaving India in 2018.
Modi was arrested by the Scotland Yard Police in March 2019 and is currently in jail in that country.
In an attachment notice dated June 4, SEBI said the pending dues of ₹2.1 crore include the initial fine ₹Rs 1.5 crore and interest of ₹60 lakh.
To recover the dues, SEBI asked all the banks, depositories – CDSL and NSDL – and mutual funds, not to allow any debit from the accounts of Choksi. However, credits have been permitted. Further, SEBI has directed the banks to attach all accounts, including lockers, held by the defaulter.
Initiating the recovery proceedings, SEBI said there is sufficient reason to believe that Choksi may dispose of the amounts in the bank accounts, mutual fund folios and securities in the demat accounts held with the depositories and “realisation of the amount due under the certificate would, in consequence, be delayed or obstructed”.
In its order passed in January 2022, the regulator imposed a penalty of ₹1.5 crore on Choksi and restrained him from the securities market for one year.
SEBI had found that Choksi communicated unpublished price sensitive information to one Rakesh Girdharlal Gajera, who sold his entire shareholding of 5.75 per cent in Gitanjali Gems in December 2017 with the intention of avoiding loss ahead of any event which may lead to disclosure of fraudulent issuance of LoUs (letter of undertaking) to Gitanjali Group and magnitude in public domain.
It was noted that fraudulent LoUs were issued on behalf of entities belonging to the Gitanjali Group, including GGL. “Noticee no. 1 (Choksi) was found to have communicated UPSI (unpublished price sensitive information) to Noticee no. 2 (Gajera) without any underlying legal obligation or any legitimate purpose,” SEBI had said in its final order.
Through such activities, the two persons had violated the provisions of the PIT (Prohibition of Insider Trading) rules. In May 2023, SEBI sent a notice to Choksi directing him to pay ₹5.35 crore in a case pertaining to fraudulent trading in the shares of Gitanjali Gems.
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