The National Company Law Tribunal (NCLT) has initiated a corporate insolvency resolution process involving Firestar Diamond International (FDIPL) — a key subsidiary owned by Firestar International. FDIPL was wholly owned by billionaire jeweller Nirav Modi, who is now in a jail in London, and lists as its directors Modi and Himanshu Trivedi.
FDIPL is one of the group’s two jewellery manufacturing units to be based in Surat Special Economic Zone (SURSEZ) in Sachin Village, Surat — the other being Radashir Jewellery Company, where only Modi is listed as director.
FDIPL’s parent firm Firestar International had extended an unconditional, absolute, and irrevocable guarantee towards the rated bank facilities.
In February last year, government agencies had launched a probe against Nirav and his uncle Mehul Choksi — promoter of Gitanjali Gems — for their involvement in the $2-billion fraud unearthed at Punjab National Bank.
Earlier, an investigation into the money trail from Modi’s firms had been started by the Enforcement Directorate, which had also provisionally attached various movable and immovable properties of Modi, including houses, personal belongings, and automobiles.
Further, a consortium of lenders against Nirav Modi, Firestar International, and Radashir Jewellery Company, had also presented an application to the Debt Recovery Tribunal-1 (DRT) in Mumbai late last year — which was decided in July this year — and is pursuing a total claim of Rs232 crore.
The consortium, including Punjab National Bank, Oriental Bank of Commerce, Bank of India, Bank of Baroda, bank of Maharashtra, UCO Bank, Corporation Bank, United Bank of India, filed an application.
In July, the DRT granted a decree for recovery and the consortium is now seeking execution of the same.
Most, if not all, of Modi’s assets are attached by the ED and, therefore, people familiar with the NCLT process indicate it is unlikely any bids are going to come through under the tribunal, and that the likely outcome will be state-authorised liquidation.
Meanwhile, the beleaguered jeweller is fighting battles on multiple fronts. He has applied for bail at least four times, and been denied every time, and is also fighting extradition to India.
He stays in custody at Wandsworth prison in south-west London, since his arrest in March this year.
On the India front, he has been contesting a plea by the ED to declare him a fugitive economic offender, under the new Fugitive Economic Offenders Act. Choksi is also absconding, and said to be hiding in Antigua.
In September 2019, the Gurgaon-based Oriental Bank of Commerce issued notices to both Modi and Choksi. The two have been termed wilful defaulters for unpaid loans by their respective companies.
Modi’s companies Firestar International and Firestar Diamond International had not repaid their outstanding dues.
The bank had declared Modi and Choksi’s assets as non-performing assets (NPAs) in the financial year ended March 2018.
Being declared as fraud accounts, banks have already begun making provisions for their exposures.