Fugitive diamond jeweller Mehul Choksi has been arrested in Belgium on an extradition request from Indian authorities over his involvement in the Rs 13,000 crore Punjab National Bank (PNB) loan fraud case, official sources confirmed on Monday.

The action was taken on Saturday against Choksi, the second prime suspect in the case, after his nephew Nirav Modi. Both Choksi and Modi are central to the investigation, with the extradition request moved by the Enforcement Directorate (ED) and the Central Bureau of Investigation (CBI).

Choksi was located in Belgium last year when he went there under the pretext of seeking medical treatment. He had been residing in Antigua since 2018 after fleeing India. Sources mentioned that the Interpol Red Notice against him had been “deleted” previously, and since then, Indian agencies have pursued his extradition.

Choksi, along with his nephew Nirav Modi, their family members, employees, and certain PNB officials, were implicated in 2018 for allegedly perpetrating the massive loan fraud at the Brady House branch of PNB in Mumbai.

The ED and CBI allege that Choksi, his firm Gitanjali Gems, and others colluded with bank officials to fraudulently obtain Letters of Undertaking (LOUs) and Foreign Letters of Credit (FLCs) without following the prescribed procedures, causing a significant loss to the bank.

Ongoing Legal Action and Extradition Proceedings

At least two open-ended arrest warrants, issued by a special court in Mumbai in 2018 and 2021, have been shared with Belgian authorities to support India’s extradition request. Formal paperwork is being processed following Choksi’s arrest, as he may seek bail on medical grounds.

Details of the Fraud and Financial Loss

The investigating agencies allege that PNB officials at the Brady House branch issued 165 LOUs and 58 FLCs between March and April 2017, against which 311 bills were discounted. These LOUs and FLCs were reportedly issued to Choksi's firms without any sanctioned limits or cash margins, evading scrutiny and enabling the fraudulent activity.

Based on these LoUs by PNB, money was lent by SBI, Mauritius; Allahabad Bank, Hong Kong; Axis Bank, Hong Kong; Bank of India, Antwerp; Canara Bank, Manama; and State Bank of India, Frankfurt.

"Since the accused companies did not repay the amount availed against the said fraudulent LoUs and FLCs, PNB made the payment of Rs 6,344.97 crore (USD 965.18 million), including the overdue interest, to the overseas banks, which had advanced buyer's credit and discounted the bills against the fraudulent LoUs and FLCs issued by the PNB," the CBI's supplementary charge sheet in the PNB bank fraud case alleged.

The ED has attached or seized assets worth Rs 2,565.90 crore in the case against Choksi and the court has allowed "monetisation" of all these properties.