Nirav Modi case: PNB recovers $3.25 million from bankruptcy proceedings in US

Punjab National Bank (PNB) has informed the Central Government that it has received US $3.25 million (Rs 24.33 crore) as the first tranche of recoveries in the Nirav Modi case in the US. 

Upon liquidation of the debtors’ assets by the US Chapter 11 Trustee, a sum of $ 11.04 million (Rs 82.66 crore) is available for distribution to unsecured creditors including PNB, according to the Ministry of Corporate Affairs. While the PNB has received the first tranche of US $3.25 million, further recovery therefrom is subject to other expenses and settlement of claims of other claimants.

The ministry was spearheading the corporate governance litigation in a foreign jurisdictional court. 

The maiden repatriation of $ 3.25 million is an unprecedented achievement for the India government in its fight against corporate fraud in an overseas territory, the ministry said, adding that it has also initiated proceedings for disgorgement of monies from the entities promoted or controlled by Nirav Modi and Mehul Choksi.

Nirav Modi, along with his uncle Mehul Choksi, is a key accused in the Rs 13,000 crore PNB scam and fled the country before the fraud came to light. Nirav Modi was declared fugitive offender on December 5, 2019. He was arrested in London last year and is presently lodged in a UK prison after his several bail applications were rejected.

PNB had in 2018 informed the Ministry of Corporate Affairs that three companies promoted by Modi - Firestar Diamond, A Jaffee and Fantasy - had filed for Chapter 11 Bankruptcy Protection in the Southern District of New York, US. PNB requested the ministry to support and join the bankruptcy proceedings in New York in order to help the bank realize its claims in the debtors’ assets.

The US Bankruptcy Court of Southern District of New York, by its Order dated July 26, 2018 recognised the claims of PNB in the proceeds of sale of assets of the properties of the debtor companies. It also authorized PNB to issue subpoenas to compel the examination of Nirav Modi, Mihir Bhansali and Rakhi Bhansali under oath.

Subsequently, 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 façade 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 ministry said.