New York, March 2: The Punjab National Bank (PNB) is not shown as a creditor in the bankruptcy documents filed in a court here by three companies affiliated with Nirav Modi, who has been accused in a $2 billion-scam involving the nationalised financial institution.
But the document acknowledges that the filing of criminal complaints by PNB regarding allegations of "unauthorised loans" to Nirav Modi and affiliated foreign companies were the "events leading" to the filing of the bankruptcy petition.
The only banks mentioned as creditors are HSBC and Israel Discount Bank (IDB), which have outstanding loans totaling $20 million to two of the companies. The IDB's revolving credit facility is guaranteed by Modi personally, as well as by two other companies, the document said.
However, tying up the three companies in bankruptcy proceedings would place hurdles for PNB to go after the Nirav Modi's assets in these companies.
"In most instances, the filing of the bankruptcy case automatically stays certain collection and other actions against the debtor and the debtor's property," warns a note from the authorities that is attached to the bankruptcy documents. "If you attempt to collect a debt or take other action in violation of the Bankruptcy Code, you may be penalised."
The three companies, -- Firestar Diamond, Inc. (FDI); Fantasy, Inc. (FI), and A Jaffe Inc. (AJI) -- filed for bankruptcy protection in the United States Bankruptcy Court for Southern New York on Monday.
The bankruptcy petition documents, obtained by IANS from the court system, show a maze of inter-connected ownerships that finally lead the three companies through several subsidiaries to Nirav Modi via Hong Kong.
Mihir Bansali, who is shown as the president and sole director of the three companies seeking voluntary bankruptcy, signed the main document for the bankruptcy petition.
On Thursday, the Nirav Modi jewelry showroom on New York's Madison Avenue in the middle of high fashion outlets was closed, with the main entrance locked and shades pulled over the windows.
It was not possible to ascertain which company owned the showroom or why it was shut.
The three companies have petitioned under the Chapter 11 of the United States Bankruptcy Code, which permits them to operate while they reorganise their operations.
Their filing claimed that the reason for seeking bankruptcy protection was to "preserve the going concern value of their businesses and effectuate a sale or other transaction" for their brands to continue. This implies that they were not under direct financial distress.
They admitted that vendors were reluctant to continue doing business with them and some customers have begun to exploring other suppliers following the "negative publicity" that has impaired their operations and "created a great deal of uncertainty and confusion in the market."
The government actions in India disrupted their supply chain, the filing added, was a reason for the bankruptcy filing.
They said they are trying to "reassure their customers and vendors that they were committed to carrying on their business and that swift action was being taken to mitigate the damage caused by the actions in India".
According to Bansali's document, FDI is owned by another US company, Firestar Group, Inc. (FGI), which is a wholly owned subsidiary of a US company, Synergies Corporation, which is a subsidiary of Honk Kong-based Firestar Holdings Limited (FHL) that is ultimately owned by Firestar International Limited (FIL), an Indian corporation whose majority shareholder is Nirav Modi.
FI is a subsidiary of FDI and 95 per cent of AJI is owned by Synergies.
Bansali is also the president and sole director of FGI and Synergies. Ajay Gandhi is shown as the secretary and chief financial officer for the three debtors, as well as FGI and Synergies.
As of Wednesday, an IANS search of court databases did not find any filings for FGI or Synergies.
The balance sheet as of last week filed in the court showed that Nirav Modi Inc owed $11.016 million to AJI and $1.767 million to FDI.
Synergies is owed $10.812 million by AJI and $7.941 million by FDI, while FHL is owed $4 million by AJI and $4.05 million by FDI, according to the balance sheet.
The filings said that FDI and FI have about $90 million of annual sales and their clients include Zales, Kay's, Jared's, COSTCO, Sam's Club, Macy's, JC Penney and US military bases.
AJI, it said, specialises in bridal jewelry and it had double digit sales growth for the last three years and were projected to reach $23 million in fiscal 2018, the document said.
Bansali asserted that they have seen "strong" early interest in purchasing some or all of their business operations.