Special court stays proceedings against Mehul Choksi's aide in loan fraud case

Mumbai: A special court here on Thursday stayed proceedings before a magistrate's court against Vipul Chitalia, former vice-president of the Gitanjali group, in a loan fraud case amounting to more than Rs 22 crore.

Fugitive businessman Mehul Choksi and Gitanjali Gems Ltd (GGL) are among the accused in the case.

The special court observed prima facie (on face of it) the magistrate's court did not pass a reasoned order while issuing summons against accused persons.

The proceedings were stayed till the next hearing by special judge VS Gaike.

The matter has been adjourned to July 7.

In an application filed through advocate Rahul Agrawal, Chitalia claimed the magistrate's court had issued a "cryptic order of issuance of process".

His lawyer submitted the trial court judge had not "applied his mind" while issuing the process (summons).

The issuance of a process marks the beginning of criminal proceedings before a metropolitan or judicial magistrate based on a complaint lodged by an individual.

The order was not a reasoned one and hence it needed to be stayed, Agarwal added.

The magistrate's court had summoned Chitalia and other accused, including Choksi, in March after talking cognizance of a chargesheet filed by the Central Bureau of Investigation (CBI).

The special judge said the magistrate's court has taken cognizance of the offence, but prima facie it did not pass a reasoned order while issuing summons against eight accused persons.

"Prima facie the impugned order does not reflect that any opinion was formed by the trial court on the basis of the material content in the chargesheet. Therefore, in view of this prima facie error in the impugned order, the further proceedings in the matter hereby stayed against the present applicant (Chitalia) till next date," the special court added.

The CBI's Banking Securities Fraud Branch (BSFB) had registered a case against Choksi and others in 2022 based on a complaint filed by Industrial Finance Corporation of India (IFCI).

IFCI had alleged Gitanjali Gems, Choksi, unknown public servants and others were part of a conspiracy to cheat the IFCI between 2014 to 2018, according to the chargesheet.

As part of the conspiracy, Choksi had approached IFCI seeking financial assistance of Rs 25 crore, for which he pledged jewels worth double the loan amount after due valuation by government-approved valuers, it said.

Later, as the accused defaulted in payment, the IFCI, in order to realise the security, conducted fresh valuation of the pledged jewels. It showed valuation of the pledged jewels had allegedly dropped by 98 per cent, said the probe agency.

The CBI, in its chargesheet filed recently before the magistrate's court, said the accused persons in conspiracy induced the bank in sanctioning the loan amount by submitting highly inflated and false valuation reports of the pledged jewellery.

Subsequently, they diverted the fund for the purpose other than for which the loan was sanctioned, the chargesheet said.

It claimed the accused company didn't repay the loan amount.

An amount of Rs 22.40 crores was outstanding in the loan account of Gitanjali Gems when the account was declared as NPA (non-performing asset), which was the wrongful loss to the IFCI and corresponding wrongful gain to the accused persons, added the chargesheet.