Mumbai/Bengaluru: After Indian banks, it is now the ministry of corporate affairs (MCA) that has joined bankruptcy proceedings against jeweller Nirav Modi’s Firestar Diamond and two of its affiliates—Fantasy Inc. and A. Jaffe Inc. The ministry has appointed a US-based law firm to represent it in the US bankruptcy court.
With this MCA has joined the long list of public sector banks, including Punjab National Bank (PNB), Central Bank of India, and Allahabad Bank, which have all hired American legal firms to assist in the current bankruptcy proceedings.
Nirav Modi and his firms are at the centre of the $2 billion PNB fraud.
The investigative agency under the MCA, the Serious Fraud and Investigations Office (SFIO), is probing 114 firms linked to jewellers Modi and Mehul Choksi for possible fund diversion, fraud and violation of the Companies Act in the Rs12,636 crore PNB fraud.
“MCA as a regulator of companies who have suffered from fraud and companies who have allegedly perpetrated fraud has a standing in the current proceedings, though not as a creditor. From afar it looks like MCA could use the representation to coordinate with the court about investigations in India, but at this point it is just a guess," said Sanjeet Malik, partner at law firm Samvad Partners.
On 26 February, Firestar Diamond and its two affiliates filed for bankruptcy protection in the US through a voluntary petition, stating supply chain disruption. Incidentally, the companies have not mentioned PNB or any other Indian bank that extended loans to Modi-owned firms as its creditors in the bankruptcy petitions.
Subsequently, on 29 March, the US court allowed Firestar Diamond and other related firms to sell their assets. The court has invited bids for assets of the distressed companies till 27 April and auction of the assets will begin on 5 May.
The court will conduct the sale hearing on 15 May. The public sector banks and MCA can submit objections till 8 May.
Nirav Modi’s companies will have time till 11 May to reply to objections.