New Delhi: The Enforcement Directorate (ED) is considering initiating proceedings under the Fugitive Economic Offenders (FEO) Act against London-based diamond merchant Jatin Mehta’s wife and two sons in relation to their absence from court proceedings, ThePrint has learnt.
Under the FEO Act, once an accused is declared a fugitive economic offender, the ED, nodal agency for implementing the law, confiscates their assets upon court approval. The Act was passed in 2018 in the wake of a series of bank frauds and the accused fleeing the country.
The ED had already moved an application against Mehta, former proprietor of Winsome Diamonds and Jewellery (WDJL) and Forever Precious Jewellery & Diamonds (FPJDL), under the Act after a series of high-value bank frauds were linked to him in 2014.
“We are examining details shared by the Central Bureau of Investigation, and based on that, an application would be moved against his family members under the FEO Act. A similar application against Jatin Mehta, moved in 2019, is being heard by a Mumbai court,” an ED official told ThePrint, requesting anonymity.
The ED is planning the move against Mehta’s wife, Sonia, and sons Suraj and Vishal—all of whom have been charged by the CBI in cases of bank fraud against Mehta and his firms.
Asked for comment, one of Mehta’s counsels, Vikram Sutaria, told ThePrint, “Lawyers can’t give response on speculations. However, ex facie FEO Act has no application to family members of Jatin Mehta.”
Overall, the CBI filed 16 cases against Mehta, who hails from Gujarat, between 2014 and 2019, on allegations of hatching a conspiracy and causing a loss of up to Rs 7,000 crore to a consortium of Indian banks.
Over time, the CBI has filed 12 chargesheets in these case, including 10 this year, while the ED has registered seven Enforcement Case Information Reports (ECIRs) against the Mehta family since 2014, and one prosecution complaint or chargesheet so far.
Broadly, the agencies allege that Mehta conspired to incorporate several shell companies in the UAE and presented fabricated export records to secure funding from banks.
The allegation is that Mehta imported raw gold on buyer’s credit from UK bullion banks, including Standard Chartered, in the names of his factories in Special Economic Zones in Chennai and Kochi, for conversion into coins and pendants and subsequent exports to UAE-based jewellers.
Bullion banks provide raw gold (bullion) to jewellery companies for manufacturing and processing, including making jewellery. Mehta’s firms acquired raw gold from UK-based bullion banks based on an agreement. Part of this agreement was submission of Standby Letter of Credit (SBLC) by a consortium of Indian banks, including Punjab National Bank, Canara Bank and Central Bank of India. An SBLC is a guarantee from a financial institution to pay a third party if the bank’s client fails to meet their contractual payment obligations.
Around 2013, Mehta’s firms defaulted on payments to the bullion banks, citing that their UAE-based clients had incurred losses and that remittances for gold exports were stuck.
Mehta claimed that his buyers lost $1 billion in derivatives trading. However, a visit to Dubai by the bankers revealed that one Haytham Sulaiman Abu Obaida was controlling all 13 client companies of Mehta through a power of attorney. Mehta’s firms defaulting on payments to the bullion banks triggered the invocation of the SBLCs extended to them by Indian banks, resulting in losses of Rs 7,000 crore, according to the ED.
The agencies further allege that Mehta siphoned off funds through the UAE-based shell companies owned by him and his family members.
It is also alleged that, in some cases, there were no actual exports by Mehta’s firms and that entries were fraudulently created on paper for the diversion of funds.
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‘Correct’ address
The first case against Jatin Mehta was filed by the CBI in 2014 on a complaint from Punjab National Bank, which alleged that it lost Rs 1,658 crore as the result of a conspiracy.
The ED lodged an ECIR based on this FIR, but claims that Mehta, along with his family, left the country in 2016 before prosecution could begin and has since not participated in the probe or judicial proceedings.
The agencies have alleged that Mehta and his family first fled to the UAE before obtaining citizenship of St Kitts and Nevis, an island nation in the Caribbean which does not have an extradition treaty with India. The family currently resides in London, according to the agencies and Mehta’s submissions in court.
While the probe and trial have been delayed due to his absence from India, Mehta this year moved as many as 13 pleas in Mumbai courts seeking directions to both CBI and ED to follow established procedure for delivering summons. All these pleas are currently pending.
In his pleas before the courts, Mehta claimed that the agencies have long been aware that he was not residing at his Mumbai residence since 2011. Instead, he said, he acquired citizenship of St Kitts and Nevis in 2012 and was based in London, but the agencies continued to deliver summonses at his Mumbai residence, last used by his mother in 2017.
Hence, Mehta requested the court to issue directions to the agencies to comply with the Mutual Legal Assistance Treaty between India and the UK, under which an Indian agency must send summonses to an accused based overseas through the Ministry of Home Affairs.
In October this year, a special PMLA court junked Mehta’s plea to appear virtually for proceedings under the FEO Act.
The court observed in its order this October that Mehta’s counsel, Swadeep Singh Hora, could not disclose any concrete reason stopping his client from physically appearing before the court and that mere convenience or preference to remain abroad can’t bypass the necessity for physical presence in court.
“The contents of the application as well as the arguments canvassed by Ld Adv. Mr Hora does not disclose any concrete reason or genuine impediment preventing physical appearance of Mr Jatin Mehta. There is no medical, legal or logistical necessity warranting exemption from personal presence,” the judge ruled.
Adding, “Mere convenience or preference to remain abroad cannot constitute a legal ground to bypass the statutory requirement of appearance before the court.”
(Edited by Nida Fatima Siddiqui)
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