Chettri v. Nepal Bangladesh Bank, Ltd.

Decision Date02 September 2014
Docket Number10 Civ. 8470 (PGG)
CourtU.S. District Court — Southern District of New York


Plaintiffs Ashim Khattri Chettri, d/b/a Tarala Internationals ("Tarala"), and Wu Lixiang ("Wu") bring this action against Nepal Bangladesh Bank, Ltd. ("NBB"), Nepal Rastra Bank, the central bank of Nepal ("NRB"), the Department of Revenue Investigation, Government of Nepal (the "DRI"), and Chase Manhattan Bank ("Chase"). Plaintiffs' claims relate to a contract that the Government of Nepal purportedly entered into with Tarala, a Colorado corporation, for the purchase of equipment for the Nepalese army and police. Tarala subcontracted Wu, a Chinese businessman, to deliver the goods and wired $1 million to Wu's NBB account. As set forth in paragraphs 1 and 4 of the Complaint, Plaintiffs allege that the DRI, acting through NRB and NBB, wrongfully froze the transferred funds pursuant to a money laundering investigation:

1. Plaintiff brings this action to recover for money and reputation damages suffered from the NEPAL RASTRA BANK, AND DEPARTMENT OF REVENUE INVESTIGATION, GOVERNMENT OF NEPAL's (hereafter "NEPAL") confiscation of $1,000,000.00 sent by TARALA via electronic wire transfer to the NEPAL BANGLADESH BANK, LTD (hereafter"BANK") with instructions to credit the amount to an account opened by "WU". With full knowledge and awareness of the source of the aforesaid funds and the normal course of business dealings established between NEPAL and TARALA, NEPAL, in bad faith, unreasonably and unjustifiably seized and confiscated the $1,000,000.00 over two years ago, thereby depriving TARALA and WU of the benefits of their business dealings with NEPAL and unjustly enriching NEPAL. . . .
4. . . . Two (2) years have elapsed since NEPAL confiscated the funds from WU and no formal charges by NEPAL have been brought - the amount was merely frozen on the basis of some unfounded and disingenuous suspicion of money laundering.

(Cmplt. (Dkt. No. 1) ¶¶ 1, 4)

Plaintiffs filed this action on November 10, 2010, asserting claims against NRB and the DRI (collectively, "Defendants") for, inter alia, tortious interference with contract and violations of the Vienna Convention on the International Sale of Goods.

On February 15, 2011, this Court entered a default judgment against the DRI and NRB in the amount of $1,000,500.00.1 (Dkt. No. 27) The DRI and NRB now move to vacate the default judgment and dismiss the Complaint on the grounds that, inter alia, (1) this Court lacks personal jurisdiction over them, because Plaintiffs did not comply with the service of process requirements of the Foreign Sovereign Immunities Act of 1976 ("FSIA"), 28 U.S.C. § 1602 et seq.; (2) this Court lacks subject matter jurisdiction because, under the FSIA, the DRI and NRB are immune from suit; and (3) Plaintiffs did not establish their "right to relief by evidence satisfactory to the court," pursuant to 28 U.S.C. § 1608(e). For the reasons stated below, Defendants' motion to vacate the default judgment and dismiss the Complaint will be granted.


Plaintiff Tarala is the principal supplier of clothing and military equipment for the Government of Nepal. (Cmplt. (Dkt. No. 1) ¶ 10; Affidavit of Dilli Raj Bhatta ("Bhatta Aff.") (Dkt. No. 42), Ex. B) Chettri is Tarala's president. (Chettri Aff. (Dkt. No. 44) ¶ 3)

Plaintiff Wu, a Chinese national, is the director of Constellation International Ltd., a Hong Kong-based company that helps coordinate the logistics of Tarala's international transactions. (Cmplt. (Dkt. No. 1) ¶ 11) Wu serves as Tarala's distribution partner, and is responsible for the delivery of goods and equipment to Tarala's customers. (Id.) Wu also conducts business with Nepal independently of his dealings with Tarala. (Id.)

Defendants NRB and the DRI are political subdivisions or agencies of the Government of Nepal. (Declaration of Gerald M. Levine ("Levine Decl.") (Dkt. No. 52) ¶¶ 3, 7) NRB acts as the "banker, adviser, and financial agent for [the] Government of Nepal," and as such may "open and operate accounts [on behalf of the] Government of Nepal and other governmental bodies." (Levine Decl., Ex. 1: Nepal Rastra Bank Act, 2058 (2002) (Dkt. No. 52-1) §§ 5(g) ("Functions, Duties and Powers of the Bank"), 13 ("Operation of Accounts")) NRB is authorized to issue letters of credit on the Government of Nepal's behalf and settle its obligations. (Declaration of Yuba Raj Khatiwada, Governor of NRB ("Apr. 14, 2011 Khatiwada Decl.") (Dkt. No. 52-2) ¶¶ 4-5) It does not, however, operate accounts for private individuals or conduct commercial activities for its own account. (Id. ¶ 4) The DRI serves as the prosecutorial arm of Nepal's Ministry of Finance and, among other things, monitors wire transfers for compliance with the Nepal Asset (Money) Laundering Prevention Act of 2008. (Levine Decl. (Dkt. No. 52) ¶¶ 7, 9)

Between 2006 and 2008, the Nepalese army and police placed several purchase orders with Tarala for equipment such as batteries, radios, gas masks, ballistic helmets, and riot shields. (See, e.g., Bhatta Aff., Ex. A & E (Dkt. Nos. 42-1 & 42-5)) In connection with these purchase orders, NRB issued irrevocable letters of credit to Chase, naming Tarala as beneficiary. (Cmplt. (Dkt. No. 1) ¶ 15; Bhatta Aff., Ex. E (Dkt. No. 42-5)) After receiving notice that a letter of credit had been issued, Tarala would instruct Wu to make arrangements with suppliers and other sub-agents to complete the transaction. (Bhatta Aff. (Dkt. No. 42) ¶ 7) Tarala would then draw upon the letters of credit by presenting an invoice demonstrating satisfactory delivery of the equipment. (Cmplt. (Dkt. No. 1) ¶ 15) Tarala contends that it received $1,675,427.00 from the Government of Nepal through these transactions. (Id. ¶ 16)

In July 2008, Tarala wired $1 million from Chase to Wu's personal account at NBB. (Cmplt. (Dkt. No. 1) ¶ 17) Wu claims that he intended to use the funds to pay a third-party to transport equipment by truck from China to Nepal. (Bhatta Aff., Ex. G (Dkt. No. 42-7) at 6-8) According to documents submitted by Plaintiffs, a portion of that equipment related to a Tarala supply contract with the Government of Nepal that was secured by Letter of Credit No. 4133/64. (Id., Ex. C (Dkt. No. 42-3) at 9, Ex. G (Dkt. No. 42-7) at 6) The equipment was delivered in satisfaction of the supply contract and Tarala received payment from the Government of Nepal via a letter of credit issued by NRB. (Apr. 14, 2011 Khatiwada Decl. (Dkt. No. 52-2) ¶ 6; Declaration of Dharma Raj Sapkota ("Sapkota Decl."), Ex. 1 (Dkt. No. 58-1) (spreadsheet showing $64,280.00 payment issued to Tarala on Sept. 16, 2008))

On August 4, 2008, NBB - based in Kathmandu - sent a letter to NRB - also based in Kathmandu - notifying it of various "anomalies" NBB had discovered concerning Tarala's wire payment. (Levine Decl., Ex. 3 (Dkt. No. 52-3)) NBB indicated that Wu had notprovided "appropriate document[ation] [regarding the] source of the [i]ncome," and that it had frozen the funds - then held in Wu's account at NBB's Bhainsepati Branch - pending an explanation of the source of the funds and further instruction from NRB. (Id.) On August 27, 2008, the DRI directed NRB to instruct NBB to "immediately freeze" Wu's account,"[o]n account of an on-going investigation." (Id., Ex. 5: Aug. 27, 2008 Translated Letter from the DRI to NRB (Dkt. No. 52-5)) As a result of the account freeze, Wu could not complete payment to the third-party for its delivery of supplies from China to Nepal. (Bhatta Aff., Ex. G (Dkt. No. 42-7) at 5)

Following the account freeze, Tarala attempted to demonstrate the legitimacy of the wire transaction and urged NBB to release the funds. Financial institutions and government agencies - including Chase, the United States Embassy in Nepal, and the Defense Attache to the Embassy of the People's Republic of China in Nepal - sent letters attesting to the legitimacy of Tarala and Wu's business dealings in Nepal. (Cmplt. (Dkt. No. 1) ¶¶ 19-25; Bhatta Aff., Ex. K (Dkt. No. 42-11)) On February 25, 2011, however, the DRI charged Wu with violating the Asset (Money) Laundering Act and, pursuant to the Act, demanded confiscation of the disputed funds. (Levine Decl., Exs. 7 & 20: Charge Sheet filed in the Special Court, Babarmahal, Kathmandu pursuant to Section 22 (2) of Money Laundering Prevention Act, 2064 (Dkt. No. 52-7 & 52-20))

Plaintiffs filed the Complaint in this action on November 10, 2010, prior to the filing of criminal charges against Wu. (Dkt. No. 1) That same day, Plaintiffs' agent served the Summons and Complaint on both NRB and the DRI through the Office of the Consulate General of Nepal, located in New York. (Bhatta Aff., Ex. N: Affidavit of Gopal Shah (Dkt. No. 42-14) ¶ 2) Plaintiffs also arranged for a local process server to personally serve copies of the Summons and Complaint on the DRPs Registration Section in Kathmandu on November 15, 2010, and onNRB's Registration and Dispatch Section in Kathmandu on November 19, 2010. (Id., Affidavit of Kalyan Pokhrel ¶¶ 2-6; id., Nov. 22, 2010 Proof of Service on the DRI)

On January 18, 2011, this Court ordered the DRI and NRB to show cause why a default judgment should not be entered against them. (Dkt. No. 17) According to Plaintiffs, the Order to Show Cause and supporting documents were served in three ways: (1) by sending copies by FedEx priority mail to NRB and the DRI offices in Kathmandu on January 20, 2011 (Bhatta Aff., Ex. R: Affirmation of Service (Dkt. No. 42-18)); (2) by personally serving copies at those offices through a local process server on January 21, 2011 (id., Ex. N: Affidavit of Process Server Bhim Datt Joshi (Dkt. No. 42-14)); and by sending...

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