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Analysis: Nirav Modi firms may not have financials to match PNB fraud magnitude

An analysis of the nine firms where Nirav Modi is director shows that most of them don’t have financials that match the magnitude of the Punjab National Bank fraud

business Updated: Feb 26, 2018 18:08 IST
Nirav Modi,PNB fraud,Punjab National Bank
Apart from directors, more than 40 firms linked to Nirav Modi share other things in common—office addresses and even official emails, to name a few, according to data submitted by these companies to the ministry of corporate affairs (MCA). (Aniruddha Chowdhury/Mint)

A Mint analysis of the nine firms where Nirav Modi, the man at the centre of an alleged $1.8 billion fraud, is director, shows that most of them don’t have financials that match the magnitude of the fraud.

According to regulatory filings, Modi is on the board of five companies—Jewelry Solutions International Pvt. Ltd (which is now amalgamated), Radashir Jewelry Co. Pvt. Ltd, Firestar International Ltd, Firestar Diamond Pvt. Ltd and Firestar International Pvt. Ltd. He is also on the board of four limited liability partnership (LLP) firms including Neeshal Enterprises, Paragon Jewellery, Paragon Merchandising and Panchjanya Diamonds.

The four LLPs incorporated in 2014 are maintaining a bare minimum of Rs1 lakh of authorized capital and no paid-up capital. Neeshal Enterprises, which is now an LLP, has long-term borrowings of Rs1.93 crore as of 2013 and no revenue is reported out of sales or manufacturing or services.

Radashir Jewelry, which is in the business of cutting and polishing gems and jewellery, is making a modest profit of Rs34 lakh as of March 2017 and has revenues of Rs26 crore. It has trade payables at Rs137 crore but no debt on its books.

Firestar Diamond Pvt. Ltd has a positive networth at Rs1.73 crore as of March 2016. But the manufacturing company is making losses of Rs28,772 with trade payables of Rs17,502.

Nirav Modi's Firestar Diamond company office which was raided by the ED officials in connection with the Punjab National Bank (PNB) fraud case, in Surat. ( PTI )

Firestar International and Firestar Diamond International Pvt. Ltd are the companies which show a corporate structure and commercial activity. But even here the numbers suggest that a full recovery of the debt may not be easy.

Firestar International as of March 2016 has a net worth of Rs2,688 crore, making a profit of Rs185 crore, has trade payables of Rs4,104 crore and Rs3,509 crore of debt on its books.

Modi is a promoter director in these firms. In his letter to PNB, Modi sought to sell off Firestar group and its assets.

Firestar Diamond International, in the business of retail as of March 2016, has a net worth of Rs595 crore, a borrowing of Rs431 crore, profits of Rs97 crore and trade payables of Rs1,087 crore.

At least six of the firms are part of the 114 companies being probed by the Serious Fraud Investigation Office (SFIO) for possible fund diversion and fraud in connection with Modi and his uncle Mehul Choksi’s case. On Friday, the MCA approached the National Company Law Tribunal to attach the properties connected to these 114 firms to prevent them from disposing of assets.

He shares the directorship in six of these firms with Hemant D. Bhatt, the first Modi employee to be arrested by the Central Bureau of Investigation (CBI) after the fraud unravelled. Bhatt is a director on 19 companies and four LLPs in the network of Modi connected firms.

Bhatt was arrested by CBI on last Friday and is on the board of companies including Firestar Diamond, Moola Consultants, Neeshal Merchandising, NDM Enterprises, Camelot Trading Pvt. Ltd, Ghazalah Investments Pvt. Ltd and Neeshal Trading Pvt. Ltd, among others.

Apart from directors, more than 40 firms linked to Nirav Modi share other things in common—office addresses and even official emails, to name a few, according to data submitted by these companies to the ministry of corporate affairs (MCA).

About half of these companies controlled by jeweller Modi share a common email address,, for regulatory purposes. Mails to this email ID bounced.

A fourth of them operate out of a small office in south Mumbai; a third have common directors on their boards; at least six of them had high debt levels; a 10th of them shut shop in past three years and half a dozen others changed their status from being a company to an LLP.

“As such calling them shell structures at this stage may not be absolutely correct but these are red flags. Red flags which we typically look at to make a case against companies for suspected fund diversion,” said a senior official with the corporate affairs ministry, requesting anonymity.

| Read: PNB fraud: 200 shell firms, benami assets under ED, I-T dept scanner

There is no set definition for shell companies under the Companies Act 2013. A shell company is usually a legal entity without significant assets, independent business or operations, and is owned or controlled by another company and is often used for illicit purposes.

Experts and lawyers say that there is nothing illegal in creating several companies and being a director on multiple companies because such companies become important when the parent company expands. It is also not uncommon for subsidiary firms to share the same premises and email IDs with parent companies.

“In the present case, the investigating agencies will look at each and every company, its directors, their accounts as well as every transaction that companies have conducted. Currently, the case is at a very nascent stage and what details are in public domain is just a tip of an iceberg,” said Zulfiqar Memon, managing partner of law firm MZM Legal. “CBI is investigating the violations of the Prevention of Corruption act and ED (Enforcement Directorate) violations of money laundering activities and other agencies such as SFIO also closely observing the case.”

Neeshal Modi, a co-accused in the scam and a director in 11 companies in the network of firms, said all the companies stand to shut down due to “no commercial activity and not generating any revenue”.

When contacted, Modi’s lawyer Vijay Agarwal did not comment on the particulars of the firms named in our report. But on the allegation that the bank funds have been diverted or siphoned off, he said that the investigating “agencies are moving forward without any facts or figures”.

(Published in association with Livemint)

First Published: Feb 26, 2018 15:24 IST