US court bar on recovering Nirav Modi’s debt for now

A day after the Union Cabinet chaired by Prime Minister Narendra Modi cleared a draft law that enables confiscation of the assets of fugitive economic offenders, absconding diamantaire Nirav Modi got a helping hand from America.

On Friday, the US bankruptcy court in the Southern District of New York passed an inte­rim order preventing creditors from collecting debt from Modi-owned Firestar Diamond Inc, which had filed for bankruptcy early this week along with its affiliate companies A Jaffe, Inc and Fantasy, Inc.

In another development, the State Department refused to confirm whether the absconding jeweller is in the US. “We are aware of recent media reports that Nirav Modi is in the United States but cannot confirm them,” news agency PTI quoted a State Department spokesperson as saying. There have been reports claiming the businessman is holed up in an upscale hotel in New York.

In its interim order, the US bankruptcy court said creditors may not take action to collect debts from the debtor or the debtor’s property. It added that while the stay is in effect, creditors cannot sue, assert a deficiency, repossess property, or otherwise try to collect from the debtor. “Creditors cannot demand repayment from the debtor by mail, phone, or otherwise,” the court order said.

The three companies includi­ng Firestar Diamond said in th­eir bankruptcy petition that the move was to “preserve the going concern value of their businesses and effectuate a sale or other transaction” for their brands to continue. The filing added the Indian government’s actions disrupted their supply chain, citing this one of the reasons for the bankruptcy filing.