NiMo's gambit for US armour

Feb 28, 2018 

Firestar Diamond Inc, the flagship company of Nirav Modi, has filed for bankruptcy in the US.

The move would suggest that the diamantaire is now trying to ring-fence his US assets from any criminal suit that Indian authorities may be contemplating against Nirav and his entities.

Firestar Diamond Inc is registered in the state of Delaware. The case has been filed under chapter 11 of the US bankruptcy code in a court filing in the Southern District of New York on Monday.

The company claimed it had listed assets and liabilities in the range of $50 million and $100 million.

The case will come up before Judge Sean H. Lane. The filing was made by Ian R. Winters of the New York-based attorney firm Klestadt Winters Jureller Southard & Stevens LLP, which describes itself as a boutique commercial law firm. The firm specialises in bankruptcy cases and its website shows a long list of jewellery entities as its clients.

Nirav and his uncle Mehul Choksi have been accused of defrauding Punjab National Bank of over Rs 12,600 crore. Both have left the country.

A Chapter 11 filing allows a debtor - in this case Firestar Diamond Inc - to remain in control of its business operations as a debtor in possession but will be subject to the oversight and jurisdiction of the court.

Under the bankruptcy code, a debtor in possession can take on new loans on favourable terms from new lenders who can be given first charge on assets, while freezing payout on the existing debt.

But the biggest advantage is that it protects the debtor from all other litigation.

Firestar Diamond will immediately be eligible for an automatic stay on all existing litigation against the debtor and all efforts to collect on pre-petition debts. The firm is not required to notify its creditors. The stay will continue through the entire length of the case.

Debtors could emerge from a chapter 11 bankruptcy within a few months or the process could drag on for years. The debtor must come up with a reorganisation plan within 120 days of filing for bankruptcy protection. There is also a 180-day exclusivity period from the date of filing for chapter 11 to allow the debtor to get approvals from creditors for the proposed plan.

Reference

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