An iconic and one of India’s greatest law firm is going down. This is a live story.
The inspiration for this blog arises from another blog titled The Rise of Nishith Desai Associates: A Case Study which was either written by a wannabe intern to butter up , or was commissioned by NMD (as Mr. Nishith Desai, the FOUNDER of the eponymous firm is also known as, in addition to the Gujju moniker Nishithbhai) himself — given his fascination and flair for PR, something most lawyers and law firms in India lack, I would not put it beyond him. If there is a story on the Rise, then there must be a story on the Fall, to keep things symmetric.
There is apparently a lot of gas in that article, but Nishithbhai is undoubtedly one the great lawyers of our country, and NDA (as Nishith Desai Associates is commonly known as) did manage to build an unparalleled practice in the field of international tax law. One may love Nishithbhai, or hate him, but cannot deny that NDA is a unique firm in the firmament of Indian law firms, and there is no other firm which is comparable. He is a legend, surely in India, and to an extent internationally, when it comes to the International Tax law. It is well known that he “discovered” the Mauritius Route, through which the major portion of FDI (and other forms of foreign investments) has come into India in the last three decades. One could argue the ethical and moral aspects of this Mauritius Route, but if the Indian legal fraternity had an equivalent of a Nobel Prize, then Nishithbhai would have been one of the recipients. He managed to build such a big practice around just one “discovery”. Nishithbhai has often bragged that he not only “discovered” an decade old Indo-Mauritius DTAA, but also convinced (and assisted) the Government of Mauritius to create a regime that turned that country into a Tax Haven in the early 1990s. In that sense, he claims that the Mauritius Route is not just his discovery, but his creation!
So what went wrong? Here is the story, episode by episode titled after the main protaganists…
Shefali Goradia
One of the early members to join the FIRM Nishith Desai Associates was an exceptionally bright and overly ambitious lady Shefali Goradai. Shefali, or Shef as NMD and everyone in the firm refers her to as, was actually not a lawyer, but a gold medalist chartered accountant.
Shefali joined NDA when it was a fledgling legal shop. Nishithbhai aspired to build a super specialized boutique law firm around International Tax, specifically around his “discovery” (Mauritius Route). Shefali was a great fit in this scheme as she brought the rigour and diligence of a CA, something that lawyers lack and was critical in the NDA’s plan to become a centre of excellence in International Tax. That was also the time when Indian economy was liberalized and opened for foreign investors. Nishithbhai indoctrinated Shef with his “ideology” of how providing a “tax friendly” environment was the most critical thing for attracting foreign investment and all the “tax planning” schemes devised by him were actually desh seva.
Thoroughly indoctrinated, Shef became the most important member of the cult (of course after the supreme leader). She enjoyed the “research” and “international” aspect of the job, which was hard to find in the accounting world in India in those days. Together they created a monopoly in the field of international tax structuring via the Mauritius route in India. Nishithbhai and Shefali became the most sought after professionals in the field.
As the firm grew, Shef started getting stifled. There were two reasons for that. Shef believed that the success of NDA was primarily due to her brain and sweat, but because Nishithbhai has never truly believed in a partnership, she was a distant number two. Nishithbhai, perhaps rightfully, thought that NDA’s success was solely due to him. Because after all if he had not discovered the Mauritius Route then NDA would not have become what it had. Besides, while Shef was bright and hard-working, she did not have the panache and biz dev skills of Nishithbhai. Secondly, Shef was not a lawyer, and Nishithbhai did not want to give a status of a partner to a non-lawyer. He had also taken a public stand that only lawyers should be permitted to provide tax advice, and the accountants should stay out of it.
This was the root cause of friction and ego clash between the two stalwarts. Shef was proud to be a CA, and believed that CAs are best equipped to handle tax work. While it would have been very easy for her to get a law degree, her ego did not permit her to get one, because she always considered lawyers to be inferior to CAs. She also started getting a feeling that an accountancy firm was her actual home and that she was a misfit in a law firm. Nishithbhai, on his part, never missed an opportunity to remind Shef that she was the number two and owed her success to him.
So Shefali decided to move out. This was a huge setback to Nishithbhai, something that he believed could never happen. He took it as granted that Shefali would always be part of NDA. He tried mighty hard, over the course of several months, to make her change her mind. But she did not budge and joined BMR Advisors in 2008.
An old timer has told me that Shef’s farewell itself was an event, almost at par with a big fat Indian wedding. A resort was booked and the whole team attended the event. Nishithbhai was extremely emotional and also with a hurt ego at the same time. There were speeches. And in order to make a point, Nishithbhai gifted an expensive car to Shef. Ironically, that car became the subject of a tax dispute later on, as Nishithbhai had shown it as business expense. Some of these legends have some funny stories too!
The accounting firm BMR that Shef went over to was no ordinary firm. It had some of the top names in the Indian accounting scene. Most of them were in Arthur Andersen in India before it imploded after the Enron saga. The partners of Arthur Andersen moved over to E&Y, where they expected to call the shots, because Arthur Anderson had a superiority complex. But the incumbents in E&Y, specifically, the father-son duo of Kashi and Rajiv Memani resisted. Consequently, the Arthur Andersen gang moved out of E&Y and started a rival BMR Advisors.
BMR Advisors had the ambition to become the leading accounting firm in India, and reach the level of Arthur Andersen. It had a distinct elitist culture and was insanely ambitious. Shefali was made a senior partner and the BMR leadership expected her to build a leading international tax practice at BMR. There were two challenges for Shef, though. First, she had become accustomed to being the top most leader (after Nishithbhai of course) at NDA, whose intellect no one could match at that law firm; in BMR there were several other partners who were with BMR since its inception or some others who were renowned in the field. Secondly, at NDA it was primarily Nishithbhai who was responsible for acquiring clients and business development, so she did not have the necessary business development skills.
However, the expectations from her were very high at BMR. She also put herself under a lot of pressure as she wanted to prove a point that NDA’s success was due to her alone by building a bigger practice at BMR. She was willing to go to any length. So she embarked on the mission and started targeting NDA’s clients and employees. Nishithbhai would also never let go of a chance to drive home the point that Shef’s success was all due to him — I am told that in one of the conferences where both Nishithbhai and Shefali were on a panel, when Shefali’s turn came, Nishithbhai interjected that her views could not be different from his, because she had learned the trade under his tutelage. All this pissed Shef even more.
Parul Jain
Sometime around 2005 another young CA joined NDA. She came to NDA after a short stint at PwC and was fascinated with the field of International Tax which had become red hot because India had become one of the top destination for foreign investment. There was no better place than NDA for International Tax.
Shefali had become the leading name in International Tax in India, and a role model for many CAs. Parul wanted to follow Shef’s footsteps. She started working as an understudy to Shef. Shef on her part ensured that Parul did not lose out in the firm on the account of not being a lawyer.
When Shef left NDA in 2008, Parul was left with no support. Not being a lawyer was not the only handicap for Parul. She was not a Gujju. NDA back then was full of Gujjus (even today there are quite a lot of them), many of them being Nishithbhai’s friends and family. In many ways, it resembled a motel in New Jersey. Gujjus had a distinct advantage in NDA. So when Shef left, the number two spot had to filled by another Gujju. Specifically for International Tax, another young Gujju lawyer Bijal Ajinkya was propped up to lead.
Bijal was about the same age as Parul, so it was difficult for Parul to digest that she had to work under Bijal. She also did not have the same professional respect for Bijal as she had for Shef, perhaps due to the fact that just like Shef she also considered lawyers below the CAs.
Whatever the circumstances may have been, Parul was feeling lost after Shefali’s departure. Meanwhile, Shef also was feeling the weight of expectations at BMR, and had started targeting NDA’s clients and later its employees. Parul was an easy and a natural target. Sometime in 2010, Shef managed to entice Parul to join BMR and she left NDA in the end of that year.
Exit of Parul was not really a major event in NDA. Or so it seemed. Shef had poached Parul not just to add one more member to her team in BMR. She needed someone to do the dirty job of poaching NDA’s clients. The idea was to make Parul do that. So soon after Parul joined BMR, they started approaching many of the clients they had serviced in NDA, and many of them switched over to BMR.
This was not the only damage done by the exit of Parul. Just before she left, she made copy of all the NDA’s data she could access. This included not only the NDA’s properietry research that Nishithbhai is proud of, but also the confidential information of the clients. This “data theft” was to hit NDA very badly, much later.
Bijal Ajinkya & Siddharth Shah
One of the early members to join NDA in the mid 1990s was a family friend of Nishithbhai. His name was Siddharth Shah, affectionately known as Sid. Sid was actually an engineer, and was a bit lost about what to do in life, when Nishithbhai managed to convince him to join NDA.
Sid, even though did not have a formal legal training, picked up the ropes really fast, and became a key member of the funds practice at NDA, which boomed as more and more funds entered India. He also developed a strong expertise in the Real Estate vertical, and became a sought after name among the clients.
Bijal Ajinkya joined NDA at the turn of the century. She was a bright lawyer and Nishithbhai immense saw potential in her. She was a Gujju to boot and a lady — NDA has always had an above average gender ratio (and a completely skewed regional ratio). Bijal worked very closely with Nishithbhai on the Azadi Bachao Andolan case, the case that Nishithbhai holds like a medal or a trophy, and which really provided his discovery, i.e. the Mauritius Route the judicial stamp of approval. Working on this Azadi Bachao Andolan case provided a boost to Bijal’s career at NDA like nothing else could, and she became a leading lawyer in the firm in a very short span of time. Of course, when Shefali Goradi quit in 2008, Bijal became the number two in the International Tax practice at NDA (after NMD of course) at a very young age.
According to the NDA grapevine, Bijal and Sid developed a liking for each other and there were signs that they were having an affair. Whatever, it may have been, in 2012, they decided to quit NDA. Just like the departure of Shef, this was a shock and a setback for Nishithbhai. Bijal & Sid quit NDA in early 2013. While many had expected that they would set up their own practice, given the goodwill and name they had earned among the NDA clientele in their areas of expertise, both of them ended up joining one the largest law firms — Khaitan & Co. This meant that Khaitan & Co could now provide strong competition to NDA in two areas which were NDA’s sweet spots. This also meant loss of clients for NDA.
Nishithbhai scrambled to put new leaders in place of Bijal and Sid, but they were not of the same calibre, especially in the areas that Bijal & Sid were heading. Over a period of time, NDA has been able to develop new leaders such as Richie Sancheti, Ruchir Sinha etc., but has had tough time retaining such folks. Once such a professional grows to a certain level, he/she starts feeling suffocated at the firm, because Nishithbhai has never embraced a true partnership model. NDA has always been Nishith Desai AND associates. Only the die-hard chamchas of Nishithbhai, most of them family friends, have stuck around, but their quality is suspect.
The Leak in the Titanic
The sinking of a ship is almost always preceded by a leak. That there was a breach in this Titanic that Nishithbhai had created, should not come as a surprise to readers who have read the earlier episode Parul Jain.
To recap — when Parul Jain had quit NDA in 2010 to join Shefali Goradia in BMR, she had taken with her a copy of all the data she had access to at NDA. The scope of the data that she stole was vast. It was not limited to just the proprietary research material of NDA, but also included the entire dump of confidential data of the clients. It included all the confidential documents the clients had provided pertaining to their structures, bank accounts, financial transactions, contracts, business plans, etc and also the legal advice provided to them by the firm. It also included NDA’s own business plans, Rolodex of its clients and partners. Back then the data security in the firm was rather flimsy, and the associates had access to almost the entire data other than from the accounts department. Therefore there was not much that was not copied and stolen by Parul.
This was a breach far more serious than it appears to be at the first look, for it did not just mean loss of a few clients to BMR (where Shefali was employed). While Nishithbhai has always publicly maintained that all the structures in various offshore jurisdictions his clients have created based on his advice are 100% legal and with full disclosures, the truth is that every practitioner in this trade knows that this is not entirely true. The primary purpose of this sophisticated structuring is tax avoidance. These structures also hide the true beneficial ownership from the authorities and are entirely about form and sans any substance. In many of the cases these structures have been created to help Indian residents or entities with permanent establishments in India to avail benefit of the DTAAs, when this is expressly barred in law. Thus the IT office is well within its rights to raise objections. But only if it is able to see through the corporate veil. If the authorities got hold of the data, specifically the confidential data of the clients, then it would mean not only piercing of the corporate veil, but opening of the kimono.
Luckily for NDA, shit did not hit the fan for a few years. Shefali and Parul used this stolen data to poach a few of the NDA’s clients, but this did not reach the authorities. Then things started changing in the country. In 2014 there was a change of government — ironically ‘NDA’ came to power. Clamping down on black money, especially that is allegedly stashed abroad, was one the key promises made by Mr. Modi. There was a change in the business environment and laws were amended while some new ones were brought into force. The schemes that NDA had designed for its clients were now being taken a dim view of, and were no longer very safe. But that is not the “change” that dealt a fatal blow to NDA (the title of this post is “The Leak”). Something else did…
The new government started cracking down on “black money”. Demonetization and GST were not the only steps taken by the government. It started creating systems for detection of money laundering. Call it a quirk of fate or something that was in destiny, Parul’s husband was engaged by the government in one of the projects to curb money laundering. He also found out about the data that Parul had stolen from NDA. He may have noticed that the data revealed illegality and he objected to his wife’s activities. This caused estrangement in their relationship followed by Parul’s filing of a Domestic Violence Complaint.
Parul’s husband retaliated, but for reasons best known to him, did not share this data with the appropriate law enforcement agencies. Instead, he approached Advocate Prashant Bhushan. Mr. Bhushan, it must be told, has always been a vocal opponent of the Mauritius Route and other tax havens. It was Mr. Bhushan who had represented the Petitioner (in Delhi HC, and the Respondent in the ensuing SLP in SC) in the famous Azadi Bachao Andolan case. It was a bitter pill for him to swallow that the Hon’ble Supreme Court had upheld the legality of the impugned Circular 789. When Mr. Bhushan got the NDA’s stolen data from Parul’s husband, he promptly shared it with CBDT, ED and the Black Money Commission (that had been set up on the orders of the Hon’ble Supreme Court) and filed a complaint of tax evasion and money laundering.
Thus the cat was out of the bag. This was a huge blow to NDA. Not only had it failed to protect the confidential data of its clients, but also there were allegations against it for abetment of Tax Evasion. The reputation that Nishithbhai had built over several decades, was now suddenly in tatters.
Anuradha V. Bajrangi
Towards the end of 2019, Parul Jain was back at NDA. Nishithbhai’s ego had gotten a boost and he was not restraining himself from bragging that someone who had quit NDA to join a large and leading accounting firm, had come back to the “NDA family”, as he likes to call the firm.
However, surprisingly there were no public announcements. Nishithbhai, PR saavy that he is, always ensures that such news gets published in the media. But in this case there was a complete silence. So much so that Parul’s name was not even added to the list of firm members on the NDA’s website, which is far better maintained than any other law firm in India.
As we, lowly members of the firm, were to later find out, Nishithbhai had learned about “The Leak”. It it difficult for me to say if he learned it from his pals in the investigative agencies with whom Advocate Prashant Bhushan had shared this information, or it was Parul who informed him, though latter seems very unlikely.
For a couple of months we noticed nothing unusual. But things changed in February of 2020. No, it was not the outbreak of COVID-19 at NDA. It was worse. Initially, we noticed that Nishithbhai and senior ‘partners’ (Gowree Gokhale, Pratibha Jain, Vaibhav Parikh from New York) having frantic parlays which also involved Parul. Subsequently some of us were also roped in.
Nishithbhai had come up with a plan to plug “The Leak” — a plan that eventually turned out to be a total disaster. He decided that NDA will file a case against Parul’s husband alleging that he had stolen the data from Parul’s official laptop and was now blackmailing NDA to fire her, or else he will put that data in public domain and tarnish NDA’s reputation. Parul happily gave a statement to this effect, on the basis of which a case was prepared.
Most of us advised Nishithbhai to abandon the plan and instead strike a deal with Parul’s husband or Adv Bhushan. Or just disown the leaked data, if the need ever arises. But Gowree supported the plan and Nishithbhai decided to go ahead with it.
It was crucial that this case had to be kept confidential as it would have been fatal if the clients came to know of the leak. The objective was to use shock and awe, and intimidate Parul’s husband. This is where the unmatched research capability of NDA came in handy. The firm can find solutions in law, which are generally unknown. Instead of filing a criminal complaint for theft and defamation, which would be very difficult to keep confidential, we figured out that a civil suit would work better.
Delhi High Court, inspired by the US and UK jurisprudence, had constituted confidentiality club in some matters pertaining to Intellectual Property disputes. Further, under the CPC the Hon’ble Court has the power to allow filing of a suit under pseudonyms and to hear the matter in camera. So a civil suit was prepared claiming that ex husband of an employee had unauthorized possession of the firm’s intellectual property, was misusing it and had defamed the firm before its clients thereby causing a reputational and financial loss to the firm. Parul gladly gave a statement against her ex husband, and this was made the basis of this suit. Statements were obtained from couple of friendly clients to the effect that Parul’s husband had approached them and defamed NDA. It was decided that the suit would be filed by the Delhi office of NDA and damages in access of Rs 2 crore will be sought, in order to make it within the jurisdiction of the Delhi High Court (which had confidentiality club precedents).
The suit was filed in pseudonyms — Anuradha V. Bajrangi. This was no ordinary filing. NMD wanted it to be a foolproof operation. The registry was bypassed. A friendly judge in Rajiv Sahai Endlaw was identified. A couple of lawyers from NDA along with a senior counsel approached him in his chambers to bring the suit directly before him. The paperbook was handed in a sealed cover and Rajiv Sahai Endlaw admitted the suit Anuradha V. Bajrangi without even verification of the paperbook. The prayers to institute the suit in pseudonym and keeping the paperbook (and memo parties) in a sealed cover were granted. Verbal prayers were made for formation of a confidentiality club, hold proceedings in camera and an ex-parte issuance of a commission to sieze all the electronic devices from the residence and office of the defendant i.e. Bajrangi (Parul’s husband). The judge granted all these verbal prayers in an order that he passed in his chambers. The Commissioner and Plaintiff were also given unbridled powers during this search and seizure.
The commission was executed on the very next day.
Lanka Dahan
Ravana was a brilliant man, no doubt. He also used his might to build the “Sone ki Lanka”. But somewhere arrogance crept in. Arrogance is something that even the brightest are not immune to, and when it sets in then there is no cure. It has a blinding effect. It was this arrogance that compelled Ravana to set the tail of Hanumana (ironically also known as Bajrangi) to fire. It took no time for Hanumana to burn down the “Sone ki Lanka”.
Nishithbhai should have seen the parallel with Ravana. He is no doubt one of the most brilliant lawyers India has produced, and the level to which he has brought NDA makes it the “Sone ki Lanka” of the legal world. If he is indeed not very spiritual, as he has openly claimed, and if he has found inspiration in the western world, then he should have drawn lesson from what happened during the WW-II - Pearl Harbour was a misadventure of Japan which woke a sleeping giant and for which it ended up getting nuked.
But that thing arrogance - makes you do stupidest of things. Nishithbhai was convinced that he could use shock and awe to intimidate Parul’s husband (henceforth referred to as ‘Bajrangi’). Brute force was displayed during the execution of the commission, or the search and seizure operation or the raid, whatever one might call it. A massive search party entered Banjrangi’s house early in the morning at 7AM. This party comprised of several NDA personnel, cops, ‘auditors’ from PwC and the appointed Court commissioner - around 15 persons in total. Even the NDA colleagues who were part of this search team admit that the manner in which this raid was conducted was a more rough than it had to be.
Bajrangi’s house was ransacked and all his electronic devices we seized - even his phones. The idea was to scare the hell out of him, so that he would not dare to take on the Goliath even in his dreams. The NDA personnel who were part of the raid team directly threatened Bajrangi that if he shares the NDA’s data with anyone, then NDA would legally carpet bomb him and make his life miserable.
But this had a completely opposite effect. Bajrangi, instead of being intimidated, declared to the raid team (including the Court commissioner) that he will now ensure that NDA is destroyed. Thus it turned out to be an act of stupidity by NDA - the complaints that Bajrangi and Adv Bhushan had filed with the agencies were possibly languishing, but by initiating such a coercive action, NDA had “woken up the sleeping giant”.
Bajrangi made an appearance in the suit through one of the top senior counsel of the Delhi High Court. He was willing to splurge money on this suit. NDA opened up some back channels to settle this matter but it could not get Bajrangi to agree with its conditions for withdrawing the suit. NDA even tried to pressurize him through the Court but he did not wilt.
Next was the audit of seized devices of Bajarangi as had been directed by the Court. Bajrangi was directed to be present during this exercise. He was called several times to the auditor’s office and made to remain present there for the entire day. We along with the Court commissioner tried our level best and all possible tricks to crack him, but all in vain. Not only did he possess excellent knowledge of computers, but he also had a decent understanding of law. He knew that there were limits to the powers of the Court commissioner, and he did not let us do anything in the audit exercise that was outside the scope of the Court order. Consequently, we found nothing useful for our suit during that audit exercise.
NDA’s objectives from this search and seizure, in addition to intimidation, were to discover with whom all Bajrangi had already shared the data and also to destroy one particular hard disk which was the primary device on which Parul had copied all the stolen data. Unfortunately, the search party could not seize this hard disk because Bajrangi had already moved it to Adv Bhushan’s office prior to the raid. We tried to get Bajrangi to handover that hard disk to us during the audit exercise but he kept on evading our demand. We even got the Court to pass an order directing Bajrangi to handover that hard disk to the Court commissioner. He, instead of complying with that order, got that hard disk delivered through Adv Bhushan to the Supreme Court Monitored Committee for Black Money (also known as the Black Money Commission), and filed an affidavit that since the hard disk was with the Black Money Commission, he is unable to produce that hard disk. We were all stumped. Not only had we failed to get possession of the hard disk, but also now this matter was before the Black Money Commission. This was bad for the reputation of the firm and also jeopardized the clients whose confidential data was there on that hard disk. Our moves had backfired, very badly.
This was the time to cool down, for damage control perhaps through withdrawal of the suit. But Nishithbhai was so pissed at the audacity of Bajrangi that he instructed us to continue pressing the suit. Bajrangi responded by making several damaging counter allegations that the NDA’s objectives were to destroy evidence of tax evasion which it had abetted and to impede investigation into its wrong doings. He further alleged that this was a collusive suit between NDA and his estranged wife (i.e. Parul) against their common enemy i.e. Bajrangi.
And then on the morning of July 13, 2021, a nuclear bomb was dropped on NDA and Nishithbhai. One newspaper - The Pioneer published a front page story on this suit. The story was titled India’s ‘Panama Papers’ on shell firms, tax loopholes gather dust.
There were explicit details of how this suit was brought directly in the chambers of the judge, how NDA had abused the process of law by getting an ex parte order to raid the “whistleblower’s” and tried to beat him down. It also questioned why this suit was proceeding under a confidentiality club. All in all, it made NDA the villain of the piece.
The story went on to publish the details of how the data revealed tax fraud by some of the top clients of NDA and several damaging allegations from the complaints of Adv Prashant Bhushan. It also mentioned that this data was with ED and CBDT, and they had failed to take suitable action, and now the matter had reached the Black Money Commission.
In one stroke NDA had gone from being the marquee international tax advisory firm to being compared with the tainted and now dead firm Mossack & Fonseca. Nishithbhai was shell-shocked, and so was everyone else in the firm. Soon some of the clients started calling and then the media. The “Sone ki Lanka” had been burnt down.
Notes
- This a medium adaptation of the original wordpress blog The Fall of Nishith Desai
