hearing date: august 29, 2018 time: 10:00 a.m. … · republic of iraq v. abb ag, 768 f.3d 145 (2d...

Hearing Date: August 29, 2018Time: 10:00 a.m.

UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF NEW YORK

NOTICE OF MOTION FOR ENTRY OF AN ORDER, PURSUANT TO

FEDERAL RULE OF CIVIL PROCEDURE 45, TO QUASH SUBPOENAS ISSUED BY

PUNJAB NATIONAL BANK TO NON-PARTIES MIHIR BHANSALI AND

RAKHI BHANSALI AND/OR FOR A PROTECTIVE ORDER

PLEASE TAKE NOTICE that upon the annexed memorandum of law of non-parties

Mihir Bhansali and Rakhi Bhansali and the Declaration of Thomas J. McCormack, dated August

8, 2018, along with the exhibits annexed thereto, by their attorneys, the undersigned will move at

a hearing before the Honorable Sean H. Lane, United States Bankruptcy Judge, United States

Bankruptcy Court for the Southern District of New York, Alexander Hamilton Custom House,

Courtroom 701, One Bowling Green, New York, New York, 10004, on August 29, 2018 at 10:00

a.m., or as soon thereafter as counsel can be heard, for the entry of an order, pursuant to Rule 45

of the Federal Rules of Civil Procedure, made applicable to this proceeding through Federal Rule

of Bankruptcy Procedure 9016, and this Court’s July 26, 2018 Order preserving the rights of

subpoena targets to object to and oppose such subpoenas (Dkt. 324), to quash four subpoenas,

dated July 26, 2018, issued by Punjab National Bank, which seek the depositions and

1 The Debtors are the following three entities (the last four digits of their respective taxpayer identification numbersfollow in parentheses): Firestar Diamond, Inc. (2729), Fantasy, Inc. (1673), and A. Jaffe, Inc. (4756).

In re:

Firestar Diamond, Inc., et al.,1

Debtors.

Chapter 11

Case No. 18-10509 (SHL)

(Jointly Administered)

18-10509-shl Doc 355 Filed 08/08/18 Entered 08/08/18 22:46:38 Main Document Pg 1 of 3

productions of documents from each of the Bhansalis, and/or for a protective order, and for such

other and further relief as the Court deems just and proper.

PLEASE TAKE FURTHER NOTICE that objections, if any, to the motion shall conform

to the Federal Rules of Bankruptcy Procedure and the Local Bankruptcy Rules for the Southern

District of New York, shall set forth the grounds therefor with specificity, and shall be filed with

this Court electronically in accordance with General Order M-399 (General Order M-399 and the

User’s Manual for the Electronic Case Filing System, which can be found at

www.nysb.uscourts.gov, the official website for this Court) by registered users of this Court’s

case filing system, and by all other parties in interest on a 3.5” disk or other electronic media,

preferably in PDF or any other Windows-based word processing format (with a hard copy

delivered directly to the Judge’s chambers) and served in accordance with General Order M-399

upon (i) Norton Rose Fulbright US LLP, attorneys for Mihir Bhansali and Rakhi Bhansali, 1301

Avenue of the Americas, New York, New York, 10019, Attn.: Thomas J. McCormack, Esq.; and

(ii) the Office of the United States Trustee, U.S. Federal Office Building, 201 Varick Street,

Room 1006, New York, New York, 10014, Attn. Richard C. Morrissey, Esq., so as to be

received not later than seven days prior to the hearing.


Dated: August 8, 2018

New York, New York

Respectfully submitted,

NORTON ROSE FULBRIGHT US LLP

By: /s/ Thomas J. McCormackThomas J. McCormackMarc D. AshleyFrancisco Vazquez1301 Avenue of the AmericasNew York, New York 10019-6022Tel.: (212) 408-5100Fax: (212) 541-5369

Attorneys for Mihir Bhansali and Rakhi Bhansali



MEMORANDUM OF LAW OF NON-PARTIES MIHIR BHANSALI AND

RAKHI BHANSALI IN SUPPORT OF THEIR MOTION TO QUASH SUBPOENAS

ISSUED BY PUNJAB NATIONAL BANK AND/OR FOR A PROTECTIVE ORDER


In re:


Debtors.

Chapter 11

Case No. 18-10509 (SHL)


18-10509-shl Doc 355-1 Filed 08/08/18 Entered 08/08/18 22:46:38 Memorandum of Law Pg 1 of 27

i

TABLE OF CONTENTS

Page

PRELIMINARY STATEMENT .....................................................................................................1

JURISDICTION AND VENUE ......................................................................................................3

PROCEDURAL HISTORY.............................................................................................................3

FACTUAL BACKGROUND..........................................................................................................6

A. Public Revelation of the Extensive Fraud Involving PNB ......................................6

B. The Alleged LOU Scheme.......................................................................................8

C. The Alleged Fraud Was Carried Out With the Participation andKnowledge of Senior PNB Employees....................................................................9

D. PNB Has Admitted That It Benefited From the Allegedly FraudulentLOUs......................................................................................................................10

ARGUMENT.................................................................................................................................10

I. LEGAL STANDARD........................................................................................................10

II. PNB IS NOT ENTITLED TO DISCOVERY FROM THE BHANSALISBECAUSE IT WAS COMPLICIT IN THE ALLEGEDLY FRAUDULENTACTIVITY IN INDIA .......................................................................................................11

III. THE DISCOVERY SOUGHT BY PNB IS AN IMPROPER USE OF RULE 2004........16

A. PNB Should Not Be Permitted To Seek Discovery For Use in India....................16

B. PNB Should Not Be Permitted To Seek Discovery in Support of PotentialClaims Against Non-Debtors That Are Unrelated to the Bankruptcy ...................19

C. PNB Should Not Be Permitted To Seek Discovery in Support of PotentialClaims Against the Debtors in This Bankruptcy ...................................................19

IV. THE DOCUMENT SUBPOENA DIRECTED TO RAKHI BHANSALICONSTITUTES IMPERMISSIBLE HARASSMENT .....................................................20

V. IF PNB’S DISCOVERY IS ALLOWED TO PROCEED, THE BHANSALISRESERVE THE RIGHT TO SERVE RECIPROCAL DISCOVERY..............................21

CONCLUSION..............................................................................................................................22


ii

TABLE OF AUTHORITIES

Page(s)

Cases

In re 19 Court St. Assocs., LLC,190 B.R. 983 (Bankr. S.D.N.Y. 1996).....................................................................................19

Bateman Eichler, Hill Richards, Inc. v. Berner,472 U.S. 299 (1985).................................................................................................................12

Celotex Corp. v. Edwards,514 U.S. 300 (1995).................................................................................................................19

In re Enron Corp.,281 B.R. 836 (Bankr. S.D.N.Y. 2002)...............................................................................17, 20

Gov’t Employees Ins. Co. v. Lenex Servs., Inc.,No. 16-6030, 2018 WL 1368024 (E.D.N.Y. Mar. 16, 2018)...................................................20

Hughes v. Twenty-First Century Fox, Inc.,17-7093, 2018 WL 1936096 (S.D.N.Y. April 24, 2018) .........................................................10

In re ICP Strategic Income Fund, Ltd.,730 F. App’x 78 (2d Cir. 2018) ...............................................................................................13

Jaffe v. Jaffe,940 N.Y.S.2d 1 (1st Dep’t 2012) .............................................................................................20

Kirschner v. Grant Thornton LLP,No. 07-11604, 2009 WL 1286326 (S.D.N.Y. Apr. 14, 2009), aff’d sub nom.Kirschner v. KPMG LLP, 626 F.3d 673 (2d Cir. 2010)...........................................................14

Kirschner v. KPMG LLP,15 N.Y.3d 446 (N.Y. 2010) ...................................................................................12, 13, 15, 16

In re Lehr Constr. Corp.,528 B.R. 598 (Bankr. S.D.N.Y. 2015) (Lane, J.), aff’d, 551 B.R. 732(S.D.N.Y. 2016), aff’d¸666 F. App’x 66 (2d Cir. 2016)..............................................13, 14, 15

In re Lehr Constr. Corp.,551 B.R. 732 (S.D.N.Y. 2016), aff’g 528 B.R. 598, 608(Bankr. S.D.N.Y. 2015) (Lane, J.), aff’d, 666 F. App’x 66 (2d Cir. 2016) .............................12

In re MF Glob. Holdings Ltd. Inv. Litig.,998 F. Supp. 2d 157 (S.D.N.Y. 2014), aff’d sub nom.In re MF Glob. Holdings LTD. Inv. Litig., 611 F. App’x 34 (2d Cir. 2015) ...............12, 15, 16


iii

McCarthy v. Sarroff, No. 02-6030,No. 02-6030, 2003 WL 21145573 (S.D.N.Y. May 16, 2003) .................................................20

New Greenwich Litig. Tr., LLC v. Citco Fund Servs. (Europe) B.V.,41 N.Y.S.3d 1 (1st Dep’t 2016) .....................................................................................13, 14, 6

Peltz v. SHB Commodities, Inc.,115 F.3d 1082 (2d Cir. 1997)...................................................................................................12

Pinter v. Dahl,486 U.S. 622 (1988)...............................................................................................12, 14, 15, 16

Republic of Iraq v. ABB AG,768 F.3d 145 (2d Cir. 2014)...............................................................................................14, 15

Sigal v. Metro. Life Ins. Co.,No. 16-3397, 2017 WL 1969680 (S.D.N.Y. May 12, 2017) ...................................................11

Snyder v. Soc’y Bank,181 B.R. 40 (S.D. Tex. 1994), aff'd sub nom.In re Snyder, 52 F.3d 1067 (5th Cir. 1995) (unpublished) ......................................................17

In re SunEdison, Inc.,562 B.R. 243 (Bankr. S.D.N.Y. 2017).....................................................................................17

Statutes

28 U.S.C. § 157(b) ...........................................................................................................................3

28 U.S.C. § 1334..............................................................................................................................3

28 U.S.C. § 1408..............................................................................................................................3

28 U.S.C. § 1409..............................................................................................................................3

Fed. R. Bankr. P. 2004........................................................................................................... passim

Fed. R. Civ. P. 26...........................................................................................................................10

Fed. R. Civ. P. 45...........................................................................................................................10


Non-parties Mihir Bhansali and Rakhi Bhansali (collectively, the “Bhansalis”)2, pursuant

to Federal Rule of Civil Procedure 45, made applicable to this proceeding through Federal Rule

of Bankruptcy Procedure 9016, and this Court’s July 26, 2018 Order preserving the rights of

subpoena targets to object to and oppose such subpoenas (Dkt. 324), submit this memorandum of

law in support of their motion to quash four subpoenas, dated July 26, 2018, issued by Punjab

National Bank (“PNB”), which seek the depositions and productions of documents from each of

the Bhansalis (collectively, the “Subpoenas”) and/or for a protective order.3

PRELIMINARY STATEMENT

The Subpoenas are premised on a selective factual presentation to this Court and purport

to relate to claims that PNB will be barred from pursuing because of its own thoroughgoing and

self-acknowledged complicity in the underlying alleged fraud. PNB personnel, including its

former CEO, have already been charged by Indian criminal authorities with respect to the very

same allegedly fraudulent scheme that is the focus of the Subpoenas. PNB’s discovery is

improper, exploitative of this proceeding, and should be summarily quashed. This Court should

not be used in service of PNB’s self-serving agenda beyond this bankruptcy.

PNB alleges that it has been the “single largest victim” of a “massive fraud” in India

perpetrated by Nirav Modi. Dkt. 224 at 1. Yet, to date, PNB has carefully curated the

information regarding the alleged fraud that it has presented in these proceedings, creating the

misleading impression that the alleged scheme was the result of a handful of rogue employees

and limited to one branch office. Conspicuously absent from PNB’s pleadings has been any

2 Mihir Bhansali is the former President and sole director of each of the Debtors. His wife, Rakhi Bhansali, hasnever been employed by or involved with the Debtors’ business.

3 The Subpoenas are attached to the accompanying Declaration of Thomas J. McCormack, dated August 8, 2018(the “McCormack Decl.”), as Exhibits A-D.


2

explanation of how such a “massive” fraud managed to continue unhindered and undetected for

over six years.

In reality, the alleged fraud did not go undetected by PNB. To the contrary, as Indian law

enforcement authorities have asserted, senior PNB executives were complicit in the alleged fraud,

and the bank’s participation was pervasive through many levels of staff and occurred in multiple

offices, including PNB’s headquarters.

Despite its incomplete presentation of the underlying facts in these proceedings, in other

settings PNB has already acknowledged its complicity in the alleged scheme. Four months ago,

in April 2018, PNB received the results of the internal investigation that it commissioned into the

alleged fraud. PNB condemned its own behavior, concluding that over 50 PNB employees –

from clerks to top management – engaged in, facilitated or blatantly ignored certain fraudulent

conduct over the span of more than six years, a reality the investigators found

“incomprehensible.” One month later, in May 2018, India’s Central Bureau of Investigation

(“CBI”) (India’s FBI analogue) criminally charged a dozen current or former PNB employees –

including PNB’s former CEO – in connection with the alleged scheme.

PNB’s systemic complicity in the alleged fraud – its own unclean hands – would

definitively bar it from bringing any related claims against the Bhansalis as a result of the in pari

delicto doctrine, which is a robust principle in New York and has long been firmly established in

this Circuit. PNB is not entitled to seek discovery in this proceeding related to claims that it

would be barred from pursuing due to its own pervasive misconduct, from which PNB clearly

benefited. PNB is no hapless victim here.

Furthermore, as PNB has explicitly admitted, its discovery is clearly aimed at discovering

facts and obtaining admissions related to future litigation having nothing to do with this


3

bankruptcy. Its discovery interests and objectives vis-à-vis the Bhansalis are tied not to

obtaining information relating to the “acts, conduct, or property or to the liabilities and financial

condition of the debtor” or any other grounds set forth in Rule 2004, but rather to propping up its

own litigation prospects connected to its losses in India. PNB’s discovery is extraneous to this

bankruptcy, and should be quashed for that additional reason.

JURISDICTION AND VENUE

This Court has subject matter jurisdiction to consider and determine this matter pursuant

to 28 U.S.C. § 1334. This is a core proceeding pursuant to 28 U.S.C. § 157(b). Venue is proper

before this Court pursuant to 28 U.S.C. §§ 1408 and 1409.

PROCEDURAL HISTORY

On February 26, 2018, the Debtors petitioned this Court for protection under Chapter 11

of the Bankruptcy Code. Nirav Modi (“Modi”), an Indian jeweler and businessman, is the

indirect majority shareholder of the Debtors. Law enforcement in India has alleged that Modi

and certain affiliated entities (collectively, the “Modi Entities”) participated in fraudulent activity

in India through and with the assistance of officers of Punjab National Bank (“PNB”). See

McCormack Decl., Ex. E at 1-3.

On April 13, 2018, the Court appointed a Chapter 11 Examiner to investigate, among

other things, “the circumstances surrounding the alleged fraud involving the individual known as

Nirav Modi, certain persons or entities affiliated with Nirav Modi (the ‘Modi Entities’) and

certain employees of Punjab National Bank (the ‘Alleged Fraud Circumstances’) […].” Dkt. 103

at 2; Dkt. 326. On May 29, 2018, the Court granted the Examiner’s motion for entry of an Order

pursuant to Bankruptcy Rule 2004 authorizing him to issue subpoenas for the production of

documents and the examination of persons and entities in aid of his investigation. Dkt. 191.

Thereafter the Examiner issued, pursuant to Rule 2004, subpoenas for a deposition and the


4

production of documents to Mihir Bhansali and a subpoena for the production of documents to

Rakhi Bhansali.

Mihir Bhansali is the former President and sole director of each of the Debtors. He

resigned on May 18, 2018. His wife, Rakhi Bhansali, has never been employed by or involved

with the Debtors’ business.

On June 7, 2018, upon the motions of the U.S. Trustee and PNB, to which the Ministry of

Corporate Affairs of the Union of India joined, the Court directed the U.S. Trustee to appoint a

Chapter 11 Trustee in this bankruptcy case pursuant to Sections 1104(a)(1) and (a)(2) of the

Bankruptcy Code. Dkt. 216. The U.S. Trustee’s memorandum of law in support of its motion

states the appointment of a Trustee is needed to “preserve what remains of the debtors’ operations

and value.” Dkt. 185-1 at 2.

Previously, in March 2018, the Debtors had petitioned the Court to approve proposed

bidding procedures related to the sale of substantially all of the Debtors’ assets, including, among

other things, setting a date to hold an auction to sell the assets of A. Jaffe, Inc. (the “Sale

Motion”). Dkt. 60. The Court granted the Sale Motion on April 3, 2018, and an auction was set

for May 3, 2018. See Dkt. 95. On May 3, the winning auction bidder agreed to pay $8 million

for certain assets of A. Jaffe, Inc., which the Debtors represented was the “highest and best

achievable bid under the circumstances.” Dkt. 160 ¶¶ 11, 34; Dkt. 162.

On May 10, 2018, PNB filed an objection to the sale of A. Jaffe, Inc.’s assets to the

highest bidder, arguing that the sale should be postponed pending discovery into the “Debtors’

involvement in the Modi fraud” under the rationale that if “there is no such involvement, this

will no doubt result in better and higher bids for the Debtors’ assets.” Dkt. 148 ¶¶ 28, 33. PNB

asked the Court to “allow discovery, including through the Examiner process, to clarify whether


5

the Debtors were sufficiently intertwined with Modi and the fraud that the Court should allow

constructive trust or similar claims by PNB against the Debtors’ assets.” Dkt. 148 ¶ 33. The

objections by PNB led to discovery and a contested hearing on the subject, as well as follow-up

discovery requests. During a telephonic hearing with the Court on May 18, 2018 with PNB’s

counsel present, counsel for Mihir Bhansali represented to the Court that if ordered to testify in

connection with the pending Sale Motion, Mihir Bhansali would assert his constitutional right

against self-incrimination, given the ongoing events in India and elsewhere.

Subsequently, Debtors withdrew the Sale Motion seeking approval of the sale of certain

assets of A. Jaffe, Inc. that PNB had opposed, and the $8 million bid was withdrawn. Dkt. 177.

Almost two months later, the Court approved the sale of substantially the same assets of A. Jaffe,

Inc. to the same bidder for significantly less money. Dkt. 332.

On June 14, 2018, after the Examiner had issued subpoenas to the Bhansalis, and after

PNB and the U.S. Trustee had successfully moved this court to appoint a Trustee “to preserve

what remains of the debtors’ operations and value” (Dkt. 185-1), PNB moved ex parte for an

Order pursuant to Rule 2004 authorizing it to issue its own subpoenas for the production of

documents and for the examinations of persons in these proceedings, purportedly to “obtain

information relevant to PNB’s claims against the Debtors.” Dkt. 224 ¶¶ 3, 18(a). In its motion,

PNB stated, “Rule 2004 discovery is necessary to confirm PNB’s claims against the Debtors and

their insiders, as well as its prima facie constructive trust claims.” Id. ¶ 25. PNB also stated,

“[t]o the extent Bhansali (or anyone else) is inclined to not testify on this basis in connection

with the Subpoenas, he or she should properly invoke those Fifth Amendment rights in the

context of a pending subpoena so that there is an appropriate record to support any adverse

inferences against the Debtors and in favor of PNB’s claims.” Id. ¶ 28.


6

On July 26, 2018, the Court granted PNB’s motion (Dkt. 324), and PNB served

subpoenas on Mihir Bhansali and Rakhi Bhansali later that day (McCormack Decl., Exs. A-D).

The Order granting PNB’s motion specifies that “nothing herein shall limit the substantive rights

of any target of a subpoena under applicable law to object to or oppose any subpoena PNB has

served.” Dkt. 324 at 3.

On August 7, 2018, the Examiner deposed Mihir Bhansali, which PNB also attended

pursuant to an invitation from the Examiner over Bhansali’s objection. As Bhansali’s counsel

had advised the Court on May 15, and subsequently advised the Examiner prior to Bhansali’s

deposition that he would do so, Bhansali asserted his Fifth Amendment right against self-

incrimination at the Examiner’s deposition. The Examiner’s report is due on August 17, 2018.

FACTUAL BACKGROUND

A. Public Revelation of the Extensive Fraud Involving PNB

While PNB has represented to this Court various facts relating to the allegedly fraudulent

activity in India (see, e.g., Dkt. 148), it has pointedly omitted salient facts regarding its own

robust and systemic participation in the scheme, for which, to date, 12 PNB employees have

been charged with crimes in India.

According to media reports, in January 2018, a representative from PNB lodged a

complaint with the Indian law enforcement agency CBI, alleging that certain PNB officials had

issued improper Letters of Undertaking (“LOU”) for the benefit of Modi and the Modi Entities.

See McCormack Decl., Ex. F; Ex. L. PNB is India’s second-largest public sector bank. Ex. I.

PNB subsequently conducted an extensive internal investigation into the LOUs issued to Modi

and the Modi Entities. According to an article published by Reuters, the resulting 162-page

internal report (the “PNB Internal Report”) was circulated to PNB management in April 2018,

during the pendency of this bankruptcy case. McCormack Decl., Ex. H at 1-2; Ex. I at 3.


7

The PNB Internal Report is self-damning.4 It identified 54 PNB officials from low-level

clerks to senior executives as active and willing participants in a scheme whereby the bank

issued LOUs to Modi and the Modi entities and then actively concealed the loans from PNB’s

internal recordkeeping systems over the course of more than six years. See McCormack Decl.,

Ex. I at 3; Ex. J. The PNB Internal Report concluded that “blatant system violations/ unethical

practices/ dereliction of responsibilities led [the] bank to such a catastrophe.” McCormack Decl.,

Ex. I at 5. PNB handed its findings over to law enforcement authorities in India. Ex. I at 9-10.

On May 14, 2018, following a months-long investigation, the CBI charged 22 individuals

and three corporations with bank fraud and conspiracy in connection with the LOUs issued by

PNB to Modi and the Modi Entities over the course of more than six years (2011-17). 5

McCormack Decl., Ex. E, Ex. K. Of the 22 individuals criminally charged, 12 of these were

PNB employees at various PNB offices and at the highest levels of the bank – including PNB’s

former CEO. See McCormack Decl., Ex. E; Ex. P at 2-3.6

To our knowledge, PNB has not disclosed in these proceedings the existence of the PNB

Internal Report, let alone its shocking findings, nor that law enforcement in India has brought

criminal charges against 12 PNB employees, including its CEO. See, e.g., Dkt. 148 ¶¶ 10, 12

4 The PNB Internal Report is in the possession of PNB, but is not in the public domain. Reuters reviewed the PNBInternal Report and published some of the report’s conclusions and other news articles have also disclosed thereport’s findings. Those press reports are attached to the McCormack Declaration as Exhibits H, I.

5 The criminal charge sheet issued by the CBI (the “CBI Charge Sheet”) is believed to be in the possession of PNB,but is not in the public domain. News articles discussing the CBI Charge Sheet are attached to the McCormackDeclaration as Exhibits E, K, N, P, and Q.

6 To date, PNB has filed in this Court two investigative documents from India related to the alleged fraud, namely, apetition filed with the National Company Law Tribunal (“NCTL”) seeking to restrain property of the Modi Entities(see Dkt. 182-3) and the NCTL’s order restraining such property (see Dkt. 76, Dkt. 151-1, Dkt. 151-2, Dkt. 151-3,Dkt. 151-6, Dkt. 182-1).


8

(implying that PNB’s complicity in the fraudulent activity in India was limited to the conduct of

a few rogue employees); Dkt. 181 ¶¶ 6-7 (same).

B. The Alleged LOU Scheme

An LOU is a guarantee made by an issuing bank (e.g., PNB) to a foreign lender that

makes a loan to the bank’s customer. McCormack Decl., Ex. L at 2; Ex. M. An LOU guarantees

that the issuing bank will repay the foreign lender the amount of the loan, plus interest, on the

due date of the LOU, should the bank’s customer default. Among other necessary

documentation required, a borrower is obliged to pledge collateral in the full amount of the loan

if they do not have a pre-approved credit line. Upon receipt of the LOU, the foreign lender

disburses the amount of the loan to the beneficiary. McCormack Decl., Ex. L at 2; Ex. M.

LOUs are common in the import/export context because they allow an importer to pay a foreign

supplier in foreign currency. McCormack Decl., Ex. M.

According to the CBI, the alleged LOU scheme initially unfolded at a local PNB branch

office in Mumbai (referred to as “Brady House”), but soon escalated to higher levels of the PNB

corporate structure. In 2011, the Brady House branch head “instructed” Gokulnath Shetty, a

now-retired Deputy Manager in the foreign exchange unit, to issue four unauthorized LOUs on

behalf of Modi Entities. McCormack Decl., Ex. N at 2; Ex. I at 5-10. Shetty reportedly issued

the four LOUs for certain Modi Entities despite the fact that those entities were not approved to

use LOUs and did not pledge sufficient collateral. McCormack Decl., Ex. N at 2-3. Shetty then

reportedly concealed the LOU transactions from PNB’s internal systems by not logging the

transactions in PNB’s internal record-keeping systems.7 McCormack Decl., Ex. G; Ex. I at 6-7.

7 LOUs are transmitted through a secure financial messaging service (“SWIFT”) between financial institutions.According to press reports, every time PNB transmitted a SWIFT message, a PNB employee had to manually logthe message in PNB’s internal record-keeping system that was separate from the SWIFT system. McCormackDecl., Ex. L at 3-4; Ex. I at 6-7.


9

C. The Alleged Fraud Was Carried Out With the Participation and Knowledgeof Senior PNB Employees

Over the course of the next six years, Indian law enforcement has alleged that Shetty –

with the assistance and knowledge of other PNB officials, including PNB’s former CEO – issued

over 1,200 LOUs that were not supported by proper documentation or pledges of collateral, and

were purposefully concealed from the bank’s internal controls. McCormack Decl., Ex. I at 3; Ex.

J. As the CBI charges make clear, the alleged criminal conduct involved PNB personnel beyond

Shetty. It encompassed the various PNB officers responsible for reconciling the SWIFT

transactions with internal bank records over the course of more than six years (McCormack Decl.,

Ex. I at 3, 9-10); the various Brady House branch heads who signed misleading daily

reconciliation reports between the two systems over the course of more than six years (id.); the

branch’s various internal auditors who failed to audit properly the two systems over the course of

more than six years (McCormack Decl., Ex. O); and various senior officers at PNB’s regional

office in Mumbai who signed off on inaccurate compliance certificates for the Brady House

branch despite lacking months of reconciliation reports over the course of more than six years

(McCormack Decl., Ex. I at 9-10). Unsurprisingly, as a Reuters article reported, the PNB

Internal Report found it “incomprehensible” that Brady House branch staff did not detect and

expose the suspected LOU scheme. Id. at 9

Per media reports, the CBI alleges that criminal conduct reached PNB’s executive

leadership. PNB’s Managing Director and CEO, Usha Ananthsubramanian, regularly met with

senior officers of Modi Entities to discuss their “credit facilities,” and therefore the CBI alleges

that the CEO “clearly . . . was aware” of the transactions completed on the Modi Entities’ behalf.

McCormack Decl., Ex. P at 1-2. Furthermore, the CBI alleges that, to the extent that she did not

already know about the alleged scheme, CEO Ananthsubramanian, and other executive directors


10

at PNB’s headquarters in New Delhi, should have uncovered the alleged scheme in 2016 when

PNB learned of its vulnerability via a comparable SWIFT fraud involving LOUs that occurred at

a Dubai-based affiliate. McCormack Decl., Ex. Q. Moreover, the CBI also accused former top

PNB executives of misleading the Reserve Bank of India (“RBI”) (India’s analogue to the

Federal Reserve) regarding PNB’s procedures for issuing LOUs. McCormack Decl., Ex. P at 2-

3; Ex. K at 1-3.

Shortly after the CBI criminal charges came down, PNB fired two executive directors

implicated in the scheme, and the former PNB CEO, Ananthsubramanian, was likewise fired

from her then-current position as CEO of another state-run lender, Allahabad Bank. McCormack

Decl., Ex. K at 3.

D. PNB Has Admitted That It Benefited From the Allegedly Fraudulent LOUs

Not only was the alleged fraud pervasive within PNB and implicated various levels of its

management including its senior leadership, but PNB also clearly benefited from the alleged

scheme about which it complains here. As the PNB Internal Report found, the Brady House’s

import and export transactions in March 2017 were 50% higher than the figures two years prior.

McCormack Decl., Ex. I at 8. The PNB Internal Report attributed the growth to the LOUs issued

to the Modi Entities and concluded that “[t]he exceptional growth should have been noticed.” Id.

ARGUMENT

I. LEGAL STANDARD

Federal Rule of Civil Procedure 45 requires a court to quash or modify a subpoena “[o]n

timely motion” if the subpoena “subjects a person to undue burden.” Fed. R. Civ. P.

45(d)(3)(A)(iv). Motions to quash are “entrusted to the sound discretion of the district court.”

Hughes v. Twenty-First Century Fox, Inc., No. 17-7093, 2018 WL 1936096, at *2 (S.D.N.Y.

April 24, 2018) (quoting In re Fitch, Inc., 330 F.3d 104, 108 (2d Cir. 2003)). Additionally, Rule


11

26(c) provides that a court may, “for good cause,” issue a protective order. Sigal v. Metro. Life

Ins. Co., No. 16-3397, 2017 WL 1969680, at *1 (S.D.N.Y. May 12, 2017).

Here, the Subpoenas should be quashed and/or a protective order entered for three

reasons. First, the in pari delicto doctrine bars PNB from obtaining discovery in aid of claims it

intends to bring against the Debtors and/or the Bhansalis as to which PNB has unclean

hands. Second, the discovery PNB seeks is an impermissible use of Rule 2004 because the only

plausible use of the requested information would be in future litigation here or abroad focused on

PNB’s losses in India. Finally, PNB’s document requests directed to Rakhi Bhansali constitute

impermissible harassment.

II. PNB IS NOT ENTITLED TO DISCOVERY FROM THE BHANSALISBECAUSE IT WAS COMPLICIT IN THE ALLEGEDLY FRAUDULENTACTIVITY IN INDIA

As described above, criminal charges filed by the CBI in India allege that PNB was

thoroughly complicit in the allegedly fraudulent activity in India at multiple levels of the bank

through the most senior ranks of its executive leadership over the course of many years. PNB

has suggested that Mihir Bhansali was also involved in the Modi scheme, but even assuming that

suggestion arguendo, PNB would still be barred from seeking discovery because the in pari

delicto doctrine forecloses any claims against the Debtors or its officers that PNB might bring in

the future, including Mihir Bhansali. Because PNB would not be entitled to discovery tied to

such claims in future litigation due to its unclean hands relating precisely to the misconduct

about which it complains, it should be barred from pursuing such discovery in this proceeding.8

The well-established doctrine of in pari delicto mandates that the courts will not

intercede to resolve a dispute between two persons alleged to have participated in the same

8 We note again that Rakhi Bhansali has never been employed by or involved with the Debtors’ business.


12

wrongdoing. Kirschner v. KPMG LLP, 15 N.Y.3d 446, 464 (N.Y. 2010). It is a robust doctrine

under New York law. “The defense is grounded on two premises: first, that courts should not

lend their good offices to mediating disputes among wrongdoers; and second, that denying

judicial relief to an admitted wrongdoer is an effective means of deterring illegality.” Bateman

Eichler, Hill Richards, Inc. v. Berner, 472 U.S. 299, 306 (1985); Pinter v. Dahl, 486 U.S. 622,

634 (1988). Thus, in pari delicto “bars a party that has been injured as a result of its own

intentional wrongdoing from recovering for those injuries from another party whose equal or

lesser fault contributed to the loss.” In re Lehr Constr. Corp., 551 B.R. 732, 738 (S.D.N.Y.

2016) (quoting Rosenbach v. Diversified Group, Inc., 926 N.Y.S.2d 49, 51 (1st Dep't 2011)),

aff'g 528 B.R. 598, 608 (Bankr. S.D.N.Y. 2015) (Lane, J.), aff’d, 666 F. App’x 66 (2d Cir. 2016).

In order for in pari delicto to apply, “[t]he plaintiff must be an active, voluntary

participant in the unlawful activity that is the subject of the suit.” Pinter, 486 U.S. at 636.

Importantly, application of the doctrine is not limited to situations where “the plaintiff’s fault is

intentional or willful.” Id. at 633; see also In re MF Glob. Holdings Ltd. Inv. Litig., 998 F. Supp.

2d 157, 190 (S.D.N.Y. 2014) (quoting Pinter), aff'd sub nom. In re MF Glob. Holdings Ltd. Inv.

Litig. (DeAngelis v. Corzine), 611 F. App’x 34 (2d Cir. 2015). “Plaintiffs who are truly in pari

delicto are those who have themselves violated the law in cooperation with the defendant.”

Pinter, 486 U.S. at 636 (citations and quotations omitted); see also Peltz v. SHB Commodities,

Inc., 115 F.3d 1082, 1091 (2d Cir. 1997) (recognizing “a broader notion of mutuality of fault”).

Where the plaintiff is a corporation (such as PNB), in pari delicto imputes to the

corporation the acts of its authorized agents and the knowledge the agents acquire while acting

within the scope of their authority. Kirschner, 15 N.Y.3d at 465. “A corporation is represented

by its officers and agents, and their fraud in the course of the corporate dealings is in the law the


13

fraud of the corporation.” In re Lehr Constr. Corp., 528 B.R. at 608 (Lane, J.) (quotations and

citations omitted); see also Kirschner, 15 N.Y.3d at 466 (“[W]e have held for over a century that

all corporate acts – including fraudulent ones – are subject to the presumption of imputation.”).

Thus, the New York Court of Appeals has clarified:

When corporate officers carry out the everyday activities central to anycompany’s operation and well-being — such as issuing financialstatements, accessing capital markets, handling customer accounts,moving assets between corporate entities, and entering into contracts— their conduct falls within the scope of their corporate authority.And where conduct falls within the scope of the agents’ authority,everything they know or do is imputed to their principals.

Kirschner, 15 N.Y.3d at 465–66 (citation omitted).

Finally, because in pari delicto is an affirmative defense, it is frequently raised and

resolved on a motion to dismiss. A court may decide, on the pleadings alone, whether the

doctrine applies. See, e.g., In re ICP Strategic Income Fund, Ltd., 730 F. App’x 78, 82 (2d Cir.

2018) (“We may resolve in pari delicto defenses on the pleadings.”) (citing Kirschner, 15

N.Y.3d. at 459 n.3); New Greenwich Litig. Tr., LLC v. Citco Fund Servs. (Europe) B.V., 41

N.Y.S.3d 1, 8 (1st Dep’t 2016) (citations omitted) (“While a claim of in pari delicto sometimes

requires factual development and is therefore not amenable to dismissal at the pleading stage, the

doctrine can apply on a motion to dismiss in an appropriate case, such as where its application is

‘plain on the face of the pleadings.’”).

Accordingly, in pari delicto frequently bars claims for fraud, breach of fiduciary duty,

and RICO, among others, where it is evident from the pleadings that a plaintiff has engaged in

the same allegedly fraudulent conduct as the defendant. See, e.g., New Greenwich Litig. Tr.,

LLC, 41 N.Y.S.3d at 8 (affirming dismissal of claims for fraud, breach of fiduciary duty and

unjust enrichment, among others, because “it is undisputed that the derivative complaints . . .

pleaded extensive wrongdoing on the part of the [plaintiffs’] funds’ management” related to


14

Madoff Ponzi scheme); In re Lehr Constr. Corp., 528 B.R. at 611 (dismissing Trustee’s faithless

servant claim against Debtor’s former employee, because it was apparent from complaint that

former employee “was merely a participant in a [fraudulent] scheme that was overseen by a

senior officer at Lehr”); Republic of Iraq v. ABB AG, 768 F.3d 145, 163 (2d Cir. 2014)

(affirming dismissal of RICO claim where it was “evident from the face of the Complaint” that

plaintiff “was the instigator and dominant force behind the [fraudulent] scheme” related to Oil-

for-Food Programme); Kirschner v. Grant Thornton LLP, No. 07-11604, 2009 WL 1286326, at

*10 (S.D.N.Y. Apr. 14, 2009) (dismissing Trustee’s claims of fraud, breach of fiduciary duty,

and malpractice against professional firms and investment banks where Debtor’s senior

management devised and carried out fraudulent scheme), aff’d sub nom. Kirschner v. KPMG

LLP, 626 F.3d 673 (2d Cir. 2010).

Here, there is no question that the criminal charges in India allege that PNB was “an

active, voluntary participant” in the allegedly fraudulent LOU scheme and, as a result, has

unclean hands that would bar it from asserting any claims against the Bhansalis in future

litigation (particularly as against Rakhi Bhansali, who had no involvement in the underlying

business). Pinter, 486 U.S. at 636; see also Republic of Iraq, 768 F.3d at 162. As the CBI

alleges and the PNB Internal Report confirms, the scheme was far from an isolated incident

involving a handful of derelict, low-level employees in a single office. Rather, it was a pervasive

scheme in multiple locations involving over 50 PNB employees, including senior executives.

Supra p. 7. Incredibly, according to Indian law enforcement, PNB’s then-CEO had actual

knowledge of the allegedly fraudulent scheme. Supra pp. 9-10.

In any event, PNB’s corporate agents need not have actual knowledge of the alleged

fraud in order to satisfy the in pari delicto defense. “[A]ctive [and] voluntary participa[tion] in


15

the unlawful activity” is all that the law requires. Pinter, 486 U.S. at 636; In re MF Glob.

Holdings Ltd. Inv. Litig., 998 F. Supp. 2d at 168, 190 (rejecting argument that in pari delicto

does not apply “where the corporate agents are not alleged to have committed fraud” and finding

defense satisfied where fund’s officers and/or “senior management” had “active involvement in

the unlawful activity”). In short, according to Indian law enforcement, PNB was “an active,

voluntary participant” in the scheme. Republic of Iraq, 768 F.3d at 162 (quoting Pinter, 486

U.S. at 636).

Further, all of the involved PNB employees were acting within the scope of their

employment and as PNB’s agents and, thus, the employees’ knowledge is imputed to PNB.

Shetty, for example, was carrying out “everyday activities” of PNB when issuing the allegedly

fraudulent LOUs, e.g., “handling customer accounts, moving assets between corporate entities,

and entering into contracts.” Kirschner, 15 N.Y.3d at 465–66. It makes no difference that the

acts are alleged to be fraudulent, as they are still imputed and attributable to PNB. Id. at 465

(“The risk of loss from the unauthorized acts of a dishonest agent falls on the principal that

selected the agent.”) (citations omitted); In re Lehr Constr. Corp., 528 B.R. at 608.

Similarly, when the Brady House branch’s internal auditors failed to audit the

reconciliation reports, they were acting within the scope of their employment as PNB’s auditors,

despite their failure to fulfill all of their duties. Supra p. 9. And when PNB’s CEO met with the

Modi Entities and when she learned that PNB’s SWIFT system was vulnerable to abuse but did

nothing to prevent such abuse from continuing (supra p. 9-10), she too was carrying out

“everyday activities central to any company’s operation and well-being” – e.g., management,

oversight and strategy. Kirschner, 15 N.Y.3d at 465–66; New Greenwich Litig. Tr., LLC, 41

N.Y.S.3d at 8 (in pari delicto applied where complaint alleged that general partner of fund


16

“completely abdicated its responsibilities . . . by failing to perform even minimal due diligence”

and “investigate red flags”) (quotations omitted). Accordingly, because PNB’s employees’

conduct fell within the scope of their corporate authority, “everything they know or do is

imputed to” PNB. Kirschner, 15 N.Y.3d at 466; In re MF Glob. Holdings Ltd. Inv. Litig., 998 F.

Supp. 2d at 190 (activities of officers and/or senior management “acting with authority and in

their official capacities” were imputed to fund). Thus, as a matter of law, the allegedly

fraudulent activities of PNB’s employees are deemed fraudulent activities of PNB itself.

In sum, criminal charges brought in India allege that PNB itself has truly “violated the

law in cooperation with” the Modi Entities. Pinter, 486 U.S. at 636. The in pari delicto doctrine

would prevent PNB from bringing claims relating to underlying activity in which it itself was an

enthusiastic participant rather than a hapless victim. Because PNB is barred from bringing

claims against the Bhansalis for any activity connected to the alleged fraud, it should not be

allowed to pursue discovery through Rule 2004 related to those unavailable claims. The

Subpoenas should be quashed in their entirety.

III. THE DISCOVERY SOUGHT BY PNB IS AN IMPROPER USE OF RULE 2004

The Subpoenas should be quashed for the additional reason that they are an abuse of Rule

2004. At bottom, they reflect a transparent attempt by PNB to gather information in aid of its

litigation interests here or abroad. This bankruptcy case should not become a vehicle for PNB to

pursue such improper discovery.

A. PNB Should Not Be Permitted To Seek Discovery For Use in India

“The party seeking Rule 2004 discovery has the burden to show good cause for the

examination it seeks, and relief lies within the sound discretion of the Bankruptcy Court.” In re

SunEdison, Inc., 562 B.R. 243, 249, 251 (Bankr. S.D.N.Y. 2017) (denying Rule 2004 discovery

requests where “the primary focus of the Application is the need for information to use in the


17

Malaysian insolvency proceeding”). “A party seeking to conduct a Rule 2004 examination

typically shows good cause by establishing that the proposed examination “‘is necessary to

establish the claim of the party seeking the examination, or . . . denial of such request would

cause the examiner undue hardship or injustice.’” Id. (quotations and citations omitted). “[T]he

party seeking Rule 2004 discovery must show a need or undue hardship relating to the

bankruptcy case in which the information is sought” – and not in some other proceeding. Id. at

251.

Courts reject requests for Rule 2004 discovery where the goal is actually to develop facts

for other pending litigations. See In re Enron Corp., 281 B.R. 836, 842 (Bankr. S.D.N.Y. 2002)

(denying Rule 2004 discovery because party was attempting to obtain improper discovery for use

in separate proceeding and not as party in interest in bankruptcy case); Snyder v. Soc’y Bank, 181

B.R. 40, 42 (S.D. Tex. 1994) (upholding decision quashing document subpoena where

appellant’s primary motivation was to use requested materials in state court action), aff’d sub

nom. In re Snyder, 52 F.3d 1067 (5th Cir. 1995) (unpublished).

PNB represented to this Court in its ex parte Rule 2004 motion that it had good cause to

seek such discovery to “confirm PNB’s claims against the Debtors and their insiders, as well as

its prima facie constructive trust claims.” Dkt. 224 ¶ 25. However, PNB’s requests belie that

representation and instead evidence a singular focus on obtaining information about the allegedly

fraudulent activity in India, undoubtedly for use in furtherance of PNB’s litigation interests in

India.

For example, PNB Document Request No. 3 seeks “All documents sufficient to identify

contact information used by Modi.” PNB offers no reason why identifying all of Modi’s

possible “contact information” is related to the “acts, conduct, or property or to the liabilities and


18

financial condition of the debtor” or any other grounds set forth in Rule 2004(b). In similar

fashion, other requests seek “job descriptions” and “organizational charts” of the Modi Entities

abroad (No. 17); documents relating to transfers “from a foreign branch of an Indian Bank” to

the Modi Entities (No. 42); and “all communications” between the Debtors and PNB, Oriental

Bank of Commerce, Andhra Bank and Vijaya Bank – all entities that transacted business in India

(No. 60). PNB’s discovery is focused on India, not on the Debtors or their U.S. affairs.

Moreover, PNB has filed debt recovery actions in India against certain entities and

persons to recover its alleged losses, and the media has reported that it intends to file additional

actions in Indian courts in the future. McCormack Decl., Ex. R.

PNB’s purported rationale for seeking Rule 2004 discovery is even more blatantly

pretextual in light of the Court’s prior appointment of both an Examiner to investigate the

allegedly fraudulent circumstances to the extent relevant to this bankruptcy and a Trustee to

protect the assets of the Debtors’s estate and preserve its value for creditors. The Examiner is

fulfilling his duties by pursuing the investigation and taking discovery, including Mihir

Bhansali’s deposition, and he will issue a report in little more than a week detailing his findings.

A Trustee has also been appointed in this case, upon PNB’s own motion, and PNB does not

allege that the Trustee has neglected this role. Moreover, law enforcement officials in India are

thoroughly investigating the allegedly criminal conduct (including that of multiple PNB

employees) that occurred there. In light of these circumstances, there is no practical rationale for

PNB’s discovery seeking detailed information about allegedly criminal activity in India other

than to assist in its self-interested fact-gathering for use in that forum, including in connection

with litigation in India that PNB has already commenced.


19

B. PNB Should Not Be Permitted To Seek Discovery in Support of PotentialClaims Against Non-Debtors That Are Unrelated to the Bankruptcy

Both PNB and the Bhansalis are non-debtors in this proceeding. The Subpoenas are

therefore also improper to the extent that PNB seeks to use the discovery to support claims

against the Bhansalis that are not “related to” the Debtors’ bankruptcy because this Court would

not have jurisdiction over such unrelated claims asserted by one non-debtor against another. See

28 U.S.C. § 1334(b); see also Celotex Corp. v. Edwards, 514 U.S. 300, 308 n.6 (1995)

(“[B]ankruptcy courts have no jurisdiction over proceedings that have no effect on the estate of

the debtor.”); In re 19 Court St. Assocs., LLC, 190 B.R. 983, 996 (Bankr. S.D.N.Y. 1996)

(“Relatedness does not lie where the dispute, while ‘conceivably’ related to the bankruptcy

estate, is so only remotely.”) (citations omitted).

C. PNB Should Not Be Permitted To Seek Discovery in Support of PotentialClaims Against the Debtors in This Bankruptcy

To the extent that PNB’s purported discovery rationale is taken at face value (“to confirm

PNB’s claims against the Debtors and their insiders, as well as its prima facie constructive trust

claims”) (Dkt. 224 ¶ 25), the Subpoenas should be quashed because there are no viable claims it

could bring against the Debtors that would not be barred by in pari delicto.9 Any conceivable

claim that PNB may have against the Debtors would necessarily relate to activity in India. Thus,

because in practice there are no plausible claims that PNB could bring in this bankruptcy case

against the Debtors, it should not be permitted to pursue Rule 2004 discovery from the Bhansalis

9 PNB also argued in its motion that “[t]o the extent Bhansali (or anyone else) is inclined to invoke FifthAmendment rights, [it should be done] in the context of a pending subpoena so that there is an appropriate record tosupport any adverse inferences against the Debtors and in favor of PNB.” Dkt. 224 ¶ 28. PNB’s explicit discoverypurpose, therefore, is to generate adverse inferences against Mihir Bhansali asserting claims relating to the allegedlycriminal conduct in India, in which PNB itself participated. But PNB can never bring such claims because theywould be barred by in pari delicto.


20

in aid of such claims. See In re Enron Corp., 281 B.R. at 843-44 (denying Rule 2004 discovery

where the related potential claims were implausible); Argument Section I, supra.

IV. THE DOCUMENT SUBPOENA DIRECTED TO RAKHI BHANSALICONSTITUTES IMPERMISSIBLE HARASSMENT

Without justification or logic, the same 60 broadly worded document requests issued to

Mihir Bhansali were also issued to Rakhi Bhansali, who has never been employed by or involved

with the Debtors’ business. Even if PNB could demonstrate that its discovery requests are

appropriate with respect to Mihir Bhansali, PNB cannot credibly assert that they are also

somehow relevant or appropriate with respect to his wife. See McCarthy v. Sarroff, No. 02-

6030, 2003 WL 21145573, at *1 (S.D.N.Y. May 16, 2003) (“We have concluded that the

explanations offered are pretextual, and that the subpoena is being served to harass and

embarrass the defendant and his wife”); Gov’t Employees Ins. Co. v. Lenex Servs., Inc., No. 16-

6030, 2018 WL 1368024, at *10 (E.D.N.Y. Mar. 16, 2018) (quashing subpoenas issued to non-

party father and son because they were “harassing and unwarranted”); Jaffe v. Jaffe, 940

N.Y.S.2d 1, 2-4 (1st Dep’t 2012).

PNB effectively concedes that Rakhi Bhansali has had nothing to do with the Debtors or

their business, instead asserting that it requires discovery from her because she is a past director

of three other non-Debtor entities that “appear[] to be connected” to Modi. Dkt. 224 ¶ 9 (e.g.,

AMI Merchandising, Neeshal Marketing Private Ltd., and Neeshal Merchandising Private Ltd.).

But the names of those non-Debtor entities do not even appear in any of the 60 document

requests issued to Rakhi Bhansali, evidencing the pretextual and cynical nature of PNB’s claim

of a need for discovery from her. And while PNB has argued that the purchase of the Bhansalis’

apartment is relevant here (see Dkt. 224 at 12), only a mere four of the 60 document requests

pertain to that apartment. See McCormack Decl., Ex. D (PNB Document Requests Nos. 32, 33,


21

36, 37). PNB’s discovery requests to Rakhi Bhansali amount to little more than impermissible

harassment.

V. IF PNB’S DISCOVERY IS ALLOWED TO PROCEED, THE BHANSALISRESERVE THE RIGHT TO SERVE RECIPROCAL DISCOVERY

To the extent that the Court allows PNB’s discovery to proceed in whatever scope10 – and

PNB should be barred from pursuing its discovery altogether for all the reasons discussed above

– the discovery regime should not be one-sided. If PNB is allowed to avail itself of this Court’s

resources relating to hypothetical claims that would likely be brought in another forum, the

Bhansalis should be provided the same opportunity to explore relevant facts underlying such

claims. The Bhansalis reserve the right to propound reciprocal discovery on PNB.

Among other things, in response to and as the flip side to PNB’s discovery requests, the

Bhansalis would be entitled to explore the applicability here of the in pari delicto doctrine and

the scope of PNB’s culpability in the allegedly fraudulent activity in India, which would militate

against and severely undermine the viability of PNB’s potential claims. Such reciprocal

discovery served by the Bhansalis could appropriately include requests for production by PNB of

the PNB Internal Report and the CBI Charge Sheet, both of which are clearly relevant to the

issue of PNB’s unclean hands regarding the very misconduct about which it complains. Supra

p.7, nn.4-5. The Subpoenas should be quashed in their entirety, but if discovery is allowed to

proceed it should be reciprocal in nature. 11

10 If the Subpoenas are not quashed, the Bhansalis expressly reserve their rights to serve specific responses andobjections to PNB’s discovery requests on grounds of, among other things, overbreadth, burden and relevance.

11 Further, any discovery produced in connection with the Subpoenas should be limited to use in this bankruptcycase.


22

CONCLUSION

For all of the foregoing reasons, the Bhansalis respectfully request that the Court quash

the Subpoenas in their entirety and/or enter a protective order, and grant all further relief as this

Court deems just and proper.

Dated: August 8, 2018

New York, New York

Respectfully submitted,

NORTON ROSE FULBRIGHT US LLP

By: /s/ Thomas J. McCormackThomas J. McCormackMarc D. AshleyFrancisco Vazquez1301 Avenue of the AmericasNew York, New York 10019-6022Tel.: (212) 408-5100Fax: (212) 541-5369

Attorneys for Mihir Bhansali and Rakhi Bhansali


23

CERTIFICATE OF SERVICE

I certify that on August 8, 2018, I caused a copy of the foregoing document to be served

by the Electronic Case Filing System for the United States Bankruptcy Court for the Southern

District of New York.

/s/ Thomas J. McCormackThomas J. McCormack


Hearing Date: August 29, 2018Time: 10:00 a.m.


[PROPOSED] ORDER GRANTING MOTION OF NON-PARTIES

MIHIR BHANSALI AND RAKHI BHANSALI TO QUASH SUBPOENAS

ISSUED BY PUNJAB NATIONAL BANK AND/OR FOR A PROTECTIVE ORDER

Upon the Motion of Non-Parties Mihir Bhansali and Rakhi Bhansali to Quash Subpoenas

Issued by Punjab National Bank and/or for a Protective Order (the “Motion”) [Dkt. __] seeking

the entry of an order, pursuant to Rule 45 of the Federal Rules of Civil Procedure, made

applicable to this proceeding through Federal Rule of Bankruptcy Procedure 9016, and this

Court’s July 26, 2018 Order preserving the rights of subpoena targets to object to and oppose

such subpoenas (Dkt. 324), quashing (1) a subpoena for an examination of non-party Mihir

Bhansali pursuant to Federal Rule of Bankruptcy 2004, dated July 26, 2018, (2) a subpoena

seeking the production of documents from non-party Mihir Bhansali pursuant to Federal Rule of

Bankruptcy 2004, dated July 26, 2018, (3) a subpoena for an examination of non-party Rakhi

Bhansali pursuant to Federal Rule of Bankruptcy 2004, dated July 26, 2018, and (4) a subpoena

seeking the production of documents from non-party Rakhi Bhansali pursuant to Federal Rule of


In re:


Debtors.

Chapter 11

Case No. 18-10509 (SHL)


18-10509-shl Doc 355-2 Filed 08/08/18 Entered 08/08/18 22:46:38 Proposed Order Pg 1 of 2

Bankruptcy 2004, dated July 26, 2018 (collectively, the “Subpoenas”), issued by Punjab National

Bank, and/or for a protective order; and upon the Declaration of Thomas J. McCormack in

support of the Motion and the exhibits annexed thereto; and the Court having fully considered

the relief requested in the Motion as well as the arguments of counsel and the record of the

hearing held on August 29, 2018; and having determined that good and sufficient cause exists for

granting the Motion, it is hereby

ORDERED, that the four Subpoenas issued by Punjab National Bank to Mihir Bhansali

and Rakhi Bhansali are hereby quashed; and it is further

ORDERED, that this Court shall retain jurisdiction with respect to any disputes with

respect to this order.

Dated: ___________, 2018

New York, New York

The Honorable Sean H. LaneUnited States Bankruptcy Judge

18-10509-shl Doc 355-2 Filed 08/08/18 Entered 08/08/18 22:46:38 Proposed Order Pg 2 of 2

hearing date: august 29, 2018 time: 10:00 a.m. … · republic of iraq v. abb ag, 768 f.3d 145 (2d...

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