PNB eyes role in Firestar bankruptcy proceedings

The bank is exploring all options for the recovery, including participating in the bankruptcy proceeding of Firestar Diamond Inc, sources said. According to sources, the bank is in the process of hiring legal experts to take the matter forward. The legal firm would be hired soon. 

Various pros and cons are being examined to make watertight case for the recovery, sources said, adding the bank is part of unsecured creditor category. When contacted, PNB declined to comment on the matter.

Last month, Firestar Diamond, a company owned by Nirav Modi filed for bankruptcy in a New York court. The US Trustee Program oversees administration and litigation for enforcement of the bankruptcy law. Modi and his uncle Mehul Choksi in connivance with certain bank officials allegedly cheated the PNB of Rs 129.68 billion through fraudulent Letters of Undertaking (LoUs). 

A Mumbai branch of PNB had fraudulently issued LoUs for the group of companies belonging to Nirav Modi since March 2011. Different investigating agencies, including CBI and Enforcement Directorate, are probing the fraud, dubbed as the biggest banking scam in the country. 

Scam-hit PNB had issued as many as 1,590 LoUs to Nirav Modi, Mehul Choksi and their associates. The total LoUs issued to the firms of Nirav Modi, his relatives and his Group are 1,213, and to Choksi, his relatives and the Gitanjali Group are 377.