Bombay High Court in PNB Nirav Modi Scam: No steps Taken by Bank in Case Involving Public Money

Bombay High Court in PNB Nirav Modi Scam: No steps Taken by Bank in Case Involving Public Money

The Bombay High Court reprimanded the Punjab National Bank (PNB) for its inaction in the loan fraud case in which fugitive diamond merchant Nirav Modi is an accused.

The division judges bench comprising of Justices Revati Mohite Dere and Gauri Godse raised concerns about the issue, given the large amount of public money was involved in the case.

The bench noting the alarming situation urged that, “Huge amount of money involved, and no steps taken by the bank. After all, this is public money. When a common man has to take loan then....”

The counsel appearing for PNB replied by submitting that the bank was not aware of the transactions in question or that the loans were unauthorized.

Following which, the Court has granted both PNB and the ED 2 weeks’ time to file their replies and kept the matter for hearing after 3 weeks.

The Court was adjudicating pleas filed by the Enforcement Directorate (ED) and the PNB raising cross-claims over attached properties worth over Rs. 500 crores belonging to Nirav Modi.

The appeals were filed against an order dated October 2022 of the special Prevention of Money Laundering Act (PMLA) Court, which had allowed the ED to confiscate 12 properties worth over Rs. 500 crores, out of 21 properties.

In the appeal against the order, PNB argued that as a creditor, it has a right to possession of the 12 properties.

Per contra, the ED appealed against the PMLA Court order on the ground that it has a right over the remaining 9 properties as well since it was the investigating agency.

Out of 48 properties, the ED was allowed to attach 12 properties, while the PNB was permitted to seize the remaining assets in order to dispose of the same for the recovery of dues.

The ED claimed that the bank, as a creditor, was not entitled to unsecured assets as the agency had the first right over freehold assets.

However, the PNB retaliated that it has the first right over the properties as it had granted the loan. Due to the non-repayment of this loan, the bank had been adversely affected, PNB added.

The bank also relied on an order of the Debt Recovery Tribunal (DRT), to claim that the tribunal had awarded certain assets of Nirav Modi’s firm to the bank.