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Decoding latest salvo in Nirav Modi privilege battle: CAM had no privilege, claims CBI

Nirav Modi privilege debate likely is far from over...
Nirav Modi privilege debate likely is far from over...

After an unnamed Central Bureau of Investigation (CBI) source had told the Times of India in April that the agency might file a case against Cyril Amarchand Mangaldas (CAM) over Nirav Modi files it had held, Reuters has today run a follow-up scoop that has been widely picked up by nearly all Indian media.

Ironically, despite Reuters’ headline today of “Exclusive: Indian police scrutinize major law firm in PNB fraud probe after documents moved”, the substance of the headline was not much of a scoop, but was nearly identical to the April Times of India headline of “CBI lens on top law firm in PNB scam”.

Indeed, much of the story was similar. Reuters today had led with: “India’s largest law firm, Cyril Amarchand Mangaldas (CAM), is being scrutinized by federal agents after they seized documents related to the $2 billion fraud at state-run Punjab National Bank”; the April Times story had led with: “CBI is exploring the option of naming a top law firm either as a conspirator or registering a fresh case - for possession of stolen property...”

While the Times of India in April did not name CAM (though we did in our coverage), today the Economic Times republished the Reuters story and went with: “Law firm, Cyril Amarchand Mangaldas, under scanner in PNB fraud probe”.

Zee Business was even bolder (and likely more reckless, seeing as the article has since been taken offline), asking in its headline (despite no evidence of fraud in the Reuters story): “Did India’s largest law firm Cyril Amarchand commit fraud? CBI hot on trail”.

(For the avoidance of doubt, the answer to that question, as dictated by Betteridge’s law of headlines and according to the facts currently available, has to be ‘no’).

Where’s the news?

But let’s put media over-excitement about anything Nirav Modi aside and take a step back and figure out what’s new, exactly.

As we see it, there are at most three new developments in today’s Reuters story.

First, Reuters has a named source to support its lead, rather than only an unnamed CBI source that the original Times of India story had.

Second, the Reuters story and CBI sources also go into privilege, which is probably the crux of the issue, as we had predicted in March, as later supported by the CBI court submissions.

And third, thanks to Reuters, we now know how many Modi documents were allegedly in CAM’s possession: “The documents were moved in a mini-truck in 50-60 cartons to the law firm, according to two witness testimonies seen by Reuters.”

However, according to Reuters today, citing CBI counsel K Raghavacharyulu and one unnamed CBI source, the agency is still considering whether to file charges against the law firm, with Raghavacharyulu reportedly saying: “Who told you we are not going to charge them? The possibility of naming CAM in the next Nirav Modi case charge sheet has not been ruled out.”

Since the CBI were considering that same option back in April and they are still apparently considering that option five months later, this begs the question: what exactly is taking them so long? Furthermore, Reuters reported today:

Since then, Raghavacharyulu said, police have not interviewed any CAM official in the case, though one CBI source said that before filing the first charge sheet, police summoned, questioned and recorded the statement of at least one junior CAM lawyer.

Surely, if the CBI had a solid case against CAM, they would have interviewed a few more people and managed to file charges already?

Much of the subtext between the lines of these reports point towards the CBI indulging in some sabre rattling, but what is particularly interesting is why the CBI feels that it needs to rattle any sabres at all?

Why the sharp words?

We had first broken on 26 February 2018 that CAM had been raided by the CBI and had cooperated, handing over documents relating to the scam probe into Nirav Modi, who had purportedly been a client of the firm on a matter that was not directly related to the fraud.

As we had argued in March 2018, however, the raid and possible cooperation by CAM with the CBI may face several problems with respect to lawyer-client privilege.

Particularly, as implied in a Mumbai special court application by the CBI in late March, the letter of undertaking (LOU) that it had recovered from CAM’s premises could be critical to a future prosecution of Nirav Modi and his associates.

If this document was potentially covered by lawyer-client privilege, Modi could try to invoke privilege in his defence in order for the evidence not to be admissable, which would require the CBI to rebut Modi’s privilege assertion (whether any of his co-accused associates could also rely on this is a different question).

However, according to Reuters’ report of today, prosecution counsel K Raghavacharyulu said: “CAM was not their attorney in the PNB fraud case, 100 percent sure ... that’s why they could not cite attorney-client privilege.” According to Reuters, Raghavacharyulu based his statement on “regular briefings” from CBI investigating officers.

It is reasonable that the CBI is hoping that the privilege question will just magically go away, especially before any potential trial.

But despite Raghavacharyulu - who has a colourful history having in 2014 himself faced CBI raids relating to the Karnataka mining scandal - apparently being “100 percent sure” about the privilege question, it’s unlikely to be as cut and dry.

How the privilege cookie crumbles (or not)

For one, it is highly unlikely Modi would have parked allegedly detrimental documents with CAM without having been a CAM client at least on paper, presumably wanting to take advantage of lawyer-client privilege (as seems to be implied in the narrative of the entire affair). Otherwise, Modi could have just dumped the documents in a warehouse, a basement, with a chartered accountant or in a fire, rather than with a law firm.

Alternatively, there is the ‘document storage’ theory, as had been speculatively put forward by lawyer Lalit Bhasin, which would imply that any lawyer-client relationship between Modi and CAM was a mere figleaf and the documents were completely unrelated to the actual instruction for legal work.

In such a case, this could mean that privilege does not apply, though, according to our March report even that is not a certainty:

One senior counsel, who deals in criminal matters and PILs but declined to be identified, disagrees that there was even a document storage exemption. “It’s kept for a client, not for the purposes of storage, because the lawyer wants to keep it,” he says simply.

After all, if a client asks a lawyer to represent them and then sends you a bunch of documents they claim are related, who is a lawyer to decide whether those documents are relevant or not (the large quantity of documents, 50-60 cartons in this case, could work for or against CAM and privilege in this respect, depending on what the instruction was).

But even if the factual situation is clear-cut, the CBI’s problem will be that there is not a lot of Indian case law (or statute) around privilege, as we had reported in March, and if the LOU is crucial to the prosecution (and if Modi ever faces the courts), whether privilege exists or not could end up being a hard-fought point by Modi’s lawyers.

Another way to nix privilege would be the fraud exemption, under section of the Indian Evidence Act 1872 under which the lawyer must have taken part or assisted in a fraud willingly and knowingly.

Seeing as there is currently no evidence of fraud committed by CAM and as the CBI does not seem to have alleged any fraud by CAM either so far, either on- or off-the-record, all that remains is an implied threat to CAM.

Of course, CAM too finds itself between a rock and a hard place: if the documents do indeed turn out to have been potentially privileged, then it doesn’t look great that CAM surrendered them in a CBI raid so quickly (with theoretical but unspecified damages against CAM available to Modi).

On the other hand, if the documents are not at all privileged, then the question arises of what CAM was doing with the documents in the first place (again, the quantity of 50-60 cartons could potentially work in their favour or against them). At that point, CAM might also be called upon to assert that it had taken receipt of the documents in good faith from Modi (though that could be very hard for the CBI to disprove in reality).

While, frustratingly for the CBI, it has not made much headway in apprehending Modi, it’s also remains likely that the legal side of the story will only really begin once they do.

Until then, there are sabres to rattle.

CAM declined to comment and did not respond to requests for comment by us, though it did to Reuters:

CAM declined to comment on its relationship with Modi, who is on the run overseas. Its spokeswoman, Madhumita Paul, said the firm “strictly follows the legal best practices and does not comment on matters that are sub-judice or are under investigation”.

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