PNB objects to sale of assets by Nirav Modi firms in US

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Mumbai/Bengaluru: In a new turn of events, Punjab National Bank (PNB) has objected to the expedited sale of assets in US by firms linked to Nirav Modi, who is at the centre of a $2-billion fraud at the bank.

According to a US court filing on Wednesday, the state-owned bank has argued that the “truncated” sale of assets proposed by the debtors—Firestar Diamond and other companies—will limit the recovery of creditors and the lack of clarity on the connection between the debtors and the Modi fraud could affect the bidding process.

On 26 February, Firestar Diamond and two affiliates (Fantasy Inc. and A. Jaffe Inc.) filed for bankruptcy protection in the US under Chapter 11 voluntary petition, stating supply chain disruption. Incidentally, the companies have not mentioned PNB as one of its creditors in the bankruptcy petitions.

These firms have asked the court to approve an aggressive sales process that, if approved, will require sealed bids by 19 April and lead to the sale of all assets by 3 May. Firestar had sought to complete closure of the sale before an important jewellery industry trade show, JCK. The show is being held during 1-4 June 2018 in Las Vegas.

PNB argued in its filing that the expedited process, in consultation with existing and perhaps conflicted management, without the benefit of the participation of an official committee of unsecured creditors or even the full involvement of any other interested party, such as PNB, may lead to the exact opposite result—a rushed sale of the debtors’ businesses at a deeply discounted price.

The bank has also argued that the debtors have refused to provide critical information that would to allow it to determine whether any of the assets to be sold were obtained with funds fraudulently obtained from PNB or whether the debtors were otherwise used to launder funds.

“To ensure that bidding procedures are both fair and efficient while maximizing the value of the debtor’s estate, courts may refuse to expedite the bidding and sales process where doing so would limit the ability of interested parties to obtain the information needed to fully participate,” said PNB in the filling.livemint