A court-appointed liquidator in India will start auctioning precious metals and gemstones belonging to Firestar Diamond International Pvt., once owned by former tycoon Nirav Modi, to clear total claims of lenders amounting to more than 120 billion rupees ($1.5 billion).
The auction will take place on March 25, said Santanu T. Ray from AAA Insolvency, the court-appointed liquidator to handle the bankruptcy proceedings. “This will be the first auction of precious metals and stones” released by the government agency, which probes white-collar crimes.
Punjab National Bank, Canara Bank, IDBI Bank Ltd., and Union Bank of India Ltd. are among lenders that extended credit to the company, which was allegedly mired in one of the largest fraud cases in India.
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Modi has become the poster boy for a series of bank frauds over the past decade in the diamond industry in India, which cuts or polishes about 90% of the world’s supply. The Indian government accused Modi of defrauding the country’s second-largest bank, Punjab National Bank, of around $2 billion using credit guarantees for his diamond business. Modi has denied all allegations of wrongdoing and contested his extradition from the UK.
The liquidator has engaged the Gemmological Institute of India, an industry group that provides certification services, to gage the correct value of the gold and diamond items, Ray said.
Who is Nirav Modi?
Nirav Deepak Modi (born 27 February 1971) is a Belgian businessman and fugitive who was charged by Interpol and the government of India for criminal conspiracy, criminal breach of trust, cheating and dishonesty including delivery of property, corruption, money laundering, fraud, embezzlement and breach of contract in August 2018.
Modi is being investigated as a part of the $2 billion fraud case of Punjab National Bank (PNB). In March 2018, Modi applied for bankruptcy protection in Manhattan, New York.
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 Amukuraj Choksey.
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 ₹28000 Crore (approximately US$4 billion) by conspiring with bank officials to fraudulently obtain Letters of Undertaking for making payments to overseas suppliers.
While ₹28000 Crore is the fraud that has been alleged to date, the potential loss to Punjab National Bank is reported to be up to ₹11000 Crore. The Enforcement Directorate (ED) is looking into the case of fraud that the CBI has registered against him.
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 $75 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, he was arrested in London after a warrant was issued against him. Later that month, Indian tax authorities raised $8m by auctioning some of his art collection. Modi applied for bail in the UK High Court on May 31, a day after his remand was extended. All his requests for bail have been rejected as of October 2020.
On 8 June 2020, the Prevention of Money Laundering Act (PMLA) Court has ordered a confiscation of nearly Rs 1,400 crores worth of his property.
On 25 February 2021, a UK court allowed the Indian government’s request to have Modi extradited to India as a key accused in the PNB fraud case. The UK Home Secretary signed the extradition order on April 15, the next step in clearing the path for his deportation to India.
Modi then had 14 days to appeal the decision to the UK High Court, which he did on 1 May, claiming that he would not get a fair trial in India. The extradition appeal could take months; while Modi remains imprisoned at Wandsworth Prison in south-west London. On 23 June 2021, a UK high court rejected Modi’s application to appeal against his extradition to India.
The October 2021 Pandora Papers showed that his sister, Purvi Modi, set up an offshore firm just one month before he fled India.
During December 2022, the Royal Courts of Justice in London refused permission for Nirav Modi to appeal to the UK Supreme Court about the order from the UK Home Secretary in April 2021 ordering his extradition to India, and ordered him to pay legal fees of £150,247.