In February 2018, the Punjab National Bank (PNB), India’s second-biggest state-run lender, announced the discovery of an alleged fraud worth Rs 11,400 Crores ($1.8 billion) at a single branch in Mumbai. The fraud was by far the biggest in India’s history. Before the announcement of the discovery, PNB lodged a criminal complaint with India’s federal investigative body against three firms: namely, Solar Exports, Stellar Diamonds, and Diamond R US, and four people, including billionaire gems merchant Nirav Modi and his uncle Mehul Choksi, the managing director of Gitanjali Gems.
The complaint further stated that they were defrauded for a sum of 2.8 billion rupees ($43 million). A subsequent review and amendment of the complaint in February held the sum to 113.94 rupees ($1.77 billion). Their complaint also mentioned that two junior employees working at its Brady House branch in Mumbai colluded with the named perpetrators, and issued fraudulent “letters of undertaking”, or LoUs, without taking any margin money as security even though the companies did not have any pre-approved credit limit. The companies allegedly raised short-term credit from overseas Indian bank branches based on these LoUs, and in some cases, fraudulent foreign letters of credit (FLCs) in favour of foreign suppliers.
Modi was subsequently arrested in February 2019 from his London penthouse where he had been hiding from arrest for over a year. After getting arrested, he petitioned the court multiple times for bail, but these petitions were all rejected by the courts based on the evidence that was presented by the Central Bureau of Investigation (CBI) and the Enforcement Directorate (ED).
The Westminster Magistrates’ Court’s Decision
District Judge (MC) Sam Goozée started his 83-page judgment by restating the background and chronology of the proceedings, the challenges to extradition, and the request and the prima facie case made against Nirav Modi. He noted the CBI’s request, under which the Government of India had to establish that Nirav Modi (i) formed or was party to an agreement, (ii) to defraud the PNB by, (iii) dishonestly causing or permitting the issue of LoUs, (iv) by one or more of the indicated means, and (v) causing loss/risk of loss to PNB.
Having considered the judgment of Shillam  EWCA Crim 160, and the evidence provided by the CBI, the Court held that (i) the LoUs were issued by Nirav Modi’s firm, (ii) the LoUs had been issued in the same manner as LoUs issued to Nirav Modi’s firms between 2011-2017, without appropriate cash margins and without being recorded on the bank’s systems, (iii) the LoUs needed to be entered to the bank; the fact that they were not entered, goes to show that the PNB was targeted to be misled and defrauded without detection, (iv) moreover, the argument stating that the PNB had provided companies with long-established and largely unsecured LoU credit facility without having to enter the bank’s system was not evidence-supported. As such, there were clear links between Nirav Modi, and in the least case, the co-conspirators operating the fraud.
Regarding the Request by the ED, it was held that the case for money laundering was “parasitic” on whether a prima facie case of conspiracy to defraud has been made out. Having established a case for conspiracy to defraud under the CBI’s request, the case for money laundering was also established without the need for an evidential re-examination of the facts again.
Having established a case for conspiracy to defraud and money laundering charges against Nirav Modi, the Court had to decide whether the extradition request had met the applicable requirements under the Extradition Act 2003 (EA 2003). The submission by the Government of India was that the offences specified in the request were extradition offences as defined by s.137(3) of the 2003 Act, which applied that Nirav Modi is accused in a Category 2 territory of the commission of offences constituted by the conduct set out in the request. The test was based upon the conduct described rather than upon the elements of the foreign offence. Moreover, according to s.206 of the EA 2003, the burden to prove the criminal standard lied with the receiving state.
In determining the conduct, the Court was to consider s.137 EA 2003. The correct 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, whether it would have constituted an English offence. The meaning of “constitute an offence” did not mean that the receiving state had to prove Modi’s guilt, it simply meant that, if proved, it would constitute a comparable English offence. In light of considerations made, the Court held that Nirav Modi could be extradited to India to face trial. However, Modi’s legal team raised human rights challenges against the extradition request; notably, Art 6 (right to a fair trial), and Art 3 (prohibition of torture and inhuman or degrading or punishment) of the European Convention of Human Rights (ECHR) and s.91 EA 2003.
Concerning Art 6 ECHR, the provision prohibits extradition in circumstances where there are substantial grounds for believing that there is a real risk that, if extradited, an individual would be exposed to a “flagrant denial of a fair trial”. Here, “real risk” did not mean proof on the balance of probabilities. Rather, it meant a risk that is substantial and not merely fanciful; it may be established by something less than a proof of 51% probabilities. Besides, “flagrant denial of justice” was considered “synonymous with a fair trial which is manifestly contrary to the provisions of Art 6 or the principles embodied therein”. It was the same as establishing a real risk of a “gross violation” or showing that the deficiencies in the process were such that the trial he would face on his return would be “so fundamental as to amount to a nullification or destruction of the very essence of the rights guaranteed”. This burden to prove lied with the requested person i.e., Nirav Modi.
The Court held that the evidence presented by Nirav Modi, especially the articles and newspaper cutouts stating that Nirav’s case has attracted political attention, and the testimonials of Indian lawyers and Justices stating the influence of Indian politicians and media broadcasting agencies, there is no doubt that the outcome of the case would be widely monitored in India. Nevertheless, the Court held that such situations are not exceptional, in that, Nirav Modi is a high-profile businessman and is charged with serious allegations. Although news media should generally refrain from reporting on these matters as they fall under judicial deliberations, it does not necessarily mean that Modi would be stripped of his right to a fair trial in India, should he be extradited. As such, his defense, under Art 6 failed.
Similarly, another challenge under Art 3 and s.91 EA 2003 was made by Nirav Modi’s team. That challenge, although separate from the challenge under Art 6, was inextricably linked due to the deterioration in Nirav Modi’s mental health since being taken into custody by the HMP Wands worth. Under Art 3, the extradition would be prohibited if there were substantial grounds for believing that there is a real risk of treatment that violates Art 3 i.e., a treatment that amounts to torture or inhuman or degrading treatment or punishment. Moreover, the prohibition is in absolute terms, and therefore “its guarantees apply irrespective of the reprehensible nature of the conduct of the person in question”. There is no threshold for flagrancy here. Although the burden on the defence is less than on the balance of probabilities, the risk had to be more than fanciful.
In a case where assurance was given by a foreign state, the Court was required to consider the eleven “Othman factors” when addressing the reliability of an assurance which ultimately all went to the question of whether a foreign state could be trusted. Notwithstanding that the assurances can, in principle, be deployed as a mechanism to support a foreign extradition request, they are not a panacea, and any assurances fall to be considered against a broader canvas.
Additionally, S.91 EA 2003 provided that an individual may not be extradited where the mental health of the accused is such that it would be “unjust or oppressive”. What amounted to “unjust or oppressive” was a question of fact. While it was clear that when a defendant is unfit to stand trial, it will be regarded as “unjust and oppressive”, the situation of Nirav Modi did not fall into this category. Under a letter of assurance by the Government of India, alongside several other details supplementary of the letter, and documentary and visual evidence presented to the Court, it was held that extraditing Nirav Modi to India to face trial will not hamper his rights as provided in Art 3 and S.91 EA 2003 jointly.
Nirav Modi would have a right to appeal to the High Court against the decision to send the case to the Secretary of State. However, this appeal would not be heard till the Secretary of State has made a decision. The appeal, however, has to be made within 14 days of the Secretary of State’s decision. Given the strong diplomatic relations between India and the UK, it is very likely that the Secretary of State would decide in favor of the Indian government.
Click here to view the Judgement.
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