PNB Fraud: Nirav Modi’s flagship firm bankrupt

Firestar Diamond Inc, the flagship company of billionaire Nirav Modi who is at the centre of the Punjab National Bank (PNB) scam, filed for bankruptcy in USA on Monday. The decision comes as government agencies are looking to arrest the jeweller and recover the over Rs 11,000 crore that he has allegedly defrauded from PNB.         

Aggressive moves have being made to get back Modi to India to stand trial. The Enforcement Directorate (ED) approached the special Prevention of Money Laundering Act (PMLA) court on Tuesday seeking to issue an open-ended Non-bailable Warrant (NBW) against him. 

The ED informed the court that as Modi is not available for examination it was required to issue NBW against him. Meanwhile, the ED has also requested the court to issue fresh Letter Rogatory (LR) to six countries to seize properties of the accused in those respective nations. 

Such actions follow other moves that have been taken against Nirav Modi and the Punjab National Bank this week to recover the money. Last week, the Enforcement Directorate (ED) said that had it attached Nirav Modi’s 21 immovable properties worth Rs 523.72 crore in connection with an ongoing probe into the fraud case while the CBI said it has questioned PNB executive director KV Brahmaji Rao, two general managers and a retired official on Monday in connection with its probe into the multi-crore fraud. 

Bank deposits, shares and luxury cars worth over Rs 100 crore belonging to the businessman and his group have been recovered. Investigative agencies have also frozen assets such as bank accounts of Modi’s uncle-cum-business partner Mehul Choksi, a co-accused in the PNB scam.     

Meanwhile, in their bid to get Nirav Modi back, the ED also informed the PMLA court that they had thrice issued summons to him through his counsel to attend their office to support the investigation. The first summons was issued on February 15 this year where the agency had asked Modi to attend the ED office on February 16. As he failed to attend, the second summons sent on February 17 and Modi was expected to attend on February 22, but he again did not turn up. Finally, the last summons was sent on February 22 and he was asked to be present on February 26. The summons was then received by his employee Ganesh Mistry.

Modi’s counsel Vijay Agarwal said the diamond jeweller may return to India only if the prosecution assures him of a free and fair trial. Also, after the last summons issued to him by the ED, Modi in an email addressed to the ED, said that his business was working at a loss and that he was working hard abroad to get things in place. 

“Modi in his email said that on February 16, he had received text messages from the passport office suspending his passport. He has received show cause notice from the passport office, but he is not sure of what is the actual position is. He further referred to the tone of politicians which has affected him majorly and also blamed the extensive negative media coverage for harassing him continuously. He further claimed that there are multiple investigating agencies that are hounding him and so has asked the ED to investigate and interrogate him through email,” said ED prosecutor Hiten Venegaonkar. 

Meanwhile, shares of Punjab National Bank fell about 8 percent as of 10:23 a.m. in Mumbai on Tuesday, its lowest since June 2016.

Apart from the crackdown on Modi and Choksi, reform measures are being put in place to ensure that such an incident does not recur. On Tuesday,  the Finance Ministry set a 15-day deadline for state banks to take action to improve their oversight of operational and technological risks. The ministry’s Department of Financial Services also ordered state-run lenders to comb through their bad loans of more than Rs 500 million for potential fraud.          

Analysts said the government directives could hit banks in the short-term if more fraud was detected, though it would benefit the sector in the long-term. “The oversight in the banking system is obviously not good,” said Yuvraj Choudhary, an analyst at brokerage Anand Rathi. “This could lead to uncovering of more potential scams. We can expect bottom-lines to be hit in the coming quarters.” 

— With inputs from agencies