Is absconding diamantaire Nirav Modi's luck beginning to run out? On the one hand, UK authorities have confirmed his presence in their country and assured cooperation in the extradition process. And on the other, he may now have lost any remaining control over three US-based companies that had filed for bankruptcy in February.
According to India Today, a US bankruptcy court has ruled in favour of a plea filed by Punjab National Bank and India's Ministry of Corporate Affairs, to appoint an independent chapter 11 trustee to oversee the functioning of Firestar Diamond and its affiliates Fantasy Inc and A. Jaffe Inc - all entities related to Modi. The latter is allegedly the mastermind behind the over Rs 13,000 crore PNB bank fraud.
PNB had previously moved a motion alleging that the position of Firestar Diamond's current management, including Chief Restructuring Officer (CRO) Mark Samson and Independent Director Neil Bivona, had become untenable. This after it came to light that Modi allegedly communicated with the president of Firestar Diamond, Mihir Bhansali, and tried to influence the bankruptcy process.
According to Indian investigating agencies, Bhansali is believed to be a close associate of Modi. When PNB's lawyers sought a testimony under oath from Bhansali in court, his lawyers said that he would "invoke his fifth amendment rights", which under US laws saves him from self-incrimination in a court of law. He has since resigned from his role in the company.
PNB's lawyer, Rahul Mukhi, alleged that "it was done to avoid providing information required by the Court". Mukhi also submitted before the court that Modi's companies had retained Samson as the CRO and appointed Bivona as a director of the debtors through an undisclosed process. PNB's lawyer further alleged that the "debtors (Nirav Modi Companies) and management are not trustworthy".
Agreeing to the motion filed by PNB and supported by the ministry, judge Sean Lane ordered an appointment of chapter 11 trustee to oversee the day-to-day affairs of the three companies. According to the US Judiciary's website, the appointment of a case trustee is "a rarity" in cases filed under chapter 11 of the United States Bankruptcy Code - frequently referred to as "reorganization" bankruptcies - but can be ordered "for cause, including fraud, dishonesty, incompetence, or gross mismanagement, or if such an appointment is in the interest of creditors," says the website. A trustee can also be appointed "if there are reasonable grounds to believe that any of the parties in control of the debtor "participated in actual fraud, dishonesty or criminal conduct in the management of the debtor or the debtor's financial reporting".
The move is seen as a setback for Modi since he will no longer be able to influence any decisions related these companies. Moreover, any possibility of him using the assets and funds of these companies would be minimized. That's a major win for PNB, which recently reported the highest quarterly loss ever posted by an Indian bank.