Three days ago, the big news in the Nirav Modi-Punjab National Bank drama was that the Ministry of Corporate Affairs was mulling legal options to try to stall Firestar Diamond's bankruptcy proceedings in the US. Well, before officials could complete that thought, the Bankruptcy Court for the Southern District of New York has reportedly given its nod to kick-start the bidding procedure of the company along with its two affiliates.
According to The Hindustan Times, the court also approved a plan to use proceeds of the asset sale to repay $20 million in dues to HSBC Bank USA and Israel Discount Bank of New York. Modi, the key accused in the Rs 13,000 crore PNB scam, has a majority stake in Firestar Diamond and its other sister companies through his other companies.
To remind you, Firestar Diamond, Inc had filed the Chapter 11 voluntary petition in New York late last month along with affiliates A. Jaffe Inc and Fantasy Inc, blaming liquidity and supply chain challenges in its filing. "This chapter of the Bankruptcy Code generally provides for reorganization, usually involving a corporation or partnership. A chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time," according to uscourts.gov, the US judiciary's official external website. "The chapter 11 bankruptcy case of a corporation (corporation as debtor) does not put the personal assets of the stockholders at risk other than the value of their investment in the company's stock." Following the bankruptcy filing, the court passed an interim order to prevent creditors from collecting debt from Firestar Diamond Inc.
Firestar and its affiliates have since been working on sale of assets. The report adds that the debtors recently moved a motion in the court to establish bidding procedure, set hearing date and approve the proposed sale, and the like. According to the firm's court filing, the process is designed to test the market for the highest and best value available under the circumstances. The court gave its nod and authorised the companies to take all action necessary.
April 19 is reportedly the deadline for submitting sealed bids and the auction date for qualifying bids has been set for April 24. The hearing to approve the sale has been scheduled for May 3. The daily adds that Firestar had sought complete closure of the sale by first week of May keeping in mind the upcoming JCK show, the jewellery industry's leading event in North America, to be held over June 1-4, 2018 in Las Vegas. "The JCK show serves as a platform to launch product lines for the fourth quarter, which is traditionally the strongest quarter for sales in the jewellery industry, like many others. If the proposed sale is consummated in the first week of May, a purchaser will have sufficient time to prepare the product lines currently owned by the debtors for the JCK show," the company reportedly said in the motion.
There is no confirmed news yet on rumours of PNB's participation in the bankruptcy proceedings. According to sources, the bank was in the process of hiring legal experts to take the matter forward and make a watertight case for the recovery.
With PTI inputs