Pankaj Bajpai

Mumbai, August 23, 2021: A Special Court has directed for the release of properties of fugitive diamond trader Nirav Modi attached by the Enforcement Directorate under the Prevention of Money Laundering Act (PMLA) in favour of the Resolution Professional/Liquidator appointed by the NCLT. 

The Mumbai bench of the National Company Law Tribunal (NCLT) had on August 10, 2021, as per Section 12(7) of the Fugitive Economic Offenders (FEO) Act, given its final order in favour of the claimant-Resolution Professional/Liquidator appointed with respect to Modi’s firm Firestar International Ltd (FIL). 

Special Judge V.C Barde, by an order dated August 13 and made available on August 17, permitted the PNB and Consortium of Banks to confiscate the subject property of Nirav Modi & his affiliates attached by the ED, and declared the accused as fugitive economic offender under section 12(1) of F.E.O Act. 

The observation came in reference to the application filed by PNB claiming release of mortgaged/hypothecated/guarantor properties, which have been attached by the ED and exempted from confiscation. 

As per the background of the case, noticing the alarming acts of Nirav Modi’s firms and their partners and beneficiaries, PNB filed a complaint with the Central Bureau of Investigation (CBI) resulting into culmination of an FIR. Additionally, PNB also filed a complaint with ED for investigation of the offence of money laundering and pursuant thereto, the ED filed a prosecution complaint and attached several properties. 

The prosecution complaint filed by the ED described a series of incidents by way of which accused no.1-Nirav Modi and certain firms/companies/entities controlled by him including the Solar Exports, FIL, Diamond R US and Stellar Diamonds have defrauded PNB to the tune of Rs.7029,06,87,950.65 by obtaining numerous Letters of Undertaking (LoUs) from PNB in an unauthorized manner, even though no credit facilities were sanctioned by PNB to Nirav Modi’s Firms for issuance of any LOUs. 

It was alleged that the funds procured against the LOUs were not used for any genuine transactions and were instead siphoned away for the unjust enrichment of Nirav Modi and his affiliates, which came to light for the first time in January 2018, after the retirement of the delinquent PNB Officers.

The claimants’ quantifiable loss came to be recognized by the Debt Recovery Tribunal (DRT) that passed Judgments in their favour. Later, proceedings were commenced under the IBC against FIL, on account of its default to pay dues owed to its financial creditors. Pursuant to the same, the NCLT passed an order appointing a Resolution Professional qua FIL. 

Due to the subsisting moratorium, PNB, PNB Consortium and UBI Consortium filed appropriate applications in proceedings before the DRT seeking a stay of the proceedings against FIL, which came to be accepted. Later on, the subject properties were attached by ED, which stood confirmed by the Adjudicating Authority. 

In view of the observations in Criminal Miscellaneous Application No.998 of 2018, it is clear that the property which is excluded/ exempted from confiscation is left to be dealt with by the applicant/consortium of banks in the manner provided by law, found Judge Barde. 

The Special Judge noted that Section 8(8) of PMLA deals with direction to the Central Government to restore any confiscated property to the legitimate Claimant. 

The Special Court, therefore, in pursuance of provisions of Section 8(7) and 8(8) of PMLA, released the attachment made under PMLA, for dealing with the excluded property in the manner provided in the order dated June 08, 2020 in F.E.O. proceedings.

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