New Delhi: India’s biggest bank fraud accused Nirav Modi’s flagship company Firestar Diamond Inc has filed for bankruptcy in the United States. This even as finance ministry on Tuesday directed state-owned banks to probe all loan defaults over Rs 50 crore for possible fraud and accordingly report the cases to CBI. State-owned banks have been asked to come up with “pre-emptive” action plan within a fortnight to combat rising operational and technical risks, and assign clear accountability to senior functionaries.
Finance ministry’s direction came after PNB said that the fraud perpetuated by Mr Modi and his uncle Mehul Choksi, owner of Gitanjali Gems could rise to Rs 12,700 crore against its earlier estimate of Rs 11,400 crore. Firestar Diamond Inc filed the Chapter 11 petition and the case has been assigned to Judge Sean H. Lane and an “order for relief entered”. Firestar Diamond, which has its operations span the US, Europe, the Middle East, the Far East and India, blamed liquidity and supply chain challenges.
Sources said that the move could be to blunt recovery of funds which went from India to foreign entities of Mr Modi. This is especially true, they said, if other Modi companies through out the Europe also file for bankruptcy proceedings. “Mr Modi has been trying to say from last many days that Firestar Diamond is separate from his other companies involved in fraud in India. In future Indian agencies will try to recover money from Mr Modi’s companies in the foreign companies whether the money went. But if all the companies went for bankruptcy in foreign shores it will become more difficult,” said a senior advocate.
Indian agencies will need to prove in these courts that the money was taken fraudulently to recover it and it is likely to become complex after filing of the bankruptcy proceedings, he said.
Meanwhile, financial services secretary Rajiv Kumar said state-owned banks have also been asked to involve Enforcement Directorate (ED)/ Directorate of Revenue Intelligence (DRI) for violations of PMLA, FEMA or export/import norms. He said that chief vigilance officer of the bank concerned will have to vet complaints and co-ordinate with CBI for frauds exceeding Rs 50 crore. Executive directors and CTOs of PSBs have been asked to prepare a blueprint to enhance preparedness for combating increasing risks. Meanwhile, PNB said that it has appointed general manager A.K.Pradhan as "Group Chief Risk Officer".