PMLA Appellate Tribunal prevents Nirav Modi & Ors. from disposing of attached properties
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PMLA Appellate Tribunal prevents Nirav Modi & Ors. from disposing of attached properties

Aditya AK

The Appellate Tribunal, Prevention of Money Laundering Act yesterday came down heavily on Nirav Modi, Mehul Choksi and others allegedly involved in the PNB Scam that cost the exchequer dearly.

In an order passed yesterday, Chairman of the Tribunal Justice Manmohan Singh has restrained Modi and his family members as well as Choksi from disposing of twenty-one properties that have been attached as a result of their failure to pay Punjab National Bank (PNB) and other banks.

Appealing against an order passed in August, PNB briefly went into the circumstances under which the scam was facilitated. It was stated that two bank officials of the Mid Corporate Branch, Brady House had fraudulently issued Letters of Undertaking (LoUs) to companies owned by Modi, his family members, and Choksi. This was done without following the prescribed procedure by obtaining required request applications, documents and approval of the authorities, and without making entries in the bank system.

Thereafter, an FIR was filed against Modi and others under Section 120-B r/w Section 420 of the Indian Penal Code and Sections 13(1) and 13(1)(d) of the Prevention of Corruption Act.

PNB had initiated proceedings under the SARFAESI Act, 2002 as well as the Recovery of Debts and Bankruptcy Act, 1976 to recover a total amount of Rs. 7,029 crore. However, the bank contended, the adjudicating authorities failed to consider Section 26E of the SARFAESI Act, which provides that the secured creditor (PNB and other banks in this case) has to be paid in priority over all other debts and all revenues, taxes, cesses and other rates payable to the Central government or state government or local authority.

Therefore, PNB sought a “status quo” order in relation to all the properties owned by Modi and the other accused.

After considering the arguments, the Appellate Tribunal held the view that Nirav Modi could not be trusted because of his conduct.

“From the entire gamut of the matter, this Tribunal is of the view that Nirav Modi is not trustworthy who ran away from this country after cheating the banks and citizens of this country. The Govt. through various agencies have taken many steps to bring him back to home country.”

Justice Singh then made a general observation on the state of Non-Performing Assets (NPAs) generated by public sector banks.

“It has been noticed from this case as well as many other similar cases that the borrowers/NPA/big corporate-houses are not paying the huge defaulted-loan amounts to the public sector banks which are owned by the Government. Most of them are not sitting on the roadside and are still operating business in different names and different managements in order to avoid returning the defaulted loan amount.

Even many of them (if they return the loan amount) to the banks/financial institutions, they will remain as rich businessmen, but they are intentionally and deliberately not clearing their debts. The question is why they should not pay the defaulted amount of loan. If they pay, rather they will not only help the Government but will also help the common citizens of this country.”

The Chairman of the Tribunal also expressed the view that if the companies are reluctant to pay the default loan amount, the same must be recovered from their personal assets.

Thus, the Tribunal declared that there was a strong prima facie case against Nirav Modi, Ami Modi and others with regard to the twenty-one properties.

“Shri Nirav Modi, Ms. Ami Nirav Modi and other respondents shall not dispose of or create third-party interest in respect of 21 immovable properties following 21 immovable properties of Defendants having purchase cost of Rs. 285,71,07,600/- and Fair Market Value of Rs. 523,72,37,000/ were personally attached of the said respondent here as the prima facie, I am of the view that the bank is entitled to receive the amount after sale proceeds.”

The Tribunal issued notice to the respondents returnable within six weeks, and posted the matter for December 10.

Senior Advocate Sudhir Nandrajog and Advocate Karishma Thakur, along with Advocates Nishant Joshi and Nikhil Varshney of Shardul Amarchand Mangaldas appeared for PNB. Advocate Mohd Faraz appeared for ED.

Nirav Modi has found himself in a world of legal trouble ever since news of the scam broke out. In March, a Mumbai Bench of the National Company Law Tribunal restrained him and Mehul Choksi from disposing of their assets. After the Enforcement Directorate attached the properties of his company Firestar Diamond, Modi approached the Delhi High Court.

Read the order:

Nirav-Modi-PMLA-Appellate-Tribunal-OCt-5.pdf
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