AI Drafter 
TaxTMI 
TaxTMI 
2019 (7) TMI 1942
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....ng unlawful advantage of the other. It is an act of inflicting willful, conscious and deliberate injury. iii. The present law suit narrates the modus operandi of Nirav Modi a luxury diamond jewellery designer and others (the Economic Offenders/the fraudsters') made fraudulent and unauthorized transactions with the applicant which is one of the largest Public Sector Banks in India in collusion and connivance with the applicant's employees viz. Gokul Nath Shetty (Deputy Manager) and Manoj Hanumant Kharat (Single Window Operator) (for short the delinquent employees). Nirav Modi enjoyed the credit facilities by unlawful means, conspiracy and deceit. iv. The recent press release on G20 summit at Osaka, Japan held on 28th/29th June, 2019 where the Heads of various G20 countries met reveals that on behalf of the Indian Government one of the issues addressed was to deal with economic offenders fleeing from one Country to another. The Indian Government strongly urged the global community to fight the menace of fugitive economic offenders running away. It was further urged that all G20 countries should combat and ensure that each country has the law to enforce preve....
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....ous (Fraud Investigation Office into the affairs of Nirav Modi Group. xiv. A Jaggle Inc., Fantasy Inc. and Firestar Diamond Inc. initiated voluntary bankruptcy proceedings before the United States Bankruptcy Court for the Southern District of New York. xv. Despite admission of the liability, Nirav Modi has no intention to repay the debt obtained by fraudulent means. Therefore, the applicant issued demand notice calling upon Nirav Modi Firms, its partners, trustees, beneficiaries and Nirav Modi Companies to liquidate the entire outstanding with interest @ 14.3 % per annum on account of the LOUs. xvi. The present law suit is filed for recovery of debt obtained by fraudulent means. The fraudulent debt is legally recoverable debt from defendant nos. 1 to 16 who have received direct and/or indirect benefit either in India or in any other countries. xvii. I have heard Mr. Jain, defendants set ex-parte. I have scrutinized and examined the voluminous material placed before me. I am convinced that the applicant has made out the case of fraud perpetrated by Nirav Modi and others to obtain LOUs. The allegations of fraud are satisfactorily explained as requi....
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....trustee in Nirav Modi Trust and partner of defendant nos. 1 and 2. Nirav Deepak Modi is also the promoter of defendant nos. 4, 5, 8 and 9. Nirav Deepak Modi is the controlling authority of Nirav Modi Firms and Nirav Modi Companies and Nirav Modi Family Trust. Nirav Modi owns and hold 99.9% shareholding of defendant no. 8 i.e. ANM Enterprises Private Ltd. Nirav Modi also owns 99.9% shares of defendant no. 9 i.e. NDM Enterprises Private Ltd. Nirav Modi is the mastermind behind the perpetration of fraud upon the applicant by obtaining the LOUs in complete defiance of the Banking norms and practices. Nirav Modi managed to obtain the LOUs from Brady House Branch in collusion and connivance with the delinquent employees of the applicant. Nirav Modi obtained the LOUs for raising buyer's credit to import diamonds, fresh water pearls, semiprecious stones, jewellery and precious stones. 9. Defendant no. 7 i.e. Ami Nirav Modi is the wife of defendant no. 6 i.e. Nirav Deepak Modi and daughter of Dinesh Saralal Jhaveri. Ami Nirav Modi is the trustee and beneficiary in the Nirav Modi Family Trust. 10. Defendant no. 8 i.e. ANM Enterprises Private Ltd. is registered under the Old Compani....
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.... assistance of the group companies i.e. Firestar International Limited and Firestar Diamond International Pvt. Ltd. alongwith their affiliates, subsidiaries, Nirav Family Trust, Nirav Modi Family Trust, directors and key managerial personnel. The Nirav Modi Firms, the Nirav Modi Companies and defendant nos. 6 to 16 is the Nirav Modi Group. 23. The partnership Firms and the Nirav Modi Companies forms part of the Nirav Modi Group controlled by Nirav Modi and his family members. They are the mastermind behind the perpetration of the fraud. Defendants have laid a complex structure or facade involving several layers of partnership Firms, companies and trusts for the purpose of perpetrating fraud and to isolate themselves from the liability that has arisen from unauthorized LOUs. No Sanction for LOUs: 24. The applicant never sanctioned any credit facility to Nirav Modi Group for issuance of the LOUs. However, Nirav Modi and others in collusion and connivance with the delinquent employees managed to obtain the LOUs illegally and unauthorisedly. 25. Nirav Modi Group and others in collusion and connivance with the delinquent employees openly flouted the guidelines/regulations fo....
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....Modi Group through its representatives had approached the applicant after the retirement of the delinquent employees. The Nirav Modi Group approached the applicant with the ulterior motive and malafide intention to continue using the unauthorized LOUs. However, the new officers who took charge after the retirement of the delinquent employees at Brady House Branch called upon the representatives of Nirav Modi Group to furnish 100% cash margin for issuance of LOUs by raising buyers' credit. The representatives of Nirav Modi Group refused to furnish any cash margin by justifying that they were doing so in the past without any such requirements. 31. This was the trigger point which alarmed the applicant and raised suspicion to the modus operandi of the Nirav Modi Firms, their partners and beneficiaries to investigate and examine the case thoroughly. 32. Upon scrutinizing and investigating the matter of the Nirav Modi Group, it came to the notice of the applicant that the delinquent employees had colluded with defendant nos. 1 to 16 and had issued the LOUs fraudulently through its SWIFT messaging system. The funds availed by the Nirav Modi Group were not entered into the trade....
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.... settle the buyers' credit with regard to the previously obtained unauthorized LOUs obtained by defendant no. 3. Thereafter, the NOSTRO Account of the applicant was misused to make the payment with regard to the unauthorized LOU no. 3731/SOLAR/17 dated 27th April, 2017 issued on behalf of defendant no. 2. In the above mentioned LOU the amount was transferred from the NOSTRO Account to the entities not mentioned in the LOU. The NOSTRO Account was also misused and misutilised for unauthorized transfer of amount to the account with regard to the unauthorized LOU no. 3731/STELLAR/17 dated 27th April, 2017 issued on behalf of defendant no. 1. 38. Upon coming to know the fraud perpetrated by Nirav Modi the applicant conducted internal enquiry, investigation to scrutinize the fraud which involved the issuance of the unauthorized LOUs to the Nirav Modi Group. Accordingly, on 27th March, 2018 the Final Investigation Report ('Investigation Report") was made. The investigation report reveals that the Nirav Modi Group commenced the obtaining of the fraudulent LOUs from 10th March, 2011 till 31st May, 2017 the fraud amount was crystallized at INR 6498.18 Crore (excluding interest and....
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....di Firms and defendant no. 6: 41. On 20th January, 2018 the Nirav Modi Firm addressed letter to the applicant requesting it to issue the LOUs to the Nirav Modi Firms which were enjoying the LOUs relating facilities since last several years. On 22nd January, 2018 the applicant replied to the letter of the Nirav Modi Firms stating that the Nirav Modi Firms were never sanctioned any facilities in this regard. The applicant further informed that 100% cash margin was required for issuance of the LOUs. 42. Thereafter, the applicant made correspondence with Nirav Modi by drawing his attention to the outstanding liabilities of the Nirav Modi Group. The applicant informed Nirav Modi of severe consequences of his illegal act and actions as well as of the Nirav Modi Group. 43. On 23rd January, 2018 and 30th January, 2018 Nehal Deepak Modi sent an E-mail to the applicant requesting a meeting to discuss how to resolve the matter pertaining to the Nirav Modi Group. E-mails were exchanged between the applicant and Nehal Deepak Modi between 30th January, 2018 and 2nd February, 2018. Thereafter, various meetings were held with the representatives of the Nirav Modi Group including Nehal Mod....
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....licant by the three Firms are receivable from the buyers of the product of these Firms. On the same day i.e. 15th February, 2018 the applicant bank responded to Nirav Modi stating that the applicant never sanctioned any credit facilities to the Nirav Modi Firms. The applicant reiterated that the LOUs issued were unauthorized and obtained fraudulently by the Nirav Modi Group. It further recorded that the ultimate benefit has gone to the Group. The applicant also advised Nirav Modi to disclose the approximate value of the inventory lying at the various geographical locations belonging to the Nirav Modi Group. 45. On 17th February, 2018 Nirav Modi sent an e-mail to the applicant. By this e-mail, for the first time, Nirav Modi sought to escape the liability of the applicant. Nirav Modi made frivolous allegations and assertions in an entirely volte-face manner. Nirav Modi stated that the LOUs were authorisedly issued in a genuine manner. The action of the applicant has affected the Nirav Modi Group adversely. Nirav Modi continued to acknowledge the liability owed to the applicant. Nirav Modi suggested that the sale of the assets of Nirav Modi Firms, Firestar International Ltd. and Fi....
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....hemes proposed by Nirav Modi on behalf of Nirav Modi Group to repay the fraudulent debt under the illegal/unauthorized LOUs were neither sincere nor workable. The applicant therefore, rejected the schemes proposed by Nirav Modi as it lacked credibility and was very vague. Nirav Modi adopted the dilatory tactics using the proposal for settlement as a tool. It is evident from the communications made between the applicant and Nirav Modi that he has failed to give the details and description of the immovable properties, fixed deposits, current Accounts etc. The inconsistency and contradictions made by Nirav Modi in his communication clearly reveal that he had no intention to repay the debt obtained by fraudulent means. 47. Since there was no fruitful deliberations on behalf of Nirav Modi, the applicant was left with no other alternate but to issue the demand notice on 14th May, 2018 calling upon Nirav Modi Firms, its partners, trustees, beneficiaries and Nirav Modi Companies to liquidate the entire outstanding on account of LOUs. The applicant called upon defendant nos. 1 to 16 to make the payment of the entire outstanding with interest @14.30% per annum until payment/realization. T....
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....ent Directorate provisionally attached various movable and immovable properties belonging to the Nirav Modi Group. 52. The applicant apprehends that the Nirav Modi Group has purchased and acquired the assets both movable and immovable Worldwide from the proceeds of the fraudulent debt. 53. On 4th March, 2018 the applicant had also filed Complaint with Central Bureau of Investigation against Nirav Modi, Firestar International Limited and Firestar Diamond International Private Limited, their Directors, officials and others for cheating the applicant for INR 321.88 crores. 54. On 9th March, 2018 the applicant addressed letter to the Joint Secretary, Department of Financial Services, Government of India and appraised the complete case of fraud. 55. On 11th April, 2018 Non-bailable Warrants were issued against Nirav Modi and Neeshal Deepak Modi. The investigation by various regulatory authorities and investigative agencies is going on. The Enforcement Directorate and Central Bureau of Investigation respectively have filed their charge-sheet. 56. On 14th May, 2018 the applicant obtained the charge-sheet from Central Bureau of Investigation which reveals that the Nirav Modi....
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....igation by serious fraud in investigation office is going on. 61. On 21st February, 2018 the applicant informed the Ministry of Corporate Affairs giving the details of the outstanding fraudulent LOUs. 62. National Company Law Tribunal proceedings: The Union of India, Ministry of Corporate Affairs has filed Company Petition No. 277 of 2018 against Geetanjali Gems Ltd. It is a company promoted by Mehul Choksi, Uncle of Nirav Modi and 67 others. The Company Petition is filed before the National Company Law Tribunal, Mumbai Bench. The principal prayer in the petition is to compensate the applicant for the loss suffered due to the fraudulent LOUs. 63. On 23rd February, 2018 an ex-parte injunction order was passed by the National Company Law Tribunal by invoking Section 221 of the Companies Act, 2013 and Section 43 of the LLP Act, 2008. By the aforesaid order, all the respondents therein who are defendants in the present law suit are injuncted from removal, transfer or disposal of funds, assets and properties. The independent Directors of Geetanjali Gems Ltd. filed Miscellaneous Application Nos. 180, 182, 183, 184, 217, 218 and 219 of 2018 to vacate the order dated 23rd....
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....om the (circumstances surrounding the Modi fraud). 69. On 20th April, 2018 the U.S. Court approved the appointment of John J. Carney as the examiner in the U.S. Proceedings. 70. In the interregnum period i.e. on 23rd March, 2018 U.S. Debtors' filed a sale motion requesting the U.S. Court to approve bidding and sale procedures for the sale of U.S. debtors' assets free and clear of liens, claims, interests and encumbrances. The U.S. Debtors' requested the U.S. Court to expedite the sale process as it was necessary to realize maximum sale proceeds of the assets, to give successful bidders sufficient time for preparation of industry trade show which was set to be held in early 2018. The sale process was expedited with the bidders' deadline given on 27th April, 2018 and the auction was proposed to be held on 2nd May, 2018. 71. On 1st May, 2018 the U.S. Debtors' adjourned the auction to be held on 3rd May, 2018. Parag Diamonds Inc. made the winning bid for the purchase price of USD 6.95 Million in cash plus USD 1.05 Million secured note payable in 12 months. 72. The applicant raised objection to the sale which was proclaimed of A. Jaffe's to Parag Diam....
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....9; credit. Thus, Nirav Modi Group have misutilised the funds and have unjustly enriched them. Defendant nos. 1 to 16 have directly and/or indirectly benefitted from the fraud perpetrated by them through the unauthorized issuance of the LOUs. Defendant nos. 1 to 16 have financially and monetarily benefitted from the proceeds obtained from the fraudulent transactions. These fraudulent LOUs were issued by the applicant during the regular banking business activities. The financial assistance was unauthorisedly and illegally availed by defendant nos. 1 to 16 which is wrongfully used by the entities belonging to the Nirav Modi Group including their subsidiaries, affiliates, group companies all over the world purportedly towards their business activities. Thus, the LOU debt is legally recoverable debt by the applicant from defendant nos. 1 to 16. The LOU debt is also legally recoverable debt by the applicant from defendant nos. 1 to 16, their group companies, affiliates, subsidiaries, officials and all such entities and other persons who have received direct and/or indirect benefits either in India or outside India. 76. The applicant is claiming the repayment of the fraudulent debt on ....
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....incipal amount of INR 6798,14,09,282.10 and interest component amounting to INR 230,92,78,668.54. 83. Based on the aforesaid facts, the applicant seeks issuance of the Recovery Certificate, publication of the notice under Rule 15(A) and prohibition against the assets belonging to the Nirav Modi Firms. 84. The summons is served upon defendant nos. 1 to 16. I have perused the order sheet dated 12th October, 2018 which reveals the issuance of summons. The order sheet dated 20th November, 2018 reveals that the packet containing summons was returned unserved with the remarks "Left, not known & closed". The applicant therefore, made application for substituted service by paper publication. The applicant was also directed to serve the summons through e-mail also. The order sheet dated 27th November, 2018 reveals that the summons was duly served upon defendant nos. 1 to 16 by e-mail. The order sheet dated 08th February, 2019 reveals that defendants were also served by way of paper publication in Times of India (English) and Maharashtra Times (Marathi). Absconder: 85. I have gone through the affidavit of service alongwith the material placed on record. I have examined and scruti....
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....he other comes to know of the issue of such a process or anticipates the issue of the process and quits the country he can be said to have absconded. 86. In the present case, defendant nos. 1 to 16 smelt action coming their way. There is no ordinary place of residence or business where the service of summons could have been affected upon defendant nos. 1 to 16. 87. The proof of service of summons (including e-mail) demonstrates that defendant nos. 1 to 16 had the notice of hearing of the original application. Defendant nos. 1 to 16 had sufficient time to appear and answer the claim made by the applicant. I am convinced that defendant nos. 1 to 16 had the knowledge of the proceedings and had the sufficient time to answer the claim made by the applicant. However, defendant nos. 1 to 16 did not choose to answer the claim. Nirav Modi and others are absconding debtors having avoided or evaded the service of legal process. The reason for Nirav Modi and others to abscond is very clear to delay or protract the legal proceedings. The ratio of "abscond" and "absconders" squarely applies to the fact and circumstances of the present case. Defendant nos. 1 to 16 is rightly proceeded ex-pa....
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....yees who had taken the charge after retirement of the delinquent employees point blank refused to entertain the request made the representative of Nirav Modi and Nirav Modi Firms. The applicant rightly asked for 100% cash margin for issuance of the LOUs. The applicant rightly pointed out the guidelines and regulations for issuance of the LOUs including Loans and Advance Circular No. 131 dated 19th October, 2009 and the Loans and Advance Circular No. 35 dated 26th March, 2014. The applicant was also right in calling upon Nirav Modi and others to make proper application for issuance of LOUs in prescribed format. The applicant also asked for counter guarantee/indemnity in the prescribed format. The applicant also informed that the guideline requires the importer to sign and execute the agreement of hypothecation of goods in the prescribed format. Since Nirav Modi and others were avoiding the adherence of the guidelines and regulations which gave rise to suspicion of the issuance of the earlier LOUs. The applicant therefore, ordered to conduct scrutiny and internal investigation of the issuance of LOUs to Nirav Modi and others. 93. On 27th March, 2018 the internal investigation repo....
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....rough Firestar International Limited made request for video conference. The video conference was held on the same day between Nirav Modi and the applicant. In the video conference meeting Nirav Modi once again admitted the issuance of LOUs. The minutes of the meeting was recorded and circulated by the applicant by email dated 12th February, 2018. The minutes of the meeting was sent to Firestar International Limited and other concerned Banks. Then there is email dated 15th February, 2018 by which Nirav Modi admitted to co-operate with the applicant with regards the LOU debt. The applicant took consistent stand that there was no approval or sanction to the LOUs issued to Nirav Modi, Nirav Modi Firms, etc. All these communication shows that Nirav Modi, Nirav Modi Firms, admitted the issuance of LOUs. Though Nirav Modi and Nirav Modi Firms claimed that the LOUs were issued validly, no documentary evidence in the form of sanction letter, etc. was either referred to in any communication or sent to the applicant. 98. Under Section 58 of the Indian Evidence Act, 1872, admitted facts need not be proved. Section 58 of the Indian Evidence Act, 1872 is reproduced hereunder: "(58) F....
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.... and reissuance of the LOUs was done at the instance of Nirav Modi and Nirav Modi Group knowingly that the applicant will be the victim of the fraud. The continued operation of the business despite the knowledge clearly demonstrates the existence of systematic fraud. The applicant has further demonstrated the fraudulent intent of Nirav Modi and Nirav Modi Group which was made with reckless indifference to its truth. 102. The fraudulent intent was further demonstrated and can now be easily inferred from the modus operandi of Nirav Modi and Nirav Modi Group. The modus operandi is that the fraudulent transactions were made outside the Core Banking System. A single reference number 3731/STELLAR/17, 3731/SOLAR/17 and 3731/FIBC/17 was repeated in all the MT 799 SWIFT messages sent to various Overseas Funding Banks confirming the issuance of numerous LOUs. Nirav Modi and others are seen to have adopted these patterns or conduct to design to deceive and victimize the Bank by exposing it to actual or potential loss. The applicant is the actual victim of the fraud and therefore, it can be inferred that it is a good evidence of the fraud perpetrated by Nirav Modi and Nirav Modi Group. The ....
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....on his behalf to the overseas bank, for obtaining the buyer's credit from the funding bank overseas. The LOU for buyer's credit can only be issued if the client has adequate credit facility (Non-Fund based) and/or given sufficient cash margin (approx. 110% of the amount of buyer's credit). Once sanctioned against limit and/or cash margin by the authorities, the LOU is issued through SWIFT messaging system to overseas banks and branches (in format MT-799). On receipt of the LOU from the importer's banker in India, the Overseas lending bank will fund the Nostro account of the Indian Bank and send a return confirmatory message by SWIFT (again MT-799 is used). This message contains amount of funds remitted, date of funding, Rate of interest of the Buyer's Credit, Period of the credit, the maturity date and the Nostro account of the overseas bank in which funds have to be returned on due date of maturity with interest. Once funds are received in the applicant Bank's NOSTRO account with reference to buyers credit sought, the applicant branch makes debits and pays the overseas exporter who has drawn the bill on the importer. On maturity of the above mentioned buyer....
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....ies of Nirav Modi. These Companies were used in export and import of diamond Jewellery of Gitanjali and Firestar Group Companies. (h) The Overseas Companies and Hong Kong and Dubai deals with the Firestar Group directly or indirectly owned by Nirav Modi who has full control over these Companies through the dummy Directors. The Enforcement Directorate in its Complaint has recorded that the list of top 8 borrowers and 8 suppliers are none else but the ex-employees of Firestar Group and acting and implementing the instructions given by Nirav Modi and Mihir Bhansali. The list of 8 buyers and 8 suppliers are set out in paragraph no. 3.2.4 of the Complaint. (i) The investigation conducted by the Enforcement Directorate further reveals that the dummy Companies were set up in Hong Kong and Dubai alongwith the regular Firestar Group Companies acted as nodes for circular transactions to layer and launder money generated by fraudulent LOUs. It further reveals that Nirav Modi floated these dummy Companies in Hong Kong as set out in paragraph no. 4.2.1 of the Complaint. (j) M/s. Stellar Diamond, M/s. Solar Export and M/s. Diamonds R US have their accounts maintained w....
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.... the economy of the country a whole and thereby posing serious threats to the financial health of the country". 107. I am in respectful agreement with the observations in the aforesaid judicial pronouncement that the concern for economic offence, are more dangerous and having far reaching impact on society than bodily offences. The judicial pronouncement in the case of Nimmogadda Prasad (Supra) case and in particular to Nirav Modi who is the mastermind of fraud. Nirav Modi has perpetrated the calculated fraud and has refused to repay the amount back to the applicant. In the case of Nimmogadda Prasad (Supra), it is observed that such person is an imminent threat to the financial economy of the country. The applicant has successfully proved the allegations of fraud which is very serious, premeditated and carefully planned and executed the fraud. Fraudulent debt is a debt: 108. Section 2(g) of the 1993 Act defines "debt" means any liability (inclusive of interest) which is claimed as due from any person by a bank or a financial institution or by a consortium of banks or financial institutions during the course of any business activity undertaken by the bank or the financial i....
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....its of financial assistance, may be in a fraudulent manner for the purpose of his business is concerned. He can surely said to be a debtor of the bank so far as the amount payable to the bank is concerned. 18. As pointed out above, in the present case, the suit was transferred long back from this Court to the Tribunal. The petitioners were the direct beneficiaries of the aforesaid so-called fraudulent transaction and the money was utilized by the petitioners for their business. It is required to be noted that the petitioners have categorically admitted the aspect about taking benefits arising out of the said transaction at the time when the proceedings are pending before the Magistrate. Considering the facts and circumstances of the case, we are not in a position to accept the submission of the learned counsel for the petitioners that the debt which arises only out of a transaction carried out in a lawful manner and by executing appropriate documents, that the same should be construed as debt. In our view, when a person takes financial benefits for the purpose of business and by utilizing the bank money for the business, even if such benefits were taken in a fraudulent man....
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....to which we are totally agreeable, we see no infirmity in the order passed by the Appellate Tribunal and this is not a case in which we would like to interfere with the order passed Appellate Tribunal in our extra-ordinary jurisdiction under Article 226 of the Constitution of India, which interference is otherwise, also not called for in view of what is stated above. The writ petition is accordingly dismissed with no order as to costs. Rule discharged." 111. The applicant has then placed reliance on the judicial pronouncement in the case of State Bank Of India vs. Madhumita Construction (Pvt.) Ltd. and others reported in AIR 2003 Cal 7 for the proposition of recovery of fraudulent debt and jurisdiction of Debts Recovery Tribunal. "15.4 Thus, the question is now raised in this case is a matter, which relates to the merit depending on the facts, which are to be gone into. Until this Court holds that this Court has jurisdiction, it cannot examine the same. 15.5 Fraudulent debt in Black's Laws Dictionary has been defined as "a debt created by fraud. Such a debt implies confidence and deception. It implies that it arose out of a contract, express or implied, and....
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....t about is highlighted above. Having regard to the definition of debt as given above, the following ingredients are to be fulfilled in order to bring a claim within the definition of debt: (i) it is to be a liability (including interest) due from any person; (ii) claimed a bank or financial institution or consortium of bank or financial institution; (iii) during the course of any business activity undertaken by such bank or financial institution or consortium under any law for the time being in force; (iv) in cash or otherwise whether secured or unsecured or assigned or whether payable under a decree or order of any Civil Court or any arbitration award or otherwise or under a mortgage; and (v) subsisting on and legally recoverable on the date of application. 15.8 As we have seen that debt includes fraudulent debts. Whether the debt is fraudulent or not can very well be ascertained before the DRT. Even if it is alleged that the debt is fraudulent, it does not take away the jurisdiction of the DRT. Neither it creates a jurisdiction to a Court, the jurisdiction whereof is otherwise barred by reason of Section 18. Admittedly, it is a liability as in this case of defendant No. ....
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....t manner, still such a person can be said to be a debtor of the bank. Defendant nos. 1 to 16 though have not signed and executed the loan and security documents have enjoyed the benefit of the amount under the LOUs are nevertheless, debtor as per the judicial pronouncement. Defendant nos. 1 to 16 cannot escape the liability to repay the debt in any manner whatsoever. Defendant nos. 1 to 16 were the ultimate beneficiaries in getting the financial assistance though in fraudulent manner, cannot escape the repayment of the liability to the applicant. 113. I am also in respectful agreement with the law laid down by the Hon'ble Calcutta High Court in the case of State Bank of India (supra) that debt includes fraudulent debt and whether the debt is fraudulent or not can very well be ascertained before this Tribunal. The LOUs were issued during the course of business activity undertaken by the applicant. The LOUs may have been issued fraudulently but the applicant's business activity of issuing LOUs is permissible by virtue of the law in force. 114. The law is well settled with regards to the expression "debt" that it has to be given widest amplitude. The allegations made in ....
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....me as set out in the original application. There is also no dispute that Nirav Modi and Nirav Modi Group are the recipient of the LOUs. The transactions though fraudulent in nature is covered by the definition of "debt" as provided under section 2(g) of the 1993 Act. The amount under the unauthorized LOUs is due and payable by defendant nos. 1 to 16. Thus, the jural relationship between the debtor and creditor is established by the applicant bank. 116. In the present law suit Nirav Modi and Nirav Modi Group have admitted the issuance of LOUs in the communication made by them. Understood thus, the LOUs were issued by the delinquent employees during the course of business activities undertaken by the applicant bank. The applicant has very specifically pleaded the fraud perpetrated by defendant nos. 1 to 16 in collusion and connivance with the delinquent employees. Defendant nos. 1 to 16 are the beneficiaries under the unauthorized LOUs. Defendant nos. 1 to 16 are therefore, bound to repay the debt with interest to the applicant bank. Therefore, the applicant is well within its right to file the application for the legally recoverable debt. This Tribunal has the exclusive jurisdict....
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..../-. M/s. Diamond R US has admitted the liability in the sum of INR 1741,04,47,554/-. (g) The copy of the aforesaid balance sheet of defendant nos. 1 to 3 respectively was sent to the applicant which is adduced in evidence by it. 118. The communication addressed by Nirav Modi and the balance sheets amounts to unequivocal admission of the documents as well as the quantum of the liability more particularly stated in the balance sheet of defendant nos. 1 to 3. It would be appropriate to take note of the observations made by the Hon'ble Supreme Court in the case of Uttam Singh Duggal & Co. Ltd. versus United Bank of India and others reported in (2000) 7 SCC 120 at page 127: "13. The next contention canvassed is that the resolutions or minutes of the meeting of the Board of Directors, resolution passed thereon and the letter sending the said resolution to the respondent Bank cannot amount to a pleading or come within the scope of the Rule as such statements are not made in the course of the pleadings or otherwise. When a statement is made to a party and such statement is brought before the court showing admission of liability by an application filed under Order 1....
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.... credit are for the period 130 days to 358 days as permissible under FEMA. These loan carry interest rate of Libor plus 0.75 to 1.15 basis points. The Firm has not provided or arranged any security/guarantee for availing buyers credit facility." 120. The averments made in the pleading clearly demonstrate that the admission of liability made by defendant nos. 1 to 3 in their respective balance sheet and the written communications made by Nirav Modi. All the documents read together constitutes unequivocal admission. In view of the admission of liability also, the applicant is entitled for the issuance of recovery certificate. 121. SWIFT & Core Banking System: SWIFT is the collectively messaging software used for transaction by the financial entities. A Core Banking System is the software used to support a Bank's most common transactions. In the present case, defendant nos. 1 to 16 managed the delinquent employees of the applicant Bank not to enter the LOUs in the Core Banking System. The delinquent employees in collusion with the dishonest defendants who purposely and intentionally with ulterior motive and malafide intention to dupe public money did not integrate t....
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.... February, 2018 the applicant informed the Ministry of Corporate Affairs with regard to the fraud perpetrated by Nirav Modi. (i) On 23rd February, 2018 ex-parte injunction order was passed by the National Company Law Tribunal. (j) On 26th February, 2018 the US debtors filed US Proceedings. (k) On 04th March, 2018 a Complaint was made to the CBI. (l) On 04th March, 2018 the applicant again filed a Complaint with CBI for the fraud perpetrated by Nirav Modi in INR 321.88 crores. (m) On 22nd March, 2018 the US Trustee filed a motion seeking appointment of an Examiner to investigate fraud with regard to the LOUs. (n) On 27th March, 2018 investigation report was presented before the competent authority. (o) On 02nd April, 2018 order dated 23rd February, 2018 passed by the National Company Law Tribunal was vacated/modified qua independent Directors. (p) On 09th April, 2018 National Company Law Appellate Tribunal reserved the Company Appeal for orders. (q) On 20th April, 2018 US Court passed order approving appointment of John J Carney as Examiner in the US Proceedings. (r) On 01st May, 2018 the US de....
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....led to recover the sum of INR 2309,04,08,900.40 as shown in the particulars of claim. 125. Claim of interest: No indulgence can be shown to the business person like defendant nos. 1 to 16 with regard to grant of interest. It was the duty of defendant nos. 1 to 16 to return the money which they have unauthorisedly used and utilized for their business purpose. Nirav Modi by his e-mail has admitted the liability but at the same time, has abused the process of law by fleeing from the country. The applicant as an instrumentality of the State deals with the public money. It would be appropriate to note the observations made in the judicial pronouncement with regard the public money in the case of State Bank of Travancore vs. Mathew K.C. reported in (2008) 3 SCC 85. It is observed by the Hon'ble Supreme Court that the "loans by financial institutions are granted from public money generated at the tax-payers' expenses. Such loan does not become the property of the person taking loan but retains it character of public money given in a fiduciary capacity as entrustment by the public. The timely repayment also ensures liquidity to facilitate loan to another in need by circ....
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....ere is no reason to disbelieve the claim made by the applicant bank. 130. In view of the observations hereinabove, the Original Application filed by the applicant deserves to be granted. Hence, I pass the following order: ORDER (A) Original Application No. 119/2018 is allowed with costs. (B) Defendant nos. 1, its partners, trustees and beneficiaries including defendant nos. 6, 7, 10 to 16 are ordered and directed to pay to the applicant either jointly and severally the aggregate sum of INR 2309,04,08,900.40 (INR two thousand three hundred nine crore four lakh eight thousand nine hundred and paise forty only) with interest @ 14.30% per annum from 30th June, 2018 till payment/realization. (C) Defendant no. 2 its partners, trustees and beneficiaries including defendant nos. 6, 7, 10 to 16 are ordered and directed to pay to the applicant either jointly and severally the aggregate sum of INR 2328,77,10,253.79 (INR two thousand three hundred twenty-eight crore seventy-seven lakh ten thousand two hundred fifty-three and paise seventy nine only) with interest @ 14.30% per annum from 30th June, 2018 till payment/realization. (D) Defendant no. 3 its ....