The three arrested officials of Punjab National Bank’s Brady House branch are produced at a special CBI court on Tuesday. (Photo: Rajesh Jadhav )

Mumbai: Taking the investigation into the multi-crore bank fraud case involving diamantaire Nirav Modi to the next stage, the (ED) will soon send letters rogatory (LR) to Hong Kong to ascertain the trail of funds raised by branches of the Allahabad and Axis Bank there.

The officials said that while some part of the funds was used to repay his debts, the remaining money was used for unknown purposes. The money was raised via 143 fraudulent Letter of Undertaking (LoUs) issued by then-deputy manager Gokulnath Shetty and junior officer Manoj Kharat of Punjab National Bank asking the Hong Kong branches of other public banks to pay.  “We will gather details of fund utilisation and to ascertain if the money was invested into immovable assets in Hong Kong or it was further diverted to other countries,” said an ED officer.

A team of ED will also go to Hong Kong to probe the roles of the officials of the Allahabad and Axis Bank branches there. The roles of officers of the two branches is under suspicion as they did not raise an alarm despite witnessing clear violations of Reserve Bank of India (RBI) guidelines.

Probe has revealed that the LoUs cannot be issued for more than 90 days, however most of the 143 LoUs were for 360 days, in contradiction to RBI guidelines, and those banks ended up honouring these LoUs.

ED will question Shetty and Kharat, who have been arrested, at a later stage. Another important allegation that is being probed is Shetty not being promoted all these years specifically to aide the Modi group of companies.

The three other PNB officers who were arrested from the tainted Brady House branch will also be questioned on the LoUs issue. The accused, Bechu Tiwari, chief manager, in charge of the forex department; Yashwant Joshi, scale II manager, forex department; and Praful Sawant, scale I officer, export; were all part of the three-layered supervisory security apparatus. They were responsible for keeping a tab on Shetty and the SWIFT messaging system along with the Core Banking System entries.  However, all three were allegedly part of the racket and did not take any action or raise an alarm despite knowing about Shetty’s illegal activities.

Meanwhile, the Central Bureau of Investigation (CBI) on Tuesday arrested Vipul Ambani, president, finance with Modi's Firestar International Pvt Ltd; Kavita Mankikar, executive assistant and another authorised signatory of three accused firms; and Arjun Patil, senior executive of the Firestar Group.

Kapil Khandelwal, chief finance officer, Nakshatra Group and Gitanjali Group; and Niten Shahi, Manager, Gitanjali Group — brands controlled by Modi’s uncle Mehul Choksi — were also arrested.

The accused will be produced in the CBI court on Wednesday.