The high court in London has issued a worldwide freezing order against fugitive diamond merchant Jatin Mehta, his wife Sonia, and two sons Vishal and Suraj. The Mehtas, who owned Winsome Diamonds and Jewellery Limited and Forever Precious Diamonds & Jewellery Ltd, face allegations of committing a $1 billion fraud through complex transactions. Over a dozen banks in India are owed more than Rs 5,000 crore by the Mehtas, who have been comfortably living in London after acquiring citizenship of St Kitts and Nevis, a tax haven, and a country with no extradition arrangement with India.
The Mehtas have been on the run for several years, and are being pursued by India's Enforcement Directorate (ED) and CBI, but that hasn’t stopped them from taking expensive holidays and living in luxury in the United Kingdom. While Nirav Modi and Vijay Mallya have been pursued by Indian agencies and have faced extradition proceedings, in the case of the Mehtas, it seems that Standard Chartered Bank has taken the lead in cornering the family.
While the Mehtas and other entities connected with them are subject to court cases in several jurisdictions, in coming weeks and months, multiple court hearings are expected to come up in the high court in London which is bound to bring a renewed focus on them. In May 2022, Justice Edwin Johnson made a worldwide freezing order against the Mehtas and also directed them to disclose their assets and surrender their passports. The Mehtas are contesting the claim and are seeking to reverse the freezing order which promises to be a keenly fought legal battle.
The alleged fraud
Standard Chartered Bank along with other banks had issued standby letters of credit to secure the repayment obligations of Winsome Diamonds under precious metals facilities. Winsome had used the facility to import gold which was used to manufacture and export jewellery to companies in the UAE. In March and April 2013, Winsome defaulted to the tune of $774 million which created widespread anxiety in India’s jewellery business circles.
Winsome maintained that 13 entities in the UAE did not pay them for the delivered jewellery which caused them irreversible financial strain. When banks sought to recoup their money, they were only able to make limited recoveries. The joint custody of the diamonds belonging to Winsome was taken by lender banks in June 2013, which was valued by the company at Rs 147.25 crore, whereas the real value was ascertained at under Rs 50 crore.
Standard Chartered (and other lenders) claims that these 13 UAE companies and a further seven entities in the UK and Ireland were used to launder money by Winsome. Meanwhile, the Mehtas were untraceable even as CBI and ED launched investigations against them and their associates. It was established that they became nationals of St Kitts and Nevis, but their exact whereabouts were not known.
The case in the UK
In June 2021, Standard Chartered managed to get three limited companies and one limited liability partnership restored to the Register of Companies through an order of the high court. These four entities that were dissolved in 2019/2020 were allegedly linked to the Mehta family. The successful restoration meant that these companies were deemed to continue in existence as if they had not been dissolved and was a successful start to the bank’s effort to launch a global-asset tracking exercise.
Standard Chartered Bank told the court that these companies were used to launder the proceeds of a very “substantial international fraud” after which they were placed into voluntary liquidation and then dissolved. However, the successful restoration of the companies to the Register of Companies opened the doors to the appointment of independent liquidators, which has now brought the Mehtas to answer questions on where the proceeds of the alleged fraud have gone.
In a short judgment earlier this month, Judge Hodge sitting in the UK's Business and Property court noted that there has been “considerable delay in seeking to pursue claims” against the Mehtas, “but that is because the whereabouts of the known defendants has only recently come to light”. The judgment also highlights that there is a “real possibility that there may be further assets to which the existing freezing order may apply.”
The Mehtas are contesting all these claims and have applied to set aside the freezing order. They claim that there has not been a fair presentation of the evidence, and additionally raised the question of whether English courts can entertain these proceedings. But now that their presence in London, which was already talked about for the last several months, has been confirmed, they also face the possibility of extradition proceedings, adding to the long list of billionaires sought by India from the UK.