Lenders ask for government takeover of Nirav Modi, Gitanjali companies
Some lenders are suggesting a government takeover of the Nirav Modi and Gitanjali group of companies as part of the Punjab National Bank (PNB) fraud investigation as an alternative to having banks initiate bankruptcy proceedings.
There is currently an ongoing fraud investigation as the PNB have reported that fraud of over 11,300 crore rupees (approximately 1.7 billion US dollars) took place at their bank and the diamond tycoon Nirav Modi and members of his family, including uncle Mehul Choksi, are believed to be responsible. Many who lent to Modi and Choksi's companies on false information are wondering what will happen to the accused’s companies. One option is for the companies implicated in the case to have bankruptcy proceedings against them initiated. If this happens, then a resolution must be reached within 270 days after admission. If no resolution can be found, the companies would then be liquidated.
However, some banks that lent to Nirav Modi or Mehul Choksi owned companies are asking for a government takeover of the jewellery brands in question, including Modi’s eponymous brand. This strategy was adopted in the Satyam Computers case when the government created a board of directors that were appointed to run the company and protect its assets. The Economic Times has reported that the Ministry of Corporate Affairs has stated that it is not happy to take over the companies as suggested as that would make them responsible for all future liabilities.
If insolvency proceedings are commenced, around 1,000 employees could be affected. The 100 percent subsidiary of Gitanjali, Hyderabad Gems Sez, has already reported loosing 700 employees, including 250 with disabilities, as a result of the fraud investigations and so it is feared that many more job losses could be on the horizon for Nirav Modi and Gitanjali companies.
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