Bank in Modi Case Objects to A. Jaffe, Firestar Sale

For the most part, the Chapter 11 cases of A. Jaffe and Firestar Diamond have proceeded in a relatively orderly way, despite the tumultuous background that sparked their filing.

But now an Indian bank involved in the Nirav Modi case is trying to throw a wrench in things.

On March 23, A. Jaffe, Firestar Diamond, and Fantasy Inc. filed a joint motion to commence a sale of their assets.

Legal papers entered in New York federal court said that while 25 companies have executed nondisclosure agreements to examine the companies’ books, ultimately, no acceptable stalking horse bids have been received.

However, “the Debtors decided, in their business judgment, that commencing the sale process without a stalking horse was the best path toward ultimately identifying the highest and best offers for the Debtors’ assets,” the motion said.

The motion asked the court to expedite the sales process so that the purchase could be concluded by the beginning of May, which would give the new owner enough time to ready the new product lines for the JCK Las Vegas show.

But on March 28, Punjab National Bank (PNB), India’s second largest state-owned bank, filed a motion objecting to the companies’ proposal.

In legal papers, the bank alleged it was the victim of a $2 billion fraud committed by the companies’ ultimate owner, Nirav Modi. (Through his attorney, Modi has denied the allegations.)

“[A]dditional time will allow interested parties, including PNB, to obtain relevant information and better understand the connections, if any, between the Debtors and the Modi fraud,” the motion said.

The bank in particular wants a better understanding of “the extent that [the Debtors’] assets may have been obtained by the Debtors using monies fraudulently obtained from PNB, and as may be subject to a constructive trust in favor of PNB,” it read.

It seeks that the court either reject the debtor’s motion outright or delay the proposed sale by 30 days.

At press time, the companies have not filed a response. Their lawyer could not be reached for comment.

The three companies first filed for Chapter 11 on Feb. 26.


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JCK News Director