Mumbai, May 5, 2018 – The Special Court for CBI at Greater Bombay, presided over by Special Judge S.R. Tamboli, today rejected the bail application of Bishnubrata Bhiranand Mishra, the former Chief Internal Auditor of Punjab National Bank (PNB), Brady House MCB branch. Mishra was arrested in connection with the massive fraud allegedly perpetrated by diamantaire Nirav Modi and his associates.
Mishra, aged 62 and a resident of Bhubaneshwar, Odisha, was arraigned as an accused in FIR bearing RC No.01/E/2018, registered by the CBI’s Bank Securities & Fraud Cell (BS&FC), Mumbai. He faces charges under Section 120-B read with Section 420 and 409 of the Indian Penal Code, 1860, and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988.
According to the FIR, Nirav Modi, along with his associates Nishal Modi, Ami Nirav Modi, Mehul Chinubhai Choksi (partners of M/s. Diamonds R US, M/s. Solar Exports, and M/s. Stellar Diamonds), and two PNB officials, Gokulnath Shetty (Deputy Manager, retired) and Manoj Kharat (Single Window Operator), allegedly defrauded PNB, causing a loss of approximately Rs. 280 Crores.
Advocate Mr. Aditya Mithe, representing the applicant, argued that Mishra served as Chief Internal Auditor from November 2011 to October 2015 and had retired before the alleged fraudulent activities in 2017, which formed the basis of the FIR. He submitted that during Mishra’s tenure, PNB lacked straight-through processing for trade finance transactions, leading to manual entries and inherent risks. He pointed to RBI guidelines issued in November 2016, after Mishra’s retirement, which mandated straight-through processing to prevent fraudulent messages.
Mr. Mithe contended that the co-accused, Mr. Shetty and Mr. Kharat, allegedly prepared and dispatched the illegal Letters of Undertaking (LOUs) without proper procedure and without entering them into the Core Banking System (CBS) to avoid detection. He argued that Mishra, as an Internal Auditor, had limited access to the CBS for review purposes only and lacked the authority or access to generate SWIFT messages or alter CBS data. Therefore, if LOUs were generated without CBS entry, Mishra would not have been able to detect the anomalies.
The defense further argued that the alleged fraud was entirely perpetrated within the PNB branch by Shetty and Kharat, and no money trail led to Mishra. Citing Mishra’s prevalent medical conditions, including severe diabetes, high blood pressure, and high cholesterol, the counsel pleaded for bail on humanitarian grounds and assured that Mishra had deep roots in society, would not tamper with evidence, and would not abscond.
However, SPP Mr. Sharma, representing the CBI, BS&FC, strongly opposed the bail application. He highlighted that the FIR was registered based on a complaint from a senior PNB official regarding fraudulent issuance of LOUs amounting to over USD 44 million in February 2017.
The prosecution’s investigation revealed that during Mishra’s tenure as Chief Internal Auditor (2011-2015), he allegedly allowed Gokulnath Shetty to continue issuing LOUs without adhering to banking procedures, bank policies, and RBI guidelines. The CBI alleged that over 700 LOUs were issued on behalf of the Modi-linked firms during this period, and PNB did not collect the legitimate commission, causing a loss of approximately Rs. 230 Crores to the bank and corresponding undue gain to the firms.
The CBI argued that as Chief Internal Auditor, Mishra had a responsibility to protect the bank’s interests and report illegal activities. They alleged that he deliberately failed to check the LOUs issued by Shetty and allowed funds received from foreign banks against Buyer’s Credit to be used for settling previous liabilities of the same firms.
The prosecution contended that the investigation was ongoing, involving the scrutiny of voluminous documents. They argued that if released on bail, Mishra could influence witnesses, many of whom were his former colleagues at PNB, and tamper with evidence. The CBI asserted that there was a prima facie case against Mishra and requested the court to reject his bail application.
Special Judge S.R. Tamboli, after considering the arguments from both sides, acknowledged that Mishra served as Chief Internal Auditor from 2011 to 2015. While Mishra’s defense relied on the argument that the fraudulent entries were not made in the CBS system, the court emphasized that as Chief Internal Auditor, it was his duty to verify daily transactions and report irregularities. The prosecution specifically alleged that there was a record of buyer’s credit in the bank and that funds from foreign accounts were used to settle earlier buyer’s credit accounts, suggesting Mishra could not have been unaware of the transactions.
The court noted the prosecution’s case alleging a conspiracy between Mishra and the co-accused, Shetty and Kharat, stating that Mishra’s role was still under investigation. Considering his former senior position as Chief Internal Auditor and the ongoing crucial stage of the investigation, the court found a significant likelihood that Mishra could influence witnesses who had worked with him.
Special Judge Tamboli concluded that the possibility of uncovering a more significant role played by Mishra could not be ruled out and that a prima facie involvement of the accused in the offense appeared evident. At this stage of the case, the court deemed it improper to release Mishra on bail, citing the prima facie allegations of fraud and conspiracy, which were still under investigation.
Consequently, the court dismissed Bishnubrata Bhiranand Mishra’s bail application. This order underscores the gravity of the allegations and the court’s reluctance to grant bail in high-value financial fraud cases, especially when the accused held a position of responsibility within the defrauded institution. The ongoing investigation is expected to further unravel the roles of various individuals involved in the multi-crore scam.