New Delhi: A US bankruptcy court was told by a court-appointed executive that the Indian government’s recent decree to go after fugitives who have committed white-collar crimes was one of the reasons for the tepid response to the auction of assets of companies owned by fugitive jeweller Nirav Modi.
The court-appointed executive was referring to the Fugitive Economic Offenders Ordinance, 2018, that allows the Indian government to attach properties of absconding offenders, both within the country and overseas.
“I believe the lack of bidding on the entirety of the Firestar/Fantasy Assets was due, at least part, to certain actions of various parties in the Union of India, including the passage of a certain ordinance on or about 21 April 2018,” Mark Samson, chief restructuring officer, told the court, according to filings reviewed by Mint.
“A copy of the “Fugitive Economic Offenders Ordinance, 2018” is attached hereto as Exhibit A…I believe it is probable that sale of A. Jaffe Assets absent the India-based fraud allegations and related action of various authorities in India would have yielded higher bids for a going concern auction,” Samson told the court.
Officials from the law ministry did not want to comment on the legislative decision in the time before it became an Act of Parliament. The promulgation of the Fugitive Economic Offenders Ordinance, 2018, was approved by the cabinet on 21 April and received the President’s assent the next day.
To ensure that the special courts entrusted with powers of attachment and confiscation of property were not burdened, only those cases where the amount involved is more than Rs100 crore would be covered under this ordinance.
The ordinance was moved swiftly to legally equip the government in bringing back economic offenders, including Vijay Mallya, Nirav Modi and Mehul Choksi, against whom probes have been initiated by agencies including the Central Bureau of Investigation (CBI) and the Enforcement Directorate (ED).
Being a temporary executive decision, the ordinance will be valid for six weeks from the date on which the next session of Parliament starts. Within such time, the Fugitive Economic Offenders Bill, 2018, tabled and pending in the Lok Sabha, will have to be approved by both houses of Parliament to become an Act.
On 26 February, Modi’s Firestar Diamond and two affiliates, including Fantasy Inc. and A. Jaffe Inc. filed for bankruptcy protection in the US through a voluntary petition, stating supply chain disruption. A month later in March, a US court, based on a request made from these companies, allowed Modi’s firms to sell some of their assets as these needed to pay back some of their foreign lenders, including HSBC.
According to the court documents, A. Jaffe’s assets totalled $22.8 million, including $14.2 million in inventory, $7.4 million in account receivables, and $786,000 in cash. A. Jaffe decided to put $16.3 million of assets on the block, including $10 million in inventory and $6.3 million in account receivables. However, A. Jaffe’s auction process managed the highest bid of only $8 million, made by Paramount Jewels (formerly called Parag Diamonds), a New York-based firm which incidentally is also run by an Indian-born diamond trader.
An email sent to Paramount Jewels seeking comment went unanswered.