Punjab National Bank (PNB) on Tuesday informed the government that it has received the first tranche of Rs 24.33 crore in recoveries in the fraud involving Nirav Modi.
Punjab National Bank (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 Nirav Modi/Mehul Choksi.
Punjab National Bank 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., A. Jaffee, Inc. and 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 24 August 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 fade of independent companies, which were, in reality, entities promoted and/or controlled by Nirav Modi, that engaged in 'round-tripping' of the diamonds amongst themselves.
The media reported that the Interpol has issued a red corner notice against Nirav Modi's wife, Ami Modi, in connection with the nearly $2 billion PNB fraud and money laundering case. He is lodged in a UK jail after being arrested in London in March 2019 and is currently fighting extradition to India. He was declared a fugitive economic offender by a Mumbai court earlier this year. The court had also ordered the confiscation of his assets. In July 2020, the ED had attached properties of Nirav Modi worth Rs 329.66 crore under the Fugitive Economic Offenders Act, 2018 (FEOA).
PNB's standalone net profit tanked 69.7% to Rs 308.45 crore on a 60.2% surge in total income to Rs 24,292.80 crore in Q1 June 2020 over Q1 June 2019.
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Punjab National Bank is a public sector bank. The Government of India held 85.59% stake in the bank as on 30 June 2020.
Shares of PNB gained 0.43% at Rs 35.35. It traded in the range of Rs 35.20 and Rs 35.75 during the day.
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