US court grants interim stay on debt collection against Firestar Diamond
Washington, Mar 2: A US court today passed an interim order that prevents creditors from collecting debt from Nirav Modi-owned Firestar Diamond Inc which early this week filed for bankruptcy.
Modi, who is being investigated for illegal transfer of over Rs 12,000 crore from Punjab National Bank, has a majority stake in Firestar Diamond and its other sister companies through his other companies.
Firestar Diamond Inc filed the Chapter 11 voluntary petition in the New York Southern Bankruptcy Court on Monday.
Entering an order for relief, the US bankruptcy court in the Southern District of New York said that the filing of case imposed an automatic stay against most collection activities.
"This means that creditors generally may not take action to collect debts from the debtor or the debtor's property," the bankruptcy court said in its two-page order.
"For example, 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," it said.
"Creditors who violate the stay can be required to pay actual and punitive damages and attorneys fees," the court warned in the order, copies of which have been transmitted to multiple stake holders, including a few dozen creditors of Firestar Diamond Inc.
A meeting of the creditors has been convened by the court in New York on March 30.
The interim relief comes days after Mihir Bhansali had filed for bankruptcy on behalf of three companies – Fantasy Diamond Inc, Fantasy Inc, and A. Jaffe Inc, of which he is the president and sole director.
In a court submission on Wednesday, Firestar Diamond Inc (FDI) had provided a list of its creditors along with their details.
According to court papers, FDI and Fantasy currently have jewellery merchandise on consignment with their customers having an aggregate consignment price value of approximately USD 33,250,000 million.
AJI currently has jewellery merchandise on consignment with its customers having an aggregate consignment price value of approximately USD 7,300,000.
Bhansali said that during the pendency of these cases, it is its intention to continue to operate their businesses while seeking an infusion of capital or the sale of its businesses, in whole or in parts, as a going concern.
"The Debtors expect that the Chapter 11 process will add a sense of order, alleviate some of the concerns expressed by vendors and customers and create a forum in which potential purchasers for all or some of the businesses are willing to participate," he said.
According to court papers, Firestar Diamond and Fantasy have approximately USD 90 million of annual sales to some of the most well-known and well-regarded major department stores, major speciality stores chains, wholesale clubs, and United States armed services bases.
Their accounts include Zales, Kays, Jareds, COSTCO, Sams Club, Macys, JC Penney, and US Navy.