On 15 February, hours after India’s largest bank scam – where diamond czar Nirav Modi and his uncle, Mehul Choksi, allegedly got illegal loans of Rs 12,636 crore from the Punjab National Bank – hit headlines, the Enforcement Directorate raided several of Modi’s and Choksi’s properties. The agency tweeted that Rs 5,100 crore worth of diamonds and precious stones had been seized – or half the scam amount.
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But, does this seizure really mean that half the exchequer’s money has been recovered from the diamond duo? Can the agency hand over the assets to PNB so that they can sell it and recover the money?
Assets Can Be Sold Only After Conviction
The ED has registered a case under the Prevention of Money Laundering Act (PMLA) against Modi and Choksi. As per law, after the seizures are made by the agency, it has to produce the seizure before the Adjudicating Authority within a month.
An Adjudicating Authority comprises three members – one each from the field of law, administration, and finance or accountancy. It functions under the Department of Revenue of the Ministry of Finance.
If the Adjudicating Authority passes an order in favour of the ED, the accused person(s) can appeal in the Applellate Tribunal against the former’s order within 150 days. The ED can take the possession of the seizure/attachments if the Applellate Tribunal too passes the order in the agency’s favour.
However, the ED cannot dispose off the seizure/attachment till the court convicts the accused persons. For instance, in the alleged 2G spectrum scam case, the ED attached assets of the accused persons worth several crore rupees during investigation in 2010. Since then, the ED was the custodian of all the attached assets.
After seven years of a fast track court trail, all the accused in the alleged 2G scam were acquitted, which means the ED has to return the seized assets to their respective owners.
However, if the CBI and ED appeal in the Delhi High Court and get a stay on the trail court order, then the agency will continue to be the custodian of the attached assets. This basically means it would be in the possession of agencies for several more years till the case is decided by the Supreme Court.
The ED can dispose off the seizure/attachments after the accused are convicted by the apex court.
The PMLA was passed in 2002. Here are the statistics of PMLA cases in the Enforcement Directorate.
Agency Yet to Determine Real Value of Assets
The ED has claimed to have seized assets worth over Rs 6,300 crore from different locations since the Modi-Choksi scam broke. The agency evaluated the worth of the assets based on the price mentioned in the ledger books seized from the offices and outlets of Modi and Choksi.
However, this was not the final evaluation.
We have sent diamonds and other jewels to a laboratory and jewellers to determine their actual price. Obviously, when a product is sold as a brand, which Nirav Modi was, the price is much higher. But when the government auctions the assets if the accused are convicted, it will be sold at a much smaller price; the price could go down 30 to 40 percent or more.Senior ED officer to The Quint
Agency Bears Maintenance Cost of Seized Assets
Apart from the jewellery, the ED has, so far, also seized luxury cars, almirahs and watches from Modi and Choksi’s properties.
Interestingly, some of the watches cost as low as Rs 2,600.
Maintenance and storage of the assets is the responsibility of the ED after it is seized. Hence, it incurs the extra cost.
In the Vijay Mallya bank fraud case, the ED seized airplanes and other assets worth Rs 12,000 crore. Every year, the government is spending crores paying rent of the hangars where the aircrafts are stored, and maintenance of the same and other properties.Senior ED officer
By the time Mallya's case is decided in the courts, one can only imagine what the price of these assets after depreciation would be.
Similarly, in the Modi and Choksi case, the ED has seized high-end cars, including a Rolls Royce Ghost, two Mercedes Benz GL Class, and a Porsche Panamera, among others, whose current market value would be crores of rupees. However, years later if those are auctioned, it could be sold as just a lump of metal.
In fact, the government would end up spending more money storing and maintaining the assets.