The only exposure the corporation has to the Nirav Modi/Mehul Choksi groups is a term loan provided for the SEZ. The Hyderabad Gems SEZ is a subsidiary of Gitanjali group and is among the properties attached by the income tax (I-T) department. The property has been valued at Rs 1,200 crore and is registered as a diamond processing zone.

According to lenders, if LIC pursues recovery under the Insolvency and Bankruptcy Code (IBC) in the National Company Law Tribunal (NCLT), it will have to give up security on the assets. But the advantage in pursuing recovery under the IBC is that the creditors’ claim gains priority over the government’s and even that of employees. However, if the corporation chooses to enforce its security interest, it might face claims from other government departments.

The SEZ is one of the biggest processing centres for the Nirav Modi group. Besides Nirav Modi and Mehul Choksi group firms, the SEZ also houses several diamond and jewellery manufacturing units. The I-T department had first raided billionaire diamond jeweller Nirav Modi in January 2017 on charges of alleged tax evasion and had also surveyed Gitanjali Gems promoter Choksi’s businesses.

In February, PNB had filed a criminal complaint with the CBI against the Nirav Modi and Mehul Choksi groups after it detected unauthorised letters of undertaking (LoUs) worth Rs 12,600 crore issued in their favour. The two firms had raised money from overseas branches on the strength of these LoUs and had subsequently defaulted on their loans.

Following the detection of the fraud, Modi and Choksi are being investigated by multiple agencies. The Gitanjali Gems Park in Hyderabad has been closed following a raid by the Enforcement Directorate (ED) in connection with the fraud. This has hit several hundred workers in the SEZ.