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FoxMandal defers lawyers' salaries after cash-flow crunch

FoxMandal Little has not been able to pay fee-earners in Delhi their salaries as the office faces a liquidity crisis.

FoxMandal Little managing partner Som Mandal said: "For certain categories of people payment has been withheld for June and would be paid in July."

It is understood that a large number of associates and partners are still unpaid but Mandal declined to confirm the precise figures and details.

He said that the Delhi office's lock-up had increased from 60 to 90 days to a period ranging from 90 days to six months. Lock-up is the time it takes for a firm to bank fees on work in progress.

Mandal told Legally India that the issue needed to be resolved to prevent it from happening in future and that the firm had "action plans in place".

"We are pretty sure of resolving this matter - hoping that it should close by this month or at the latest by August," he said and added: "We are looking at alternatives how we can secure ourselves in bridging the payment gap."

Mandal explained that the Delhi office was experiencing delays in payment from 60 to 70 per cent of clients, particularly from international clients, which account for 70 to 80 per cent of the office's billings.

He said that the delay in fees-collection has caused a cash flow problem for the office, despite Delhi's revenues increasing by 45 per cent in the last financial year ending 31 March 2009. "I would also like to state that we were perhaps the only firm in India to [have increased associate salaries] between 5 to 10 percent even in this difficult situation."

Mandal explained that many US and English firms have taken money from their partners to assist in their financing but noted: "In India we don't ask partners to put in capital and we don't get bank finance or overdraft for working capital."

The situation only affected FoxMandal Little's Delhi office, he said.

Little & Co is the Mumbai chapter in the FoxMandal Little network but is financially independent and not integrated. One Little & Co partner confirmed that the Mumbai office was unaffected by Delhi's cash flow problems and the non-payment of staff salaries.

Several large Indian firms told to Legally India that they have experienced a delay in billing recovery, although all claim to have continued paying staff normally. Managing lock-up has also become a major problem for international firms.

Click here to read how law firms and legal consultants have been trying to manage lock-up in India and abroad.

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