Fugitive businessman Mehul Choksi gets Sebi demand notice to pay ₹5.35-cr within 15 days

The Securities and Exchange Board of India (Sebi) on 18 May sent a notice to fugitive businessman Mehul Choksi, and asked himn to pay ₹5.35 crore in a case pertaining to fraudulent trading in the shares of Gitanjali Gems Ltd.

Sebi also warned Choksi of being arrested and his assets attached as well as bank accounts if he fails to make the payment within 15 days.

The notice arrived following Choksi failed to pay a fine imposed on him by the Sebi.

Former chairman and managing director as well as part of promoter group of Gitanjali Gems, Choksi, is the maternal uncle of Nirav Modi. Both of whom are facing charges of defrauding state-owned Punjab National Bank (PNB) of more than ₹14,000 crore.

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As per details, both Choksi and Modi fled India after the PNB scam that came to light in early 2018. Choksi is said to be in Antigua and Barbuda, while Modi is lodged in a British jail and has challenged India's extradition request.

In its fresh notice, Sebi directed Choksi to pay ₹5.35 crore, which includes interest and recovery cost, within 15 days.

In case of non-payment of dues, the markets regulator will recover the amount by attaching and selling his moveable and immoveable property. Besides, Choksi faces attachment of his bank accounts and arrest.

Earlier in October 2022, Sebi had imposed a fine of ₹5 crore on him for indulging in fraudulent trading in the shares of Gitanjali Gems. Apart from penalising, the regulator had barred him from the securities market for 10 years.

Also, Sebi had issued common show cause notice to Choksi in May 2022 pursuant to an investigation into the alleged manipulative trading in the scrip of Gitanjali Gems. The regulator conducted an investigation into the trading activities of certain entities in the scrip of the company for the period July 2011 to January 2012.

That time Sebi had said that Choksi had funded a set of 15 entities known as 'front entities', who were directly or indirectly connected with him and with each other and who had taken position in the scrip of Gitanjali Gems both in the cash and derivative segments during the investigation period. He had used them as front entities for manipulation in the company's scrip.

It was observed that the fund transfers by the company to front entities were to the extent of ₹77.44 crore, out of which funds to the tune of ₹13.34 crore were used by front entities to trade in the scrip.

Choksi tried to corner the shares available in the market through front entities to reduce the shares available for general investors which subsequently increased after the front entities sold the shares in the market.

Among others, the front entities cornered the position limits in the scrip of Gitanjali Gems by building up substantially large positions in the derivatives segment, as per the order.

In February 2022, Sebi had prohibited Choksi from the securities markets for one year and levied a fine of ₹1.5 crore on him for violating insider trading rules in the matter of Gitanjali Gems and in February 2020, the regulator slapped a total fine of ₹5 crore on Choksi, Gitanjali Gems and another individual for violating various regulations, including listing norms, in connection with the massive fraud on PNB.

With agency inputs.