Summons on Gautam Adani in Fraud Case

Context:

The U.S. Securities and Exchange Commission (SEC) has approached a New York court, informing it that it has sought assistance from the Indian government under the Hague Service Convention to serve summons on billionaire Gautam Adani and his nephew Sagar Adani. 

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• The summons are related to a securities and wire fraud case involving allegations of bribery amounting to over $250 million to secure Adani Group’s solar projects. 
• The Adanis have been charged by both the U.S. Department of Justice and the SEC in criminal and civil cases.

SEC’s Legal Approach

• Article 5(a): The SEC has invoked Article 5(a) of the Hague Service Convention, formally known as the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (1965). 
• Assistance from India: The Commission has requested India’s Ministry of Law and Justice to facilitate the service of summons on the defendants. 
• Alternative Methods: Additionally, the SEC is exploring alternative service methods permitted under Rule 4(f) of the Federal Rules of Civil Procedure, which governs civil litigation in U.S. federal courts.
• New Decision: This development follows a decision by the Trump administration to temporarily pause enforcement of the Foreign Corrupt Practices Act (FCPA) for 180 days. 
  • The FCPA prohibits U.S. entities and individuals from bribing foreign officials to secure business. 
  • However, the SEC’s latest court filing suggests that the executive order does not apply retroactively, meaning the investigation into the Adanis is likely to proceed unless legislative changes are made.

Understanding the Hague Service Convention

• Adoption: The Hague Service Convention was adopted in 1965 to streamline the process of serving judicial and extrajudicial documents across borders. 
• Purpose: With the increase in cross-border litigation, the treaty was designed to ensure that defendants residing in foreign jurisdictions receive timely and official notification of legal proceedings against them.
• Members: The Convention has 84 member states, including India and the U.S. It applies only when both the sending and receiving countries are signatories. 
  • Each member state must designate a central authority responsible for processing and facilitating service requests from other signatories. 
  • The primary mode of service is through these designated central authorities, although alternative methods such as postal services, diplomatic channels, and direct communication between judicial officers are also available.

Service of Legal Documents in India

• India acceded to the Convention on November 23, 2006, with certain reservations, expressly opposing all alternative service methods under Article 10.
  • The country prohibits the service of judicial documents through diplomatic or consular channels unless the recipient is a national of the requesting country. 
  • Additionally, all service requests must be in English or accompanied by an English translation.
• Valid service in India can only be executed through the Ministry of Law and Justice, India’s designated central authority. 
  • The Law Ministry has the discretion to reject a service request but must provide specific reasons, such as concerns over sovereignty or security, as per Article 13. 
  • However, a state cannot refuse a request solely because it claims exclusive jurisdiction over the subject matter under its domestic law.
• If the central authority raises no objections, it proceeds with serving the defendant. 
  • The service is then treated as a summons issued by an Indian court under Section 29(c) of the Code of Civil Procedure, 1908. 
  • The entire process typically takes six to eight months.

Judicial Precedents on Alternative Service Methods

• There is ongoing debate over whether alternative service methods, such as social media and email, are precluded by India’s reservations under Article 10 of the Convention. 
• Courts in different jurisdictions have ruled inconsistently on this matter.
• In Federal Trade Commission v. PCCare247 Inc. (2013), a U.S. district court ruled that service through Facebook and email was permissible since these methods do not explicitly fall under Article 10, and India has not objected to them.
• However, in Punjab National Bank (International) Ltd. v. Boris Shipping Ltd. (2019), the England and Wales High Court invalidated a lower court ruling that had allowed alternative service methods on defendants residing in India, emphasising the necessity of adhering to India’s designated procedure under the Convention.
• In Rockefeller Technology Investments v. Changzhou SinoType Technology Company (2020), the Supreme Court of California ruled that if contracting parties explicitly agree to an alternative method of service, such service remains valid even if the recipient state has objected to Article 10.

Possibility of a Default Judgment

• A default judgment may be issued under the Convention if a foreign government refuses to cooperate in serving summons on a defendant residing within its jurisdiction. However, Article 15 sets specific conditions that must be met before such a judgment can be rendered:
  • The document must have been transmitted through one of the prescribed methods under the Convention.
  • At least six months must have passed since transmission, and the court must determine this period as reasonable.
  • No certificate of service has been received despite reasonable efforts to obtain it through competent authorities in the recipient state.
• India has explicitly declared that its courts may issue default judgments in cross-border disputes even if no certificate of service or delivery is received, provided that all conditions under Article 15 are met.
• In Duong v. DDG BIM Services LLC (2023), American plaintiffs sought permission to serve Indian defendants via email due to delays in effectuating service through India’s central authority. 
  • Judge Kathryn Kimball Mizelle ruled that Article 15 serves as a “safety valve,” allowing default judgments if India’s central authority fails to facilitate service.

The SEC’s efforts to serve legal summons on Gautam Adani and Sagar Adani highlight the complexities of cross-border legal proceedings. With India’s firm stance on service of process under the Hague Service Convention and the U.S.’s evolving enforcement landscape concerning the FCPA, the case presents significant legal and diplomatic implications. As the SEC continues its investigation, the effectiveness of international legal cooperation under the Convention will be put to the test.