Mr Modi is using his company, Firestar Diamonds, to "abuse the process of law" and indirectly challenge the case by moving the plea through his firm, the ED's representative Additional Solicitor General Sandeep Sethi told a bench of Justices S Muralidhar and IS Mehta.
Firestar Diamond International Pvt Ltd, one of the accused in the alleged fraud, has sought an interim stay of the proceedings moved by the ED.
The ED, in an affidavit filed through central government standing counsel Amit Mahajan, said Mr Modi's request was "not maintainable" as it was "premature" and "misconceived".
Mr Modi, his uncle and jeweller Mehul Choksi and some PNB officials have been accused of taking crores of rupees from PNB via illegal ways. The system of Letter of Undertaking or LOUs, which allows the customer of a bank to withdraw foreign currency from an Indian bank in another nation, was scrapped by the Reserve Bank of India after Mr Modi and his partner Mehul Choksi perpetrated the massive fraud.
The ED said "grave miscarriage of justice" will be caused to its probe if Firestar Diamond's plea for stay of further proceedings is granted. "The entire purpose of the application is apparently to hinder the investigation," the ED said.
"Nirav Modi is the director of the petitioner company since incorporation and is signatory to the memorandum and articles of the petitioner. He has not joined investigation pursuant to summons issued by the ED or even by the CBI. His communication has expressed that he does not intend to join investigation," the ED said.
The ED has filed the money laundering case against Mr Modi, his firms and others on the basis of a First Information Report filed by the Central Bureau of Investigation (CBI).
Over Rs 12,000 crore worth of LoUs had been issued by PNB in favour of Mr Modi and Mr Choksi but only smaller sums had been entered in the banking system, investigators said.
But in case of Nirav Modi, his companies neither had funds to cover the debts, nor any service charges were paid to the bank. There was no credit limit either.
With inputs from PTI