Money & Banking

Nirav Modi case: PNB gets ₹25 crore as first tranche of claim amount

KR Srivats New Delhi | Updated on August 20, 2020

Nirav Modi and his co-conspirators had allegedly used fraudulently obtained letters of undertaking to perpetrate a ₹13,000-crore fraud on PNB (file photo)

Lender may get ₹75 crore more as American creditors of Modi-controlled entities sell assets under US bankruptcy proceedings

Punjab National Bank (PNB) has received the first tranche of about ₹25 crore as part of its claim on the assets sold by American creditors of Nirav Modi-controlled entities that underwent insolvency proceedings in the US.

PNB received the tranche a few days back and more is expected in the coming days, said sources in the country’s second largest public sector bank. There is some indication that PNB may get about ₹100 crore in total from the US assets.

It may be recalled that the Ministry of Corporate Affairs (MCA), in probably the first such instance, had filed a petition in February 2018 in a US bankruptcy court, seeking the inclusion of PNB as a party to the sale of any assets of Nirav Modi entities.

In July 2018, the US court recognised PNB’s claim. It signed a stipulation recognising PNB’s agreement with the Chapter 11 Trustee, that proceeds of any asset sales by the US creditors will be subject to PNB’s claims of constructive trust regarding the Modi entities.

Mega bank fraud

Firestar Diamond Inc, A Jaffe Inc and Fantasy Inc — indirectly controlled by Modi — had separately filed for Chapter 11 bankruptcy protection in the US. These bankruptcies were filed in the shadow of the alleged ₹13,000-crore fraud perpetrated by the diamantaire and other co-perpetrators against PNB.

PNB had contended that some of the assets acquired by the three entities may have been funded using the monies fraudulently obtained from it by Modi.

The ₹13,000-crore scam had involved the issuance of unauthorised Letters of Undertaking (LoU) by a few PNB officials to Modi-controlled entities in India. A series of entities that posed as independent third parties were used in sham transactions to import gemstones and jewellery to obtain bank financing in the form of LoUs. PNB has already made provisions for 100 per cent of its exposure to the fraud.

International legal recourse

Aseem Chawla, Managing Partner at law firm ASC Legal, told BusinessLine: “The given development (PNB receiving the first tranche of money) is suggestive of quick legal recourse; the fetters on matters having cross-border implications are now a distant past.” Indian authorities and local entities are well equipped to seek international legal recourse, he added.

Published on August 20, 2020

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