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August 25, 2020

MCA maiden success in recovery of $3.25 million in Nirav Modi case from USA

by facelesscompliance in Compliance Law

MCA maiden success in recovery of $3.25 million in Nirav Modi case from USA

Nirav Deepak Modi (born 27 February 1971) is a fugitive Indian businessman, wanted by the Interpol and the Government of India for criminal conspiracy, criminal breach of trust, cheating and dishonesty including delivery of property, corruption, money laundering, fraud, embezzlement and breach of contract since August 2018.

Modi is being investigated in a $2 billion fraud case[5][6] of Punjab National Bank (PNB) and is also being sued in the State of California for US$4.2 million for defrauding Los Angeles entrepreneur, Paul Alfonso, over two custom diamond engagement rings that turned out to be lab diamonds.

In March 2018, Modi applied for bankruptcy protection in Manhattan, New York.[9] In June 2018, Modi was reported to be in the UK and has applied for political asylum in Britain. In June 2019, Swiss authorities have frozen a total of 6 million US dollars present in Nirav Modi’s Swiss bank accounts along with the assets


Punjab National Bank Ltd. (PNB) has informed the Ministry of Corporate Affairs (MCA) which spearheaded the corporate governance litigation in a foreign jurisdictional Court, that it has received $ 3.25 million (equivalent of Rs. 24.33 crore) as the first tranche of recoveries. Upon liquidation of the debtors’ assets by the US Chapter 11 Trustee, a sum of $ 11.04 million (equivalent of Rs. 82.66 crore) is available for distribution to unsecured creditors including PNB.

Further recovery therefrom is subject to other expenses and settlement of claims of other claimants.

The maiden repatriation of $ 3.25 million is an unprecedented achievement of the Government of India, Ministry of Corporate Affairs in its fight against corporate fraud in overseas territory.

The Ministry also has initiated proceedings for disgorgement of monies from the perpetrators, i.e., the entities promoted and/or controlled by Mr. Nirav Modi/ Mr. Mehul Choksi.

Punjab National Bank Ltd.in 2018 informed the Ministry of Corporate Affairs, Government of India that three companies promoted by Mr. Nirav Modi, namely M/s. Firestar Diamond, Inc., M/s. A. Jaffee, Inc. and M/s. Fantasy, Inc., had filed for Chapter 11 Bankruptcy Protection in the Southern District of New York, United States of America.

PNB requested the Ministry of Corporate Affairs to support and join the bankruptcy proceedings in New York, USA in order to help PNB realize its claims in the debtors’ assets.

The US Bankruptcy Court of Southern District of New York, by its Order dated July 26, 2018 recognized the claims of PNB in the proceeds of sale of assets of the properties of the debtor companies.

It also authorized PNB to issue subpoenas to compel the examination of Mr. Nirav Modi, Mr. Mihir Bhansali and Ms. 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 façade of independent companies, which were, in reality, entities promoted and/or controlled by Mr. Nirav Modi, that engaged in ‘round-tripping’ of the diamonds amongst themselves.

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