Will Nirav Modi's lenders be able to get their money back?

On March 25, the first lot of movable assets belonging to Nirav Modi’s companies – Firestar Diamond International and Firestar International, are scheduled to be auctioned. This is part of the several rounds of auctioning lined up to raise the Rs 12,000-crore ($1.5 billion) the fugitive diamantaire owes his lenders, several public sector banks among them. But a moot question that remains unanswered is – “Will the lenders be able to recover all their money from this exercise?”

The cryptic response from a source, familiar with the goings on, was, “It was a scam. You can’t expect to get back all your money. Still, efforts are being made to get most out of the auctions of the seized assets of the diamantaire, such as jewellery, property, luxury cars, priced paintings etc. The proceeds of these auctions will go to the lenders.” Among the state-owned banks, that extended credit to Nirav Modi, are Punjab National Bank, Canara Bank, IDBI Bank and Union Bank of India.

Presently, the upcoming auction is at the stage of vetting expressions of interest, that were allowed to come in until March 9. About 25 entities, both domestic and global, have evinced interest in participating in the auction. Interestingly, these include several jewellers from the southern parts of the country.

Talking to Deccan Herald, the court-appointed liquidator to handle the bankruptcy proceedings, Santanu T Ray from AAA Insolvency, said, “There are a good number of prospective bidders, both from India and abroad, who have shown interest. And it is expected that the auction will finally see a number of bidders, bidding for whole or individual blocks of the precious inventory.”

The 25 prospective bidders have been given data room access. Not allowed to physically examine the assets up for auction, the bidders will be able to virtually see the items on offer and their certification done by the Gemological Institute of India (GII), which is promoted by Gem and Jewellery Export Promotion Council – the apex body supported by the Union Ministry of Commerce and Industry. The GII certification is based on test results of the ornaments, built on parameters such as authenticity, carat and quality. The liquidator, in consultation with the different stakeholders, roped in GII, to ensure transparency in the process and assure participants on the authenticity of the products. The jewellery in the line-up include neck pieces, rings and bangles made of diamonds, platinum, gold and silver.

Based on the readings from the data room access, the bidders are required to submit the Earnest Money Deposit (EMD) for the items they wish to bid for, on or before March 23. This will open the doors to their actual participation in the auction. The reserve price for the items on sale will be declared only on the auction date.

The liquidator also informed that that this is first of several rounds of auctions coming up. Other lots of auctioning will happen as an when the GII certification and valuation for the inventory are completed.

To date, the liquidator has completed the e-auctioning of the immovable properties of Firestar International and Firestar Diamond, raising Rs 15 crore from the sale of small office spaces at Prasad Chambers in Mumbai’s Charni Road and the Bharat Diamond Bourse in the Bandra-Kurla Complex, office equipment and some machinery. The value realised was higher than the reserve price.

Next up, the liquidator is looking to auction the large furnished offices of Firestar Diamond International at Mumbai’s Kohinoor City, Kurla. Despite its prime location, four attempts at auctioning the property have been unsuccessful in the past and a 5th auction date has been fixed for April 4.

These, incidentally, are just the properties released by the Enforcement Directorate (ED) to the liquidator so far. Many others await that clearance. “All assets of the Nirav Modi group has been attached by ED, under PMLA (Prevention of Money Laundering Act, 2002). We are getting possession of them from ED, lot by lot, after which we are getting them valued before selling them. The process is time consuming,” Ray pointed out.

Insolvency and Bankruptcy Board of India (IBBI)-approved valuers are conducting the certification and valuation process to ensure accuracy in their estimations, so as to propel buyers to offer better value for the products.

The Debt Recovery Tribunal will also be conducting auction of seized personal assets and proprietary concerns of Nirav Modi – the date for which is yet to be announced.