Nirav Modi, accused of defrauding Punjab National Bank of more than ₹13,000 crore in India’s biggest bank scam, has made a pre-emptive move to ring-fence his companies against an aggressive chase by lenders.
Modi has filed for bankruptcy proceedings under US laws for Firestar Diamond Inc. and affiliate companies.
Firestar Diamond has listed assets and liabilities of $50-100 million, according to a court filing in the Southern District Of New York, Bloomberg reported on Monday.
Last week, the Central Bureau of Investigation (CBI) arrested Firestar International’s key executives in connection with the fraud disclosed by PNB. Experts whom
“In most cases, creditors are barred from sending threatening letters, making harassing telephone calls and even filing or continuing a lawsuit. Such harassment from creditors stops when you admit that you are bankrupt and go for legal liquidation in the US,” said a legal expert with knowledge of US tax and banking laws.
Experts say that Indian banks will now have to make a case and fight it out under US laws to recover money from Firestar Diamond Inc. Yet, there is also a view that banks could state that this was a case of fraud and not of a legitimate business failure leading to bankruptcy
Modi’s flagship company Firestar Diamond is believed to have discounted Letters of Undertaking (LoU) issued by PNB with overseas branches of several banks and has not returned the due amount.