Nirav Modi must repay Rs 7300 crores to Punjab National Bank : DRT
Pune, July 6, 2019 : In a major blow to fugitive diamond trader Nirav Modi, the Debt Recovery Tribunal (DRT), Pune directed Modi and his aides repay Rs 7300 crores with interest to the Punjab National Bank (PNB). DRT presiding officer/judge Deepak Thakkar passed the order in two cases registered by PNB in Mumbai.
Thakkar holds additional charge of DRT,Mumbai. One more case of alleged fraud around Rs 1700 crores registered by PNB against Nirav Modi is pending before DRT, Mumbai.
Nirav Deepak Modi (born 27 February 1971) is a fugitive Indian businessman, wanted by the Interpol for criminal conspiracy, criminal breach of trust, cheating and dishonesty including delivery of property, corruption, money laundering, fraud, embezzlement and breach of contract since August 2018.
Modi made international headlines again in early October 2018 when Los Angeles entrepreneur, Paul Alfonso, filed a US$4.2 million lawsuit in Los Angeles against Modi and two of his now defunct companies namely Firestar Diamond Inc. and A. Jaffe Inc.
According to court records from the Superior Court of California, Modi fraudulently sold two custom diamond engagement rings to Alfonso that turned out to be lab diamonds. The value of both diamond rings were US$200,000. Modi’s younger brother Neeshal Deepak Modi and manager and close aide Parab Subhash Shankhar are also wanted by Interpol since August 2018 in connection with the same crimes as Nirav Modi.
Modi is being investigated in a $2 billion fraud case of Punjab National Bank (PNB) and is also being sued in the State of California for US$4.2 million for defrauding Los Angeles entrepreneur, Paul Alfonso, over two custom diamond engagement rings that turned out to be lab diamonds. In March 2018, Modi applied for bankruptcy protection in Manhattan, New York. In June 2018, Modi was reported to be in the UK and has applied for political asylum in Britain. He is now under arrest in the UK. In June 2019, Swiss authorities have frozen a total of 6 million US dollars present in Nirav Modi’s Swiss bank accounts along with the assets.
Early life
Nirav Modi was born in Palanpur, Gujarat, and grew up in Antwerp, Belgium. His family has been in the diamond business for several generations. When he was 19, he and his father Deepak Modi moved to Mumbai to work in his uncle’s business, Mehul Choksi, the head of Gitanjali Group, a retail jewellery company with 4,000 stores in India.
Modi attended the Wharton School at the University of Pennsylvania but eventually dropped out. While studying, he met his future wife, Ami, the daughter of a diamond businessman.
Personal life
Nirav Modi is married to Ami Modi, they have three children (two daughters and one son). They met when both were students at the Wharton School of the University of Pennsylvania, although Modi himself dropped out after a year to return to the diamond business.
Ami is a US citizen by birth. In spite of having been a billionaire family, they have attempted to raise children conservatively, and they only use Gujarati in their home. She ran the “Nirav Modi Scholarship for Excellence”, which supported 250 students every year. After leaving India, they had been reported to have been living in a JW Marriott Essex House suite in New York City.
Career
After moving to India in 1989, and training in all aspects of the diamond trading business, he founded Firestar in 1999 (Formerly known as Firestone), a diamond sourcing and trading company. Firestar is the exclusive distributor of Rio Tinto’s Argyle pink diamonds in India.
In 2002, his company started manufacturing jewellery on a contract basis. He acquired Frederick Goldman in 2005, and Sandberg & Sikorski and A.Jaffe in 2007 in the USA.
In 2008, a close friend asked Nirav Modi to make a pair of earrings, after which he created the brand.[26][non-primary source needed] In 2010 he launched a diamond store bearing his name in New Delhi’s Defence Colony, followed by one in Mumbai’s Kala Ghoda. 17 other store openings followed across the world.
He became well known after he designed his “Golconda Lotus Necklace” with an old, 12-carat, pear-shaped diamond as a centerpiece in 2010. The diamond was earlier sold in the 1960s; it was repolished. It featured a lattice of white and pink diamonds. It was included on the cover of Christie’s catalogue in Hong Kong, and was auctioned for US$3.6 million in 2010. In 2012, the Riviere of Perfection, featuring 36 flawless white diamonds weighing a total of 88.88 carats, was sold at Sotheby’s Hong Kong auction.
In 2014, Nirav Modi opened his first flagship store at Defence Colony, New Delhi, followed by a store at Kala Ghoda, Mumbai in 2015. Nirav Modi launched globally with boutiques in New York City (on Madison Avenue, opened by Donald Trump and Hong Kong in 2015, followed by two other boutiques opened in Hong Kong in 2016., and one in MGM Macau in 2016.
It had been reported that he was planning to sell some of his business to a well-known foreign brand and was also planning to raise funds through an initial public offering (IPO).
It is believed that he was overextended for several years and used new MOUs to pay for the past ones for about seven year. One of his employees has stated that “He wanted to grow his business, and to do in five years what might otherwise have taken 20 years.” he claimed that “If he’d gone public, maybe he could have pledged his equity, raised some money, and finally paid the bank back. Perhaps he would have done that.”
Dealings with Union Bank of India
The Union Bank of India sued Nirav Modi in a Hong Kong court. Union Bank claimed in a writ filed at the High Court on 26 September 2018 that Nirav Modi guaranteed two loans made to Firestone Trading Private on 21 October 2011 and Firestar Diamond on 15 November 2011. The bank demanded that Nirav Modi pay more than $5.49 million plus interest after both firms allegedly defaulted on repayments.
2018 Investigation and Lawsuits (PNB fraud case)
In February 2018, the Indian government’s Central Bureau of Investigation (CBI) launched an investigation of Modi, acting on a complaint from the Punjab National Bank alleging Modi and his partners defrauded the bank of Rs 280 Crore (approximately USD 40 million) by conspiring with bank officials to fraudulently obtain Letters of Undertaking for making payments to overseas suppliers. While Rs280 Crore is the fraud that has been alleged to date, the potential loss to Punjab National Bank is reported to be up to Rs 11000 Crore. The Enforcement Directorate (ED) is looking into the case of fraud that the CBI has registered against Modi.
A few of Modi’s stores initially remained open for business as usual, including the one at Marina Bay Sands in Singapore, however these have gradually all closed. On 7 March 2018, Modi’s firm Firestar Diamond Inc. applied for bankruptcy protection at a Manhattan bankruptcy court, in order to protect its assets in the United States and their revolving credit facility with Israel Discount Bank.
Modi responded to the bank on 15/16 February 2018, stating that “In the anxiety to recover your dues immediately, despite my offer (on 13 February, a day before the public announcement, and on 15) your actions have destroyed my brand and the business and have now restricted your ability to recover all the dues leaving a trail of unpaid debts”. Modi estimated his domestic business at around Rs 6,500 Crore, and said “this could have helped reduce/discharge the debt to the banking system,” but claimed that this is now impossible as all his bank accounts have been frozen and assets have been seized. Modi bought a Rs 900 crore sea-facing property in Mumbai’s coveted Samudra Mahal properties with his wife Ami Modi. His properties in India, including jewellery, paintings, and real estate, worth about Rs 523 crore (about $100 million) have been attached by the Enforcement Directorate.
The Enforcement Directorate (ED) attached four wind power plants, owned by Modi, in Rajasthan with a total capacity of 9.6 megawatt (MW). The plants earn up to Rs 5 crore a year due to share purchase agreement with Rajasthan’s state electricity board. These wind power plants have been operational since 2014-15. In March 2018, the ED had attached a 5.24 MW solar power plant spread over 135 acres in Karjat in Ahmednagar district worth Rs 60 crore. In May 2018, the CBI and the ED had registered two FIRs each to probe the case. Both Modi and Mehul Choksi are said to have left the country before criminal cases were lodged against them.
With the collapse of his brand, Modi’s fortune has collapsed. Forbes removed him from their annual billionaires list, and on 9 March 2018, estimated his current wealth to be less than $100 million. As a result of the fiasco, the RBI has stopped issuing LoUs and LoCs for imports, which has limited the financial flexibility of importers. His company, A.JAFFE, acquired through his Synergies Corporation, was auctioned in May 2018 and was purchased by Parag Diamond. All the stores have been since closed.
In April 2018, it was alleged Modi had found safe haven in Hong Kong, but in June of that year he was reported to be in the UK where he applied for asylum, claiming he was a victim of “political persecution” and denying any wrongdoing. In March 2019, Modi was reported have been sighted in the UK by The Telegraph. It was said that he was living in an apartment costing £8 million. Indian authorities responded to the report by saying that an extradition request had been made to the UK. On 20 March 2019, Modi was arrested in London after a warrant was issued against him. Later that month, Indian tax authorities raised $8m by auctioning some of Modi’s art collection. Modi applied for bail in the UK High Court on May 31, a day after his remand was extended till June 27. The hearing of his bail plea will take place at the Royal Courts of Justice in London on June 11.
