AT LEAST nine firms associated with billionaire diamond jeweller Nirav Modi were incorporated in 2010 but did not carry out any business before all of them were shut down in 2012, records investigated by The Indian Express show.
An analysis of the 41 companies associated with Modi, in the wake of alleged fraudulent transactions involving three of his companies and Punjab National Bank, shows that these nine firms were incorporated between March and August 2010.
Records show that Modi’s brother Neeshal Modi, who has been named by the CBI as an accused in the alleged Rs 11,400-crore PNB fraud, was a director in all these nine firms.
These firms, according to their statement of accounts, did not show any business in the two years of their existence and at least seven of them filed for closure on June 21, 2012. The other two were also shut down that year.
In their board resolutions, each of these firms cited the same reason for winding up: they foresee “no sustainable commercial activity” and are not in a position to “generate any revenue surpluses”.
These nine firms are: Punarvasu Consultants Pvt Ltd, Ananthnath Valuers Pvt Ltd, Neminath Consultants Pvt Ltd, Vashupujya Valuers Pvt Ltd, Moola Consultants Pvt Ltd, Sambhavnath Consultants Pvt Ltd, Suvadhinath Consultants Pvt Ltd, Moon Valuers Pvt Ltd and Supasvanath Consultants Pvt Ltd.
However, sources familiar with the case said it is possible that not all of the 41 companies linked to Modi that are under probe by the CBI, Income-Tax department and Enforcement Directorate are “shell firms”. “The complete picture will emerge only after the investigation is complete,” said sources.
According to documents accessed by The Indian Express, the nine firms were opened in 2010 with authorised capital and paid-up capital of Rs 1 lakh each and struck off in 2012 under the government’s fast-track exit scheme announced the previous year. The scheme provides a fast exit route for companies that are inoperative since incorporation or commenced business but became inoperative or defunct later under the Companies Act.
Apart from these, the probe agencies are also looking into 26 active firms associated with Modi — and four firms that were incorporated in February 2000, converted to limited liability partnerships (LLPs) later, and dissolved.
The four dissolved firms include Paragon Jewelry Pvt Ltd, Paragon Merchandising Pvt Ltd, Panchajanya Diamonds Pvt Ltd and Neeshal Enterprises Pvt Ltd. As per the last available records of Paragon Jewelry and Paragon Merchandising, the companies made a net loss before tax of Rs 11,801 and Rs 12,157.17, respectively, at the end of March 31, 2013.
While Paragon Jewellery, Paragon Merchandising and Neeshal Enterprises were converted into LLPs on March 19, 2014, Panchajanya Diamonds were converted into a LLP on April 22, 2014, with a total obligation for contribution of Rs 1 lakh each, records show.
It is not illegal to convert a company to a LLP, which is a partnership where some or all partners have limited liability and one partner is not responsible or liable for another partner’s misconduct or negligence.
Industry experts say LLPs have become popular, particularly among small and medium businesses, as it is tax-efficient and limits the liability of partners as far as civil cases are concerned. Also, LLPs are governed by the LLP Act, 2008, and they do not have to comply with the stringent norms of the Companies Act.
According to the documents, at least 25 of the 41 companies associated with Modi are registered at the same address at Opera House in South Mumbai.
Nirav Modi did not respond to an email from The Indian Express seeking comment on the activities of firms linked to him. Modi’s lawyer Vijay Aggarwal did not respond to calls from The Indian Express seeking comment.