The Debt Recovery Tribunal (DRT) has directed fugitive diamantaire Nirav Modi and his companies to pay Punjab National Bank (PNB) and a consortium of banks an aggregate sum of £720 mn, with 14.3% annual interest from June 30, 2018. Presiding Officer Deepak Thakkar, who holds additional charge of DRT, Mumbai, passed two orders in two cases in favour of the PNB. DRT issued the recovery certificates, based on which the bank’s recovery officer can now proceed to attach Modi’s properties if necessary. But with most of Modi’s assets attached by the Enforcement Directorate (ED), it will have to be seen how the recovery proceeds.
The recovery officer may have to move the Prevention of Money Laundering Act (PMLA) court. Some of Modi’s high-value art works and other assets have already been auctioned by ED. “I am convinced that the applicant PNB has made out the case of fraud perpetrated by Nirav Modi and others to obtain the LoUs (letters of understanding),” said Thakkar in his judgment.
Advocate Nitesh Jain appearing for PNB narrated what DRT observed was the “modus operandi of Nirav Modi and others” through “fraudulent transactions… in collusion with Bank’s employees. Modi enjoyed the credit facilities by unlawful means, conspiracy and deceit,” argued Jain. PNB was the first to approach DRT last July against Modi, seeking recovery of £720 mn in the case of alleged fraud by Modi, currently lodged in a London jail. He fled India last year. There were 150 allegedly fraudulent LoUs issued in Modi’s favour without approval or authority, said PNB. The fraud was systematically perpetrated in open defiance of the SWIFT System and Core Banking System, observed DRT.
£380 mn fraud against Bhushan Power and Steel
A year after the fraud by Nirav Modi, PNB has reported another fraud worth over £380 mn by Bhushan Power and Steel, which is a non-performing asset for lenders and is facing insolvency action. The intimation to the RBI follows a forensic audit investigation by the CBI, which has filed an FIR against the company and its directors, alleging diversion of funds, PNB said in a stock exchange filing. Sources in the bank said the decision was taken by a consortium of lenders led by the State Bank of India, which has also informed the RBI.
PNB said that its large corporate branch in Chandigarh had an exposure of close to £320 million to the controversial company, while there was an overseas exposure of £34.5 million through its branch in Dubai and another facility of £26.8 million was extended by the Hong Kong branch.
For the promoters Singals too, this is the latest headache as they are facing multiple investigations after their failure to repay loans to banks. The company, along with Bhushal Steel, has been under the lens for the past several years as their investments were suspected to have been overvalued. BPSL is one of the 12 accounts identified by the RBI for insolvency proceedings. Bhushan Steel's former chief financial officer and director Nittin Johari was arrested by the Serious Fraud Investigation Office (SFIO) on May 2 and is in judicial custody. He was arrested for alleged fraudulent activities, including filing false documents with various banks.