Punjab National Bank plans to take part in the bankruptcy proceeding of Firestar Diamond Inc., a group company of jewellery designer Nirav Modi, who has been accused of defrauding the public sector lender of nearly Rs 13,000 crore.
The bank is exploring all options for the recovery, including participating in the bankruptcy proceeding of Firestar Diamond, according to sources. The bank is in the process of hiring legal experts to take the matter forward, they added. The legal firm would be hired soon.
Various pros and cons are being examined in order 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.
A Mumbai branch of the PNB had fraudulently issued LoUs for the group of companies belonging to Mr. Nirav Modi since March 2011.
Different investigating agencies, including the CBI and Enforcement Directorate (ED), 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 Mr. Nirav Modi, Mr. Mehul Choksi and their associates.The total number of LoUs issued to the companies of Mr. Nirav Modi, his relatives and the Nirav Modi Group are 1,213, and to Mr. Mehul Choksi, his relatives and the Gitanjali Group are 377.
Seeing the scam, the Reserve Bank has decided to strictly stop banks from issuing LoUs and Letters of Comfort for trade finance.