Bank Fraud

Case BriefsForeign Courts

Westminster Magistrates’ Court: Marking a significant development in the Punjab National Bank fraud case, District Judge Sam Goozée while deliberating upon request submitted by the Government of India for the extradition of Nirav Modi held that, Modi’s extradition to India is compatible with his ECHR Convention rights within the meaning of Human Rights Act, 1998, therefore for further processes as per Section 87(3) of Extradition Act, 2003, the case shall be sent to the Secretary of State for a decision as to whether Nirav Modi is to be extradited. The Court also notified Mr Modi that he has the right to appeal to the High Court (on a point of law or fact or both) against the Judge’s decision to send the matter to the Secretary of State. However, it was clarified that in case Mr Modi chooses to exercise his right to appeal, the appeal will not be heard until the Secretary of State has reached a decision on the matter.

Background

CBI and Enforcement Directorate Cases: In January 2018, CBI received a complaint by the Deputy General Manager of the Punjab National Bank alleging large-scale fraud perpetrated by Nirav Modi. It was alleged that a number of Modi’s firms had fraudulently used the credit facility offered by PNB known as ‘Letters of Undertaking’ [a form of bank guarantee to facilitate foreign transactions]. Post investigating the matter, CBI charged Mr Modi with offences under Section 120B (IPC) (Criminal Conspiracy) read with Section 420 of the IPC (Cheating and Dishonestly Inducing Delivery of Property), Section 409 of IPC (criminal breach of trust by a public servant or by banker, merchant or agent) and Section 13 of the Prevention of Corruption Act 1988 (Criminal Misconduct by a Public Servant).

As a result of the CBI investigation, the Enforcement Directorate (ED) launched a parallel investigation into offences of suspected money laundering of the proceeds of the fraud reported by PNB. As a consequence, as a result, Nirav Modi was charged with an offence contrary to Section 3 of the Prevention of Money Laundering Act 2002.

Evidence Tampering: It was also alleged that, Modi conspired to remove the original documents relating to the LOU applications from PNB bank premises to the offices of a law firm. The firm was misled into accepting the documents as they were informed that the documents they were receiving were not original documents.

Subsequent disappearance and Extradition attempts by India: Owing to the uproar following the revelation of the bank fraud, Nirav Modi absconded. He was later reported to be sighted in the United Kingdom. Once his presence in the UK was confirmed, the Government of India put forth the extraction request in July 2018, to seek Modi’s return for the purposes prosecution. Post-certification of the requests by the Home Office in February 2019, the Secretary of State issued a  certificate in accordance with s.70(1) of the  Extradition Act, 2003, certifying the requests were valid and had been made in the approved way. Nirav Modi was arrested on 19th March 2019 and has remained in custody throughout the extradition proceedings.

Issues

The primary issue that concerned the Court was that Section 78(4)(b) of Extradition Act, 2003 required the Judge to decide whether the offences specified in the request are extradition offences or not.

Contentions  

Nirav Modi, via his counsels Clare Montgomery and Ben Watson challenged the extradition requests on the following grounds-

  • Whether the offences stated in the requests are extradition offences as per S. 137 of Extradition Act, 2003. Whether there is a prima facie case and evidence which would be sufficient to make a case requiring an answer by Nirav Modi if the proceedings were the summary trial of information against him.
  • Whether extradition is compatible with Modi’s ECHR Convention rights,  especially Articles 3 and 6 (as per the requirement in S. 87 of Extradition Act)
  • It was further contended that granting the extradition request will be oppressive to Mr. Modi’s mental health (S. 91 of Extradition Act).

Court’s Observations

Perusing the facts, the contentions of the case, evidences produced and issues of human rights, the Court deemed it fit to categorize its discussion and observations under the following heads-

Prima facie case (CBI, ED): After perusing “16 volumes of evidence and information from the GOI and 16 bundles of expert reports and defence evidence and a total of 32 lever arch folders of documents”, the Court concluded that, “On one possible view of the evidence, I am satisfied that there is evidence upon which NDM could be convicted in relation the conspiracy to defraud the PNB. A prima face case is established”. Similarly, the Court observed that there is a prima facie case of money laundering as well. The conclusions were based on a detailed scrutiny of the facts and evidences adduced, based on which the Court was satisfied that the LOUs issued to Modi’s firms without appropriate cash margins and without being recorded on the bank’s systems. The concerned LOUs were also issued in direct contravention to the Circular issued by the Bank. The Court was also satisfied that the evidences had clearly established the links between Nirav Modi and the co- conspirators. The CBI investigation also demonstrated that Nirav Modi had retained control of the Nirav Modi Firms but had sought to disguise the control of the firms through the use of dummy partners recruited at his behest in order to sustain the LOU scheme.

Extradition Offences:  The Court observed that offences specified in the request are extradition offences as defined by Section 137(3) of Extradition Act. Nirav Modi is accused in a Category 2 territory of the commissions of offences constituted by the conduct set out in the request. The Court noted that the burden rests on the Requesting State (in this case India) to prove to the criminal standard pursuant to Section 206 Extradition Act that the offences within the request are extradition offences. “The approach is to look at the essentials of the conduct relied on and consider whether if it had occurred in England, at the time it was alleged to have occurred, it would have constituted an English offence” that is to say that the words “constitute an offence” in Section 137(2)(b) does not mean the Requesting State has to prove guilt of Nirav Modi in English law, it simply means that, if proved, it would constitute a comparable English offence. Examining the concerned provisions of the 2003 Act, the Court stated that, “A request need not identify the relevant mens rea of the equivalent English offence for the purposes of satisfying dual criminality. Instead it suffices that the necessary mental element can be inferred by the court from the conduct identified in the request documents or that the conduct alleged includes matters capable of sustaining the mental element necessary under English law”.

Analyzing the submissions of the Indian Government, the Court was satisfied that they had proved that ‘conduct’ in the requests is capable of satisfying the requirements of the notional English offences, thereby meeting the requirements of Section 137 of Extradition Act.

Human Rights (Articles 3 and 6 of ECHR and S. 91 of Extradition Act): The Court took note of the doubts raised by Nirav Modi’s counsels that he will not be tried fairly in India, citing evidences regarding the fragility of the independence of the judiciary. The District Judge observed that, Modi’s case has garnered huge media attention due to the allegations of defrauding a State-owned bank of significant sums of money, therefore it comes of no surprise that the case has garnered political interest and some commentary. “Sensationalist media reporting in high profile criminal cases is not unique to India and is not unknown in this jurisdiction. Courts are used to dealing with high profile cases which are subjected to ill-advised political commentary”. The Court concluded that irrespective of the media and political attention, there is no evidence which raises a doubt on the independence of judiciary and suggests that upon extradition, Nirav Modi will not be tried fairly.

Regarding the concerns directed towards deterioration of Nirav Modi’s mental health, the Court noted the Indian Government’s details about Barrack No 12, Arthur Road Jail, where Nirav Modi will be lodged upon his extradition; and also the comprehensive assurances vis-à-vis Modi’s physical and mental well-being during his time in prison. The Court also perused Nirav Modi’s psychiatric report, which states that Modi requires regular psychiatric support to review and adjust his medication as required. Based on the expert opinions and information furnished on the issue, Sam Goozée, J., concluded that “I have no doubt that Courts would ensure these assurances are upheld. There is no reliable evidence of the GOI breaching their solemn diplomatic assurance… the Indian authorities have capacity to cope properly with NDM’s mental health and suicidal risk, bolstered by NDM being able to access private treatments from clinicians. I also weigh up the strong public interest in giving effect to extradition treaty obligations”.

Other Remarks: Apart from the aforementioned observations, the Court also pointed gave a sharp critique on certain aspects that emerged during the course of the proceedings-   

  • In course of examining the numerous evidences adduced, the Judge noted that, “Unlike the evidence from the Defence, the evidence produced by the GOI in the case, through no fault of Counsel, was poorly presented and very difficult to navigate”.
  • The Judge also made some scathing remarks on the “ill-advised political commentary” and sensationalist approach of the media around the case.
  • The Judge particularly took note of the comments expressed by former Supreme Court Judge Shri Markandey Katju (expert opinion), stating that, “Despite having been a former Supreme Court judge in India until his retirement in 2011 his evidence was in my assessment less than objective and reliable. His evidence in Court appeared tinged with resentment towards former senior judicial colleagues. It had hallmarks of an outspoken critic with his own personal agenda. I found his evidence and behaviour in engaging the media the day before giving evidence to be questionable for someone who served the Indian Judiciary at such a high level appointed to guard and protect the rule of law”.

[Government of India v. Nirav Deepak Modi, decided on 25-02-2021]

Sucheta Sarkar, Editorial Assistant has put this story together.

Hot Off The PressNews

On Day 27 of the Aadhaar hearing, ASG Tushar Mehta continued with his submissions before the 5-judge bench of Dipak Misra, CJ and Dr. AK Sikri, AM Khanwilkar, Dr. DY Chandrachud and Ashok Bhushan, JJ.

Below are the highlights from Day 27 of the Aadhaar Hearing:

  • ASG:
    • The argument that the Aadhaar act was made in violation of interim orders of the SC has already been refuted in the case Binoy Viswam (Aadhaar PAN linking judgment). Only the challenge to article 21 is open with respect to Aadhaar. All the other aspects have already been dealt with in Binoy Viswam. It has already been proved that Aadhaar linking with PAN will help curb money laundering and black money, and prevent tax evasion. This question is not open to challenge anymore as it has already been decided by this court.
    • Biometrics will help curb the growth of shell companies. This is again a facet of reasonableness and proportionality.
    • Balancing of interests is also a facet of proportionality, which was propounded in the judgement of modern dental college.
    • Aadhaar will help law enforcement curb terrorism.
    • There’s no random scrutiny of people in the name of Aadhaar. The exercise of linking Aadhaar with bank, phone etc is only done to weed out fake or duplicates.
    • IT Dept uses third party information to identity cases of defaulters. Rule 114b requires quoting of PAN to file returns. A person can easily say that they don’t have PAN and then evade taxes. Pan Aadhaar linkage will prevent this kind of tax evasion.
    • A statutory measure should not be excessive with respect to the object it seeks to achieve and the court will not look into the legislature’s wisdom till it’s shockingly disproportionate.
    • If there’s a competition between right to privacy and the right to information of a citizen, the former has to be subordinated with the latter for the sake of larger public interest. The fair needs of the society and the nature of social control has to be kept in mind when enforcing reasonable restrictions.
    • Legitimate state interest is enough. No need to prove compelling state interest. The word ‘necessary’ is not synonymous with ‘indispensable’. It only has to be proved that it’s necessary for larger public interest. If there’s an overwhelming public interest then there’s no need to apply the “least intrusive” test.
    • Menace of hawala transactions and money laundering is a global concern.
  • Sikri, J: There’s no doubt that money laundering is a problem. The only question that needs to be answered is how Aadhaar will prevent money laundering.
  • ASG:  Prevention of Money Laundering Act not a toothless law anymore. The formation of rules flows from section 12(c) of the Act.

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To read the highlights from the submissions by ASG Tushar Mehta, click here.

To read the highlights from the submissions by the Attorney General, click here, here , here and here.

To read the highlights from the PowerPoint Presentation made by the CEO of UIDAI, click here.

To read the highlights from submissions of Senior Advocates Meenakshi Arora, Sajan Poovayya, CU Singh, Sanjay Hegde and Counsel Jayna Kothari, click here.

To read the highlights from submissions of Senior Advocates KV Viswanathan and Anand Grover, click here.

To read the highlights from Senior Advocate Arvind Datar’s submissions, click here, here and here.

To read the highlights from Senior Advocate Gopal Subramanium’s submissions, click here, here and here.

To read the highlights from Senior Advocate Kapil Sibal’s arguments, click here, here and here.

Looking for the detailed submissions of Senior Advocate Shyam Divan? Read the highlights from Day 1, Day 2, Day 3, Day 4 , Day 5, Day 6 and Day 7 of the hearing.

Source:  twitter.com/SFLCin

Hot Off The PressNews

On Day 26 of the Aadhaar Hearing, Attorney General KK Venugopal completed his submissions before the 5-judge bench of Dipak Misra, CJ and Dr. AK Sikri, AM Khanwilkar, Dr. DY Chandrachud and Ashok Bhushan, JJ. Additional Solicitor General Tushar Mehta began his arguments before the Bench.

Below are the highlights from Day 26 of the Aadhaar Hearing:

  • AG: Section 59 of the Aadhaar Act, 2016 provides retrospective effect. (Cites cases to show that a particular action can be validated by a subsequent Act, as it happened in the case of Aadhaar. Reads out the third version of the Aadhaar enrollment form. Reads out the content and says it’s free and voluntary and has provisions for taking informed consent.)
  • Chandrachud, J: The first two forms did not have any reference to biometrics. It was only inserted in the third form.
  • AG: The CBI had gone to Bombay high court to obtain biometrics in connection of a rape, since UIDAI had refused to provide them as biometric data cannot be shared without the individual’s consent. The state has no interest in collection of biometrics except for the benefit of the individual himself. Emphasizes that invasion is privacy. When there was no right to privacy, the government acted in a bonafide manner when they enacted Aadhaar. Therefore that action cannot be said to be void by retrospective action.
  • Chandrachud, J: the question of privacy was irrelevant in MP Sharma. Only the first part of Kharak Singh affirmed that there’s a right to privacy. The subsequent judgments that affirmed privacy relied on the first part of Kharak Singh.
  • AG completes his submissions.
  • ASG Tushar Mehta:
    • The challenge to section 139aa was examined by this court. Apart from right to privacy, all other aspects were considered.
    • In Privacy Judgment, all nine judges have affirmed that right to privacy is not absolute.
    • J. Chandrachud laid down the three tests under which privacy can be invaded in particular cases. Five out of nine judges have upheld the principles of legitimate state interests and proportionality.
    • A legislation has to pass all four tests to be valid. Three laid down in Privacy Judgment and also the test of manifest arbitrariness.
    • All these tests were examined in Binoy Viswam although in the context of Article 19.
    • Another test will be the test of larger public interest.
    • All the demographic information that is required under Aadhaar was already being taken since 1989 under section 139a of the income tax (for obtaining PAN).
    • Left hand thumb impression was also taken for people who can’t sign. Bench says there’s no collection of biometrics and there’s no authentication taking place.
    • Those who have already taken PAN do not have any legitimate interest in withholding information that they have already provided for obtaining PAN.
    • 1.3 lakh cases of duplicate PAN were found. Says that PAN can be misused for the purpose of tax evasion, black money , setting up shell companies etc. Aadhaar will ensure that one person has one PAN by interconnecting the PAN-aadhaar database.
    • Even companies need pan cards. And the documents used for obtaining PAN can be easily forged. Therefore, Aadhaar with the use of Biometrics will prevent that.
    • Fake PAN cards are used to create shell companies abroad and Aadhaar can make sure that this does not happen.
    • Uniqueness of pan is important. Deduplication test needs to be conducted. Demographic way of verifying de duplication is not fool proof. Hundred percent verification is possible with Aadhaar as biometrics and Iris scans will be used.
    • There’s a huge gap between the no.of PAN holders and the entire tax base.
    • Finance minister has described financial frauds in his Feb speech. Also our tax collection is very low in our GDP ratio. We are a largely tax non compliant country and the burden of people who evade taxes falls on honest tax paying citizens.
    • 17.4 cr out of 36 cr tax payers have already linked their Aadhaar with PAN. Even transgenders are included without having to disclose their gender.
  • Bhushan, J:  You’ll have to prove there’s no violation of privacy. In substance Puttaswamy and Shaira bano retrospectively ratifies what was held in Binoy Viswam.

____________________________________________________________________________________________________________________________

To read the highlights from the other submissions by the Attorney General, click here, here , here and here.

To read the highlights from the PowerPoint Presentation made by the CEO of UIDAI, click here.

To read the highlights from submissions of Senior Advocates Meenakshi Arora, Sajan Poovayya, CU Singh, Sanjay Hegde and Counsel Jayna Kothari, click here.

To read the highlights from submissions of Senior Advocates KV Viswanathan and Anand Grover, click here.

To read the highlights from Senior Advocate Arvind Datar’s submissions, click here, here and here.

To read the highlights from Senior Advocate Gopal Subramanium’s submissions, click here, here and here.

To read the highlights from Senior Advocate Kapil Sibal’s arguments, click here, here and here.

Looking for the detailed submissions of Senior Advocate Shyam Divan? Read the highlights from Day 1, Day 2, Day 3, Day 4 , Day 5, Day 6 and Day 7 of the hearing.

Source:  twitter.com/SFLCin