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TMI Blog2019 (7) TMI 1942X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 preventing the fugitive economic offenders from fleeing the Country. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 required under Order VI Rule 4 of the Code of Civil Procedure, 1908. I have also considered the submissions that despite the admission made by Nirav Modi in obtai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 Companies Act. Defendant no. 8 is a partner in defendant no. 3 i.e. M/s. Diamond R US. Defendant no. 6 owns 99.9% share of defendant no. 8. 11. Defendant no. 9 i.e. NDM Enterprises Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 for issuance of LOUs including Loans and Advance Circular No. 131 dated 19th October, 2009 and Loans and Advance Circular No. 35 dated 26th March, 2014. The guidelines require the importer to make an application i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing 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 finance module of the Core Banking System of the applicant. It was for this reason that the applicant could not detect the fraud perpetrated by the Nirav Modi Group. 33. The Nirav Modi Firms and their partners had approached th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31/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 calculated @ 1 USD = INR 64). The amount of fraud increased to INR 7029,06,87,950.65 (comprising of the principal amount of INR 6798,14,09,282.10 and interest component amounting to INR 230,92,78,668.54. The aggregate amount in the sum of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 Modi. These meetings were held at Delhi and Mumbai to pay the outstanding of the LOU debt. On 5th February, 2018 Nirav Modi expressed his willingness and responsibilities to resolve the issue and liabilities of the Nirav Modi Group. On 6th February, 2018 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Firestar Diamond International Pvt. Ltd. will be sufficient to settle the claim made by the applicant. On 20th February, 2018 the applicant bank replied to the e-mail of Nirav Modi. By this e-mail the applicant once again recorded that no facility was sanctio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. The applicant clarified that the interest @14.30% is charged in clean overdraft facilities in the normal course and therefore, the applicant justified it by claiming under the demand notice. The payment under demand notice was to be made within 10 days. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Firms and their partners have unauthorisedly obtained 150 LOUs by defrauding the applicant. The charge sheet also reveals that defendant nos. 1 to 3, Nirav Modi and Neeshal Modi have committed various offences concerning fraud. 57. The applicant has referred to and relied upon t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 February, 2018 against them. 64. On 2nd April, 2018, National Company Law Tribunal modified the order by vacating the injunction order dated 23rd February, 2018 qua the independent Directors. The vacating/modification of the order dated 2nd April, 2018 is challenged by the Union of India, Ministry of Corporate Affairs before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 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 Diamond. The objection was raised as the sale was propounded at a significant discount. The Ministry of Corporate Affairs also joined the applicant. The auction process could not have achieved a significant value and therefore, the sale was adjourned for clarification by the U.S. Debtors for the fraud perpetrated by defendant nos. 1 to 16 including the U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns. 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 account of the fraud played by defendant nos. 1 to 16 in collusion and connivance with the delinquent employees. The fraud is the ultimate result of the issuance of unauthorized LOUs which were used and utilized to illegally procure the funds from Overseas Funding Banks. Therefore, the LOU debt constitutes a 'debt' under the 1993 Act legally recoverable by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heet 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 scrutinized it. I am satisfied that the applicant actually attempted to serve upon defendant nos. 1 to 16 as stated in the affidavit. Defendant nos. 1 to 16 purposely and intentionally avoided or evaded the service of summons. Defendant nos. 1 to 16 absconded from the last known address, by absconding from their place does not mean to hide but would mean to evade the service also. Here, I would li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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-parte. 88. The applicant has filed evidence affidavit (Exhibit-24) of Mr. Rajendra Prasad Keshri s/o. Mr. Shivnath Keshri and list of documents (Exhibit-25) thereby adducing in evidence the documents at serial nos. AW-1/1 to AW-1/88 which are admitted in evidence, read, recorded and exhibited. 89. I have scrutinized and examined the allegations contained in the Original Application and analyzed the evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oans 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 report of the applicant was ready and was placed before the competent authority. This report revealed that Nirav Modi Group started obtaining unauthorized LOUs from 10th March, 2011 which continued upto 31st May, 2017. The report further disclosed that Nirav Modi and others perpetrated fraud the amount of the Nirav Modi Firms which crystallized (excluding interest and calculated at the rate of $1 = INR 64) at INR 6798,14,09,28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned 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) Facts admitted need not be proved: No fact need to be proved in any proceeding which the parties thereto or their agents agree to admit at the hearing, or which, before the hearing, they agree to admit by any writing under their hands, or which by any rule of pleading in force at the time they are deemed to have admitted by their pleadings: Provided that the Court may, in its discretion, require the facts admitted to be proved otherwise t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her 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 applicant has further demonstrated that Nirav Modi and Nirav Modi Firms had intent to deceive coupled with injury by way of loss. 103. I am convinced by the pleading and material placed on record that defendant nos. 1 to 16 directed against victimizing the applicant bank. I am also convinced by the applicant's pleading and evidence about the falsity of the statements made knowingly with intent to execute the scheme to defraud the applicant and obtai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eipt 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's credit, the applicant (Importer) needs to either provide funds in his current account maintained at the branch or submit debit authority utilizing his credit limits if any sanctioned with regards to buyers credit. From this the bank offset/repay with interest the buyers credit on due date to the overseas funding bank." (b) The applicant has also relied upon the investigation made by the Enforcement Directorate which reveals that the staff working in the Companies r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstructions 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 with Axis Bank, Andheri Branch, and PNB, Brady House Branch, have fraudulently rotated the amount from Dubai and Hong Kong Companies as set out in paragraph no. 4.13 and 4.13.1 of the Complaint. (k) Understood thus, the well planned and orchestrated fraud was perpetrated by Nirav Modi upon the applicant. 106. The applicant has made the averments demonstrating and indicating financial irregularities, dishonest and fraudulent transaction that have taken place in the affairs of the applicant Bank. The number of diamond import Firms are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. 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 institution or the consortium under any law for the time being in force, 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 subsisting on, and legally recoverable on, the date of the application [and includes any liability towards debt securities which remains unpaid in full or part after notice of ninety days served upon the borrower by the debenture trustee or any other authority in whose favour security interest is created for the be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efits 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 manner, still such a person can be said to be a debtor of the bank and even so called alleged fraudulent transaction can also be covered under the definition of debt. It is not mandatory that in every case, unless and until all necessary documents are executed at the time of taking financial help or benefits or assistance, in whatever manner one may get, yet such a transaction cannot be treated as a debt. In the instant case, the petitioners have utilized considerable money of the bank for the purpose of business and the said benefit had taken with the help of the officers of the bank. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 that fraudulent practices were implied by the debtor by which the creditor was defrauded. It had also defined debt as a sum of money due by certain and express agreement. A specific sum of money owing to one person from another, including not only obligation of debtor to pay but right of creditor to receive and enforce payment (State v. Ducey, 25 Ohio App 2d 266 NE 2d 233, 235). A fixed and certain obligation to pay money or some other valuable thing or things, either in the present or in the future. In a still more general sense, that which is due from one person to another, whether money, goods or services. Also, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itration 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. 53 to 57 towards SBI. At the same time, it is a liability of SBI towards the respondent No. 53 to 57 respectively the proceedings before DRT. Admittedly, each of these respondent No. 53 to 57 and SBI are either banks or financial institutions. The LCs were issued during the course of business activity undertaken by the SBI. Even if it is said that the LCs were issued fraudulently and SBI may not have undertaken this exercise during the course of its business, but it cannot be denied that the respondent No. 53 to 57 had undertaken this exercise during the course of its business activities. Admittedly, such business activities are permissible by v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the application are also required to be seen for the purpose of jurisdiction. It would be appropriate to take note of the observation made by the Hon'ble Supreme Court in the case of United Bank of India versus Debts Recovery Tribunal reported in (1999) 4 SCC 69 at page 75: "15. In the case in hand, there cannot be any dispute that the expression "debt" has to be given the widest amplitude to mean any liability which is alleged as due from any person by a bank during the course of any business activity undertaken by the bank either in cash or otherwise, whether secured or unsecured, whether payable under a decree or order of any court or otherwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 jurisdiction under Section 17 of the 1993 Act to entertain and try the present application. The law laid down in the case of United Bank of India (supra) squarely applies to the facts and circumstances of the present case. Admission of Liability: 117. It is also pertinent to note that Nirav Modi by various communications has unconditionally, unequivocally and voluntarily admitted the liability as stated hereinafter. (a) By email dated 13th February, 2018 Nirav Modi recorded that "I refer to the ongoing discussions regarding the amounts claimed from Solar Exports, Stellar Diamonds and Diamond R Us. These firms will pay to you whatever amounts are available with them a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assed 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 12 Rule 6 and the other side has sufficient opportunity to explain the said admission and if such explanation is not accepted by the court, we do not think the trial court is helpless in refusing to pass a decree. We have adverted to the basis of the claim and the manner in which the trial court has dealt with the same. When the trial Judge states that the statement made in the proceedings of the Board of Directors' meeting and the letter sent as well as the pleadings when read together, leads to unambiguous and clear admission with only the extent to which the admission is made in dispute, and the court had a duty to decide the same and grant a decree, we think this approach is unexceptionable." 119. It is pertinent t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the Core Banking System with the SWIFT messaging network. It appears that the two technical systems, i.e. SWIFT and the Core Banking System did not communicate with each other resulting in the failure to detect the fraud. Consequently, the applicant had no opportunity to reconcile the SWIFT messaging sheet for trade finance on behalf of defendant nos. 1 to 16. It was under these circumstances that the prior the fraud was triggered only upon issuance of letter dated 20th January, 2018 for rolling over the LOUs. The magnitude of fraud perpetrated by Nirav Modi reminds me of the judicial pronouncement in the case of Central Bureau of Investigation v. Jagjit Singh reported in (2013) 10 SCC 686. The Hon'ble Supreme Court observed that the offence when committed by the bor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied 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 debtors adjourned the auction to 03rd May, 2018. (s) On 14th May, 2018 a charge sheet was filed by CBI with regard to LOUs. (t) On 14th May, 2018 US debtors filed the reply to the applicant's sale objections. (u) On 15th May, 2018 US Court held a hearing to consider approval of the US debtors request to sell the A Jaffe assets to Parag Diamonds. (v) On 19th May, 2018 Mihir Bhansali refused to testify and instead invoked his US constitutional rights not to incriminate himself. (w) On 31st May, 2018 US debtors did not contest the appointment of Trustees. (x) On 07th June, 2018 US Court passed order directing appointment of Richard Levin, a leading US bankruptcy lawyer, as Trustee. (y) On 15th June, 2018 Richard Levin was appointed as Trustee. (z) All the aforesaid dates and events reveal the systematic fraud was perpetrated by Nirav Modi and moving the US Court for insolvency to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 circulation of the money and cannot be permitted to be blocked by frivolous litigation by those who cannot afford the luxury of the same". 126. It is pertinent to note that on 14th May, 2018 the applicant issued demand notice calling upon defendant nos. 1 to 16 to repay the debt obtained fraudulently and unauthorisedly. By the demand notice the applicant placed on record that in a similar circumstances, interest at the rate of 14.30% per annum is charged in Clean Over Draft facilities in normal course. Nirav Modi by email dated 30th May, 2018 made and attempt to avoid or evade the liability admitted by his previous emails. However, Nirav Modi did not choose to reply in context to the repayment of the fraudulent debt due and payable with interest at the rate of 14.30% per annum. The applicant has claimed relief for interest at the rate of 14.30% per annum with monthly rest. The prayer is contrary to the pleading as regards monthly rest. In the facts and circumstances of the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 partners and beneficiaries including defendant nos. 6, 8 and 9 are ordered and directed to pay to the applicant either jointly and severally the aggregate sum of INR 2391,15,68,796.46 (INR two thousand three hundred ninety-one crore fifteen lakh sixty-eight thousand seven hundred ninety-six and paise forty-six only) with interest @ 14.30% per annum from 30th June, 2018 till payment/realization. (E) Defendant nos. 1 to 3 their partners and beneficiaries, Defendant nos. 4 and 5 are ordered and directed to pay to the applicant either jointly and severally the aggregate sum of INR 7029,06,87,950.65 (INR seven thousand twenty-nine crore six lakh eighty-seven thousand nine hundred fifty and paise sixty-five only) with interest @ 14.30% per annum from 30th June, 2018 till payment/realization. (F) Defendant nos. 1 to 16 are ordered and directed to disclose on oath the properties and assets, both movable and immovable, belonging to them and their subsidiaries affiliates, related parties, directors, partners, officials and KMPs, group ..... X X X X Extracts X X X X X X X X Extracts X X X X
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