Firestar Diamond’s Chapter 11 case to have trustee appointed

New York, June 8 – Firestar Diamond, Inc.’s bankruptcy proceeds will be overseen by a Chapter 11 trustee, the U.S. Bankruptcy Court for the Southern District of New York decided in an order filed late June 7.

The court said that the appointment of a trustee is in the best interests of the creditors, equity security holders and other interests of the estate.

Appointment of the trustee will be carried out by the U.S. Trustee for the case.

The action came after Firestar’s loan repayment guarantor, Punjab National Bank, asked for a trustee to be named.

In a motion making its request, the bank said, “PNB seeks the appointment of a Chapter 11 trustee to serve as a responsible fiduciary who can oversee a sales process not tainted by the Modi fraud and the disturbing evidence of ongoing mismanagement and misconduct by the debtors’ management following the commencement of these Chapter 11 cases that was revealed during the sale hearing.”

Specifically, the bank said the record from the sale hearing demonstrates that the Firestar Diamond debtors’ existing management failed to take any serious steps to ensure that those involved in fraud and other wrongful conduct were not involved in the sale process, that employees did not participate in discussions with potential bidders, constituting conflicts of interests, or that employees stopped communicating with indirect majority shareholder Nirav Modi, who is “a fugitive from justice.”

In addition, the bank said Firestar president Mihir Bhansali “abruptly resigned” following the sale hearing “to avoid providing information required by the court at the sale hearing and, through his counsel, informed the court that if called to testify he would invoke his Fifth Amendment right against self-incrimination.”

“A Chapter 11 trustee fiduciary is needed not only to safeguard the debtors’ assets and restore confidence in the sales process, but also to provide the transparency and access to information that has been missing in these cases,” Punjab National Bank said in its motion.

Firestar Diamond is a subsidiary of Mumbai-based diamond manufacturer Firestar International Pvt. Ltd. The company filed for bankruptcy on Feb. 26 under Chapter 11 case number 18-10509.

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