Securities and Exchange Board of India (Sebi) on Thursday, May 18, sent a notice to fugitive businessman Mehul Choksi asking him to remit Rs 5.35 crore in a case in connection with the fraudulent trading in the shares of Gitanjali Gems Ltd. The Sebi also warned of arrest and attachment of assets and also the bank accounts if he fails to make the payment within 15 days.
The demand notice came after Choksi failed to pay a fine imposed on him by the regulator Sebi.
Nirav Modi's maternal uncle is Choksi, who served as the chairman, managing director, and a member of the promoter group for Gitanjali Gems. They are both accused of stealing more than Rs 14,000 crore from the state-owned Punjab National Bank (PNB).
Choksi and Modi left India when the PNB scam became public in the beginning of 2018. Choksi is rumoured to be in Antigua and Barbuda, but Modi is detained in a British prison and has objected to India's plea for extradition.
Choksi was given 15 days to pay Rs 5.35 crore, which includes interest and recovery costs, in response to a new notice from Sebi issued on Thursday. If fees are not paid, the market regulator will seize and sell the debtor's personal property in order to recoup the money owed. In addition, Choksi might be arrested and have his bank accounts attached.
He was fined Rs 5 crore by Sebi in an order issued in October 2022 for engaging in dishonest trading in Gitanjali Gems shares. In addition to fining him, the regulator had given him a 10-year ban on the securities market.
In May 2022, the regulator served Choksi with a standard show cause notice after looking into claims of manipulative trading in Gitanjali Gems' stock. The regulator looked into the transactions made by a few entities in the company's stock from July 2011 to January 2012 by conducting an examination.
Sebi said, Choksi funded a group of 15 'front entities' that had positions in Gitanjali Gems' stock in both the cash and derivative divisions during the investigation period and were either directly or indirectly related to him and to one another. They had served as front companies for his manipulation of the stock of the corporation.
It was observed that the fund transfers by the company to front conmpanies were to the extent of Rs 77.44 cr, out of which funds to the tune of Rs 13.34 cr were used by front entities to trade in the stock.
Through front companies, Choksi attempted to restrict the number of shares available to general investors, which expanded when the front companies sold the shares on the market.
The front entities further violated the position limits in the Gitanjali Gems scrip by amassing disproportionately huge stakes in the derivatives segment in accordance with the directive.
For breaking insider trading laws in the case of Gitanjali Gems, Sebi barred Choksi from the securities markets for a year and fined him Rs 1.5 crore in February 2022. The regulator levied a total fine of Rs 5 crore in February 2020 against Choksi, Gitanjali Gems, and another person for breaking various rules, including listing norms, in connection with the massive fraud on PNB.
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