NSE fines Gitanjali Gems; 23 others for not filing fin results
Tasmayee Laha Roy
The fraud by Mehul Choksi’s Gitanjali Gems no longer appears to be limited to forged letters of undertakings (LoU) issued by Punjab National Bank. A senior ex-employee has alleged the companies would falsify the quality of its diamonds, and even pass off fake diamonds as real ones.
According to the company's former Managing Director Santosh Srivastava, a huge chunk of diamonds sold by Choksi were lab produced with valuations nowhere near the price at which it was sold to customers.
“The diamonds were sold at a premium in the name of brand value, cuts and certifications that were given out. The certifications too were forged. A diamond that claimed to be of Grade A in a purchase made was actually Grade C,” Srivastava told Moneycontrol. He had headed the retail business at Gitanjali until 2013.
Srivastava’s allegations could give customers of Gitanjali sleepless nights. The premium charged for the rocks sold at Gitanjali were way too much according to Srivastava. “The diamonds that were passed as precious and rare and were actually lab produced coasted only 5%-10% of the cost it was sold at,” he said.
A Mumbai resident, Srivastava is a metallurgical engineer from IIT(BHU) and served Choksi between 2007 and 2013. Srivastava, who joined Choksi as Vice President of his company, rose swiftly within the organsation. Promoted to the rank of President in 2008 and then Managing Director for the retail arm in 2009, things were going well for him till he complained of the fraudulent acts he noticed in the company.
Srivastava said the complaints made to Choksi included his observations in areas like backing out on agreements with franchise owners, fictitious inventory showed in the books of account, overpriced products sold to customers and also sent to franchises.
While Srivastava expected correction in the delinquency all he got was threats. “You mind your own business,” was all he heard back from Choksi.
The arrangement didn’t quite suit Srivastava’s ethical values and he parted ways with Choksi in 2013. Five months after his resignation, Srivastava was summoned by the local police on the basis of the company management filing a cheating and forgery case against him. Srivastava wasn’t shocked.
“Soon after I left, Choksi faced complaints from franchises and I was called to help them and be by their side. When I refused to provide any aid, I was threatened to be dragged in cases that I could never come out of,” he said.
Choksi made good his threat and the police summoned Srivastava soon after.
“My case was taken up by Economic Offences Wing and I was released in a couple of days from their police custody when their investigations proved me innocent,” he said.
According to numbers provided by Srivastava during his stint at Gitanjali, the brand had sold jewelry worth Rs 5,000 crore. It's not clear how much of that came from products that were 'fake.'