LI Network
Published on: 19 May 2023 at 17:12 IST
On Thursday, Sebi issued a notice to fugitive businessman Mehul Choksi, demanding a payment of ₹ 5.35 crore in relation to fraudulent trading in the shares of Gitanjali Gems Ltd. The notice warned of potential arrest, asset attachment, and bank account freezing if Choksi fails to make the payment within 15 days. This action was taken after Choksi did not pay the previously imposed fine by Sebi.
Mehul Choksi, who served as the chairman, managing director, and part of the promoter group of Gitanjali Gems, is the maternal uncle of Nirav Modi. Both individuals are facing charges of defrauding the state-owned Punjab National Bank (PNB) of over ₹ 14,000 crore.
After both Mehul Choksi and Nirav Modi fled India following the Punjab National Bank (PNB) scam in 2018, Choksi is reported to be in Antigua and Barbuda, while Modi is currently in a British jail and is challenging India’s request for extradition.
In a recent notice issued on Thursday, Sebi instructed Choksi to pay ₹5.35 crore, which includes interest and recovery costs, within 15 days. Failure to make the payment could result in the attachment and sale of his movable and immovable property, as well as the freezing of his bank accounts and possible arrest.
Sebi had previously imposed a fine of ₹5 crore on Choksi in October 2022 for engaging in fraudulent trading in the shares of Gitanjali Gems. Additionally, Choksi was barred from participating in the securities market for a period of 10 years.
The regulator had issued a show cause notice to Choksi in May 2022 as part of an investigation into alleged manipulative trading in Gitanjali Gems’ shares. The investigation focused on trading activities of certain entities during the period from July 2011 to January 2012.
According to Sebi, Mehul Choksi funded a group of 15 entities referred to as “front entities,” which were directly or indirectly connected to him and each other. These front entities took positions in the shares of Gitanjali Gems in both the cash and derivative segments during the investigation period. Choksi used these entities as a means to manipulate the company’s scrip.
During the investigation, it was observed that Gitanjali Gems transferred funds amounting to ₹77.44 crore to these front entities, of which ₹13.34 crore was used by the entities to trade in the scrip.
Choksi, through these front entities, attempted to acquire a significant portion of the available shares in the market, thereby reducing the shares available to general investors. Subsequently, the front entities sold the shares in the market, leading to an increase in the availability of shares for general investors.
Furthermore, the front entities accumulated substantially large positions in the derivatives segment of Gitanjali Gems, thereby cornering the position limits in the scrip.
In February 2022, Sebi barred Choksi from the securities markets for one year and imposed a fine of ₹1.5 crore on him for insider trading violations related to Gitanjali Gems. Additionally, in February 2020, the regulator levied a total fine of ₹5 crore on Choksi, Gitanjali Gems, and another individual for various violations, including listing norms, in connection with the PNB fraud case.