PNB to take part in bankruptcy proceedings of Nirav Modi's Firestar Diamond in New York

In a bid to recover its dues from the celebrity jeweller Nirav Modi, the Punjab National Bank (PNB) is planning to stake its claim in the bankruptcy proceedings of Firestar Diamond. The fugitive diamantaire has been accused of defrauding the public sector bank of over Rs 13,000 crore.

The state-run bank is exploring all options for the recovery, including participating in the bankruptcy proceeding of Firestar Diamond Inc, PTI reported. PNB is also looking to hire lawyers for the insolvency proceedings of one of the Nirav Modi's companies.

The comes close on the heels of the CBI and ED making a fresh seizure at Nirav Modi's sea-facing Mumbai apartment. The agencies had seized antique jewellery, costly watches and paintings of Amrita Sher-Gil and M F Hussain worth Rs 26 crore from Samudra Mahal luxury residential flats of Nirav Modi in Mumbai's Worli area.

Various pros and cons are being examined in order to make watertight case for the recovery, PTI said, adding the bank is part of unsecured creditor category. When contacted, PNB declined to comment on the matter.

Firestar Diamond, a company owned by Nirav Modi filed for bankruptcy in a New York court last month. The US Trustee Program oversees administration and litigation for enforcement of the bankruptcy law. Firestar Diamond Inc filed the Chapter 11 voluntary petition in the New York Southern Bankruptcy Court

Following the bankruptcy filing, US court passed an interim order earlier this month that prevents creditors from collecting debt from Nirav Modi-owned Firestar Diamond Inc.

The US bankruptcy court in the Southern District of New York said that the filing of case imposed an automatic stay against most collection activities. A meeting of the creditors has been convened by the court in New York on March 30.

Nirav Modi has a majority stake in Firestar Diamond and its other sister companies through his other companies.

The Ministry of Corporate Affairs is considering legal options to try to stall bankruptcy proceedings in the US against diamantaire Nirav Modi's group firm Firestar Diamond, amid stepped up action in the over Rs 13,000 crore scam at Punjab National Bank, according to officials.

Earlier the National Company Law Tribunal (NCLT) had restrained more than 60 entities, including Nirav Modi, Mehul Choksi, various individuals, companies and limited liability partnership firms, from selling their assets.

According to officials, Firestar Diamond that filed for bankruptcy in a US court is a subsidiary of one of the companies against whom the NCLT has passed the order.

Since there is a strong possibility of fund diversion among various group entities, money could well have been diverted to Firestar Diamonds, they added.

Against this backdrop, the ministry is exploring legal options with regard to the bankruptcy case of Firestar Diamond in the US and the process of engaging lawyers is being looked at, the officials said.

They said the effort would be try to stall the bankruptcy proceedings so that the company's assets are not liquidated before completion of the probe into the scam.

Meanwhile, sources said PNB is looking to be part of the bankruptcy proceedings against the firm in the US as a claimant.

Modi and his uncle Mehul Choksi in connivance with certain bank officials allegedly cheated the PNB of Rs 12,968 crore through fraudulent Letters of Undertaking (LoUs).

Scam-hit PNB had issued as many as 1,590 LoUs to Nirav Modi, Mehul Choksi and their associates.

The total number of LoUs issued to the companies of Nirav Modi, his relatives and the Nirav Modi Group are 1,213, and to Mehul Choksi, his relatives and the Gitanjali Group are 377.

The amount of repayment made by the companies against each LoU cannot be currently ascertained as the matter is under investigation, Finance Ministry in a reply to Parliament said.

PNB has apprised that payment of LoU is a contingent liability and may fall back upon the bank on due date only if the same is not paid on or before due date by the buyer.

Following the scam, the Reserve Bank has stopped banks from issuing LoUs and Letters of Comfort for trade finance.

with PTI inputs