In what could be the first such case, Punjab National Bank (PNB) has received Rs 24.33 crore ($3.25 million) as proceeds from the liquidation of Nirav Modi-owned companies, which are undergoing bankruptcy proceedings in the US.
The bank informed the Ministry of Corporate Affairs that upon liquidation of the debtors' assets by the US Chapter 11 Trustee, a sum of $11.04 million (Rs 82.66 crore) was available for distribution to unsecured creditors, including PNB. The bank has said that further recovery is subject to other expenses and settlement of claims of other claimants.
The MCA in a statement has said that the maiden repatriation of $3.25 million is an unprecedented achievement of the government in its fight against corporate fraud in overseas territory. The Ministry has also initiated proceedings for disgorgement of monies from entities promoted and controlled by Nirav Modi and Mehul Choksi.
According to reports, three Nirav Modi-promoted companies - Firestar Diamond Inc, A Jaffee Inc, and Fantasy Inc had filed for Chapter 11 Bankruptcy Protection in the Southern District of New York. PNB requested the Ministry of Corporate Affairs to support and join the bankruptcy proceedings in New York in order to help PNB realise its claims in the debtors' assets.
The US Bankruptcy Court of Southern District of New York on July 26, 2018, recognised the claims of PNB in the proceeds of sale of assets of the properties of the debtor companies. It also authorised 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 facade of independent companies, which were, in reality, entities promoted and/or controlled by Nirav Modi and were engaged in 'round-tripping' of the diamonds amongst themselves.