The Ministry of Corporate Affairs on Tuesday said Punjab National Bank has received over Rs 24 crore as the first tranche of recoveries from bankruptcy proceedings of three Nirav Modi-promoted companies in the US. In 2018, the lender had informed the ministry that three companies promoted by Nirav Modi — Firestar Diamond, Inc, A Jaffee, Inc and Fantasy, Inc had filed for Chapter 11 bankruptcy protection in the Southern District of New York, US.
The bank had also requested the ministry to support and join the bankruptcy proceedings in New York in order to help PNB realise its claims in the debtors' assets, the ministry said in a release. According to the release, Punjab National Bank has informed the ministry, which spearheaded the corporate governance litigation in a foreign jurisdictional court, that it has received USD 3.25 million (equivalent of Rs 24.33 crore) as the first tranche of recoveries.
"Upon liquidation of the debtors' assets by the US Chapter 11 Trustee, a sum of USD 11.04 million (equivalent of Rs 82.66 crore) is available for distribution to unsecured creditors, including PNB. Further recovery therefrom is subject to other expenses and settlement of claims of other claimants," it added. Further, the release said the "maiden repatriation of USD 3.25 million is an unprecedented achievement of the Government of India, Ministry of Corporate Affairs in its fight against corporate fraud in overseas territory." The ministry also has initiated proceedings for disgorgement of monies from the perpetrators — the entities promoted and/or controlled by fugitive jewellers Nirav Modi and Mehul Choksi.
In an order, dated July 26, the US Bankruptcy Court of Southern District of New York recognised the claims of the bank in the proceeds of sale of assets of the properties of the debtor companies. It also authorised the bank to issue subpoenas to compel the examination of Nirav Modi, Mihir Bhansali and Rakhi Bhansali under oath, the release said. On August 24, 2018, the examiner appointed by the New York Bankruptcy Court submitted his report.
"The report explains the modus operandi of the fraud, and the manner in which the US-based employees of the debtors participated in the fraud. "One prominent feature of the fraud was the apparent facade of independent companies, which were, in reality, entities promoted and/ or controlled by Nirav Modi, that engaged in 'round-tripping' of the diamonds amongst themselves," the release said. Nirav Modi had perpetrated an over USD 2 billion worth financial scam at the Punjab National Bank.
He is lodged in a UK jail after being arrested in London in March, 2019 and is currently fighting extradition to India. He was declared a fugitive economic offender by a Mumbai court earlier this year. The court had also ordered confiscation of his assets.
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