27 February 2019: The resolution professional overseeing Gitanjali Gems has contested the Enforcement Directorate’s seizure of the company’s assets on the grounds that the action has disrupted the insolvency resolution process.
The RP asked the National Company Law Tribunal to direct the ED to release the confiscated assets including jewellery and property so that they can be evaluated independently in accordance with the bankruptcy code and an information document can be submitted to prospective bidders. The ED initiated a probe into the company following the alleged fraud at Punjab National Bank and filed charges against fugitive businessman and founder Mehul Choksi.
The company’s committee of creditors, which comprises representatives from 30 banks, is of the view that the assets in the ED’s custody are the “suspected proceeds of crime” but until there is a conviction, they should be left free for valuation, according to a person briefed on the matter. The committee has met twice since the insolvency process began but has been unable to make any progress towards resolving the claims of the creditors in the absence of access to the company’s records, according to the person. The claims of financial creditors against the company amount to Rs 6,000 crore.
The charges pertain to alleged diversion of funds through offshore companies by Choksi, who obtained letters of credit from state-run PNB to pay overseas suppliers and then refused to make good the payments.
The ED’s case under the Prevention of Money Laundering Act predates ICICI Bank’s filing of insolvency proceedings against the company. The tribunal admitted ICICI Bank’s plea in October last year and approved the appointment of Vijay Kumar Garg of Duff & Phelps as the resolution professional.
A spokesperson for Duff & Phelps declined to comment on the matter.
The tribunal recently acted on a similar plea by the resolution professional of Sterling SEZ, which is undergoing insolvency proceedings and is being investigated by the ED, and ordered the agency to free the company’s attached properties and allow them to be valued. Sterling’s promoters, the Sandesaras, are also accused of fleeing India to avoid criminal prosecution by the probe agency.
Choksi had been absconding even before the alleged fraud at PNB was officially called out by the lender. The authorities have sought to expedite his extradition from Antigua where he has obtained citizenship.