Sebi attaches bank accounts, MF holdings of Mehul Choksi to recover Rs 2.1 cr insider trading dues

India’s markets regulator Sebi has ordered the attachment of absconding diamantaire Mehul Choksi’s bank accounts, mutual funds and shareholdings to recover dues of ₹2.1 crore in an insider trading case involving Gitanjali Gems.

The move follows a demand notice issued to Choksi on May 15, warning of asset seizure if the penalty remained unpaid within 15 days. Choksi, a key accused in the ₹13,500 crore PNB scam was fined by Sebi in January 2022 for insider trading violations but has failed to comply.

The demand notice came after Choksi failed to pay the fine imposed by the Securities and Exchange Board of India (Sebi) in January 2022 in a case of violation of insider trading rules in the shares of Gitanjali Gems Ltd.

Choksi, the maternal uncle of Nirav Modi, is a key accused in the ₹14,000 crore Punjab National Bank fraud. Both fled India in early 2018 after the scam surfaced. While Modi has been jailed in the UK since his 2019 arrest, Choksi was detained in Belgium in April this year following an extradition request from India.

According to Sebi, all banks, depositories (NSDL and CDSL), and mutual fund houses have been directed to block any debits from Choksi’s accounts while permitting credits. The order also covers any lockers or other holdings in his name.

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Modi was arrested by the Scotland Yard Police in March 2019 and is currently in jail in that country.

In an attachment notice dated June 4, Sebi said the pending dues of Rs 2.1 crore include the initial fine of Rs 1.5 crore and interest of Rs 60 lakh.

To recover the dues, Sebi asked all the banks, depositories — CDSL and NSDL — and mutual funds not to allow any debit from the accounts of Choksi. However, credits have been permitted. Further, Sebi has directed the banks to attach all accounts, including lockers, held by the defaulter.

Initiating the recovery proceedings, Sebi said there is sufficient reason to believe that Choksi may dispose of the amounts in the bank accounts, mutual fund folios and securities in the demat accounts held with the depositories and ”realisation of the amount due under the certificate would, in consequence, be delayed or obstructed”.

In its order passed in January 2022, the regulator imposed a penalty of Rs 1.5 crore on Choksi and restrained him from the securities market for one year.

Sebi had found that Choksi communicated unpublished price sensitive information to one Rakesh Girdharlal Gajera, who sold his entire shareholding of 5.75 per cent in Gitanjali Gems in December 2017 with the intention of avoiding loss ahead of any event which may lead to disclosure of fraudulent issuance of LoUs (letter of undertaking) to Gitanjali Group and magnitude in public domain.

It was noted that fraudulent LoUs were issued on behalf of entities belonging to the Gitanjali Group, including GGL. ”Noticee no. 1 (Choksi) was found to have communicated UPSI (unpublished price sensitive information) to Noticee no. 2 (Gajera) without any underlying legal obligation or any legitimate purpose,” Sebi had said in its final order.

Through such activities, the two persons had violated the provisions of the PIT (Prohibition of Insider Trading) rules. In May 2023, Sebi sent a notice to Choksi directing him to pay Rs 5.35 crore in a case pertaining to fraudulent trading in the shares of Gitanjali Gems.

With inputs from agencies