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Rajiv Luthra ‘terminates’ Mohit, ‘strips of all authority’ • Mohit ‘retires’ Rajiv, claims to ‘reconstitute firm’ • Split & lit near inevitable [UPDATE-2]

The old Luthra.com website has been offline for weeks now: Who keeps domain name and other assets is likely to be one of several bones of contention in any litigation or break-up
The old Luthra.com website has been offline for weeks now: Who keeps domain name and other assets is likely to be one of several bones of contention in any litigation or break-up

Senior partner Mohit Saraf, who holds a 33.4% equity stake in L&L Partners, has internally announced that managing partner Rajiv Luthra has effectively “retired” and “withdrawn” from L&L Partners and that Saraf would “reconstitute” the firm without him. This latest shot in the war of words follows managing partner Rajiv Luthra’s previously telegraphed announcement that he had unilaterally promoted two salaried partners to equity partner out of his own 66.6% equity stake (albeit without specifying the structure or conditions).

Update-1, 01:50: We understand that Rajiv Luthra responded to Saraf’s email late last night, categorically stating that he has not retired. Luthra called Saraf’s allegations “absolutely false and there is no question of my withdrawing, nor retiring from the firm, which I have set up with my sweat and blood”. See his full email below.

Update-2, 13:04: Rajiv Luthra has just sent out an email internally purporting to terminate Saraf’s role in the partnership, with immediate effect. We have not been able to confirm under which provision of the partnership deed or otherwise the notice has been served on Saraf. See full email below.

In his email sent last night (12 October), Saraf had announced five routine (if delayed) promotions of fee-earners to L&L’s salaried partner level, as we have reported separately.

However, in the same email Saraf also dropped another (alleged) bombshell that Luthra had in January 2020 first served Saraf with a notice to terminate their partnership.

According to Saraf, Luthra had also “unilaterally extended” this termination until 31 October via WhatsApp messages sent in April, May, June and August of 2020.

And Saraf claimed that on 13 September Luthra had “restated his retirement and withdrawal”, with Saraf quoting Luthra’s email in which he had allegedly written that he did not “wish to partake in any future all partners meetings at the moment”.

According to Saraf, Luthra had “request[ed] us to decide by no later than October 12, 2020, whether we would like to continue the partnership and association (as applicable) with Mr. Luthra”.

Saraf then claimed in his email, yesterday: “If Mr Luthra cannot or does not want to continue to work with me, then the only option left with him is to retire.”

Saraf announced in his email that he was therefore proceeding with “reconstitution” of firm, after Luthra’s purported withdrawal-cum-retirement that had made Saraf the sole “surviving partner”.

This would entitle Saraf to all goodwill, assets, employees, clients and fee-earner retainers of the firm, he claimed, and that he had therefore decided to “reconstitute the Delhi firm” by “inducting the salaried partners in the corporate practice of the Firm as equity partners of the Delhi Firm”.

Neither Saraf nor Luthra responded to requests for comments, though it does not seem far-fetched that if Luthra did comment, he would disagree with at least some of Saraf’s assertions.

And perhaps Luthra contesting the assertions is in fact Saraf’s gameplan, hoping for an end to the stalemate one way or another, before partners, clients (and maybe even Legally India readers) decide to get bored of the dispute and move on.

Constitution of reconstitution

Saraf noted in his email that the equity for the new partners would come from 67% of the current equity; while not entirely clear, that is presumably referring to Rajiv Luthra’s chunk, though Saraf “clarified” that he would not “realise any amounts from any un-distributed percentage interest (if applicable)“.

An equity system would be rolled out by the end of March 2021, in addition to a democratic-decision making structure at the firm, promised the senior partner.

According to Saraf, somewhat cryptically, in this “locked step equity model, the percentage interest of a new partner shall be computed based on his/her performance”. While this seems like more of a blend of eat-what-you-kill and lockstep, Saraf also added: “The percentage interest of the equity partners shall be reset pursuant to implementation of a locked step equity model and the firm shall issue additional percentage interest to the new partners from time to time from the undistributed percentage interest.”

The Mumbai partnership - which had been started by Luthra and Saraf in 2003 as a “partnership at will” three years after their Delhi partnership - had already been dissolved as of 6 June 2020 due to Luthra’s purported notices of termination, claimed Saraf, having only “unfortunately discovered” this “on a belated basis”.

As the Mumbai partnership firm stood “dissolved” from 6 June, Saraf said that the Mumbai office that had been a separate partnership would be administered through the Delhi partnership, assuring the “Mumbai team they have nothing to worry about”.

The Delhi partnership could not be unilaterally dissolved by Luthra, although Luthra did have the right to retire or withdraw, according to Saraf.

Saraf alleges Luthra prejudiced firm

To buttress his case, Saraf also alleged that Luthra had “committed some serious material breaches” prejudicial to the firm, “coupled with the withdrawal by and retirement of Mr. Luthra from the firm”, including:

  • the (now infamous) Zoom town hall, which Saraf claimed had an “adverse impact on the reputation” of the firm.
  • Luthra allegedly refusing to give control to the firm over its domain name (the firm’s website, incidentally, has appeared to be offline for several weeks now - see screenshot above). Clarification 14 October: The firm’s new domain name is at llpartners.com rather than luthra.com (though its primary email address remains the latter).
  • Luthra allegedly refusing to hand over “retainership agreement etc which are wrongfully in his possession”, according to Saraf.
  • Luthra allegedly delaying decisions over bonus payments and promotions, both of which had now concluded according to Saraf,
  • having asked “some of the oldest serving and most profitable partners in the Firm to leave”.
  • Luthra’s unilateral promotions with Saraf’s consent were illegal and had “demotivated” other lawyers in the firm.

Many of Saraf’s as well as Luthra’s emails over the past few weeks can be read as internal communications to lobby the wider partnership of the firm to pick sides.

But Saraf’s latest email is the clearest indication yet of Saraf preparing the ground for what now seems like an inevitable court case.

Next step: Litigation-cum-mediation?

Both Luthra and Saraf did not respond to messages seeking comment but judging by all the previous correspondence and salvos fired between the parties, it seems unlikely that Luthra will agree to Saraf’s assertion without protest.

It is possible that Rajiv Luthra’s move to announce two equity promotions out of his own stake and Saraf’s latest counter claiming Luthra’s self-ouster from the partnership, are clear signals of the intent of each effectively intending to start / continue separate firms without the other.

Even so, both are unlikely to come to a straightforward amicable agreement about some how the hairier issues, such as how to divide the L&L-cum-Luthra & Luthra brand name, how to split up partners and fee-earners, client accounts and other assets of the firm.

And Saraf’s now stated intent to proceed on the basis of Luthra having retired from the partnership, may leave the latter few options.

The odds of the dispute between the two parties to the 1999 partnership deed eventually ending up in court, have therefore only increased since our initial reports in late September:

However, judges have historically often been loathe to interfere in law firm partnership battles between senior lawyers (exhibit 1: Shroff vs Shroff).

On top of that, the 1999 partnership deed itself does not appear offer much in the way of clarity as to what will happen in the case of such intractable differences.

If the dispute hits the courts, it therefore seems a distinct possibility that the court may first order both parties to settle their beef via mediation.

Whenever litigation does start it is therefore anyone’s guess how smoothly, if at all, some of the fundamental differences between Luthra and Saraf can be ironed out.

In any case, the longer this dispute and uncertainty remains, the less there may be left worth fighting for.

We understand from sources with knowledge of the dispute that both sides have had several senior counsel blocked and on standby for a while now.

Update-1: Luthra's full response to Saraf

Update 13 October, 01:50: Luthra’s full email response to Saraf stated:

My dear All,

I am writing this message, because I have received plenty of calls and messages from many of you, expressing concern at a misguided and illegal email sent by Mohit about my so-called retirement.

The differences I have been having with Mohit Saraf are now known to all of you. I was hoping he would behave in a mature and professional manner, but my hopes are in vain. I am not going to bother all of you with a detailed rebuttal of the false and baseless allegations made by Mohit to disrupt the smooth functioning of the Firm, however, I would like to assure all of you, that all the allegations made by Mohit are absolutely false and that there is no question of my withdrawing, nor retiring from the Firm, which I have set up with my sweat and blood.

Everything I have done in the last few months, including, but not limited to, diluting my equity, inducting new partners, proposing promotions, (all of which I have kept you all in the loop), speaks by itself, of my intentions to making our Firm inclusive.

Apropos the promotions, I had confirmed Partners’ recommendations and sought confirmation from the Corporate Partners on Thursday, October 8, 2020, and had informed them that I intend to make the promotion announcements today. Additionally, on Saturday, October 10, 2020, I had informed the Corporate Partners group about the induction of two equity partners - Mr. Aniket Sengupta and Mr. Harish Kumar...

...attached is the list of all the promotees...many congratulations to all of you - this promotion is entirely well deserved for each one of you, endorsed by each one of your partners, as well. Please also join me in congratulating Aniket Sengupta and Harish and welcoming them on board.

I continue to remain committed to taking our Firm to greater heights.

...stay home and stay safe!

Warmly always,

Rajiv

Update-2: Luthra's email terminating Saraf

Update 13 October, 13:04: Things are happening rather fast though at the same time, not much substantive seems to be happening at all other than the exchange of emails.

Rajiv Luthra has responded to Saraf (and the entire firm) yet again, counter-accusing Saraf of a number of things (as before). In this email, he claims that he had been left with “no option but to terminate Mr. Saraf’s partnership, which was done earlier this morning”, adding: “Mr. Saraf is now stripped of all authority and standing, and has no authority to instruct you or otherwise to act on behalf of the Firm. No one should fall into the trap of accepting any non-existent equity, which he wants to offer to anyone, and further complicate matters.”

We have reached out to Saraf and Luthra for comment, as usual. But, much as above in the reverse situation, if Saraf did comment, we would expect him to contest Luthra’s email and deny his termination (Saraf had in fact stated in his earlier email that he believed Luthra did not have the power under the deed to unilaterally remove him).

Luthra’s full email below:

Dear Friends,

All of you must have seen the e-mail sent by Mr. Mohit Saraf last evening and I assume it must have caused you a lot of confusion and concern…

…the behavior and attitude exhibited by Mr. Saraf is a source of pain for me, and yet, inevitably a source of new clarity and resolve.

All of you are intelligent people and I don’t need to waste your, and my time, explaining the ludicrousness and lack of legal sanctity of the content, and intent, of Mr. Saraf’s e-mail/notice – hoisting on me an imaginary retirement/withdrawal from the Firm.

Blinded by his unbridled desire to see me out of the Firm and propelled by an all consuming ambition (on top of his utter reluctance to dilute any part of his equity holding) what other option did he have, other than to come up with such a clumsy strategy?

Over the last many months, Mr. Saraf indulged in many acts and deeds that constitute material breach of the terms of the Partnership Deed and are gravely prejudicial to the interest of the Firm, and in complete bad faith. The e-mail/notice sent yesterday is the proverbial last nail in the coffin – leaving me no option but to terminate Mr. Saraf’s partnership, which was done earlier this morning.

Mr. Saraf is now stripped of all authority and standing, and has no authority to instruct you or otherwise to act on behalf of the Firm. No one should fall into the trap of accepting any non-existent equity, which he wants to offer to anyone, and further complicate matters.

Amidst all this, the biggest responsibility on all of us is to keep serving the clients with continued vitality and commitment. Let us please make sure that all ongoing work continues as routine. We have a control and command structure in place and that shall continue to be followed.

All teams are still intact and associates at all level must take guidance from their respective partners, as to the partners, I am available, in case of any issues / clarifications, 24/7. Please feel free to call me at any time.

All payments will be released on stipulated time and all commitment shall be met.

This is just a brief message, primarily to do away with any apprehension in your minds as to the continuity of our functions and of the Firm. I shall talk to all of you very soon, and we shall continue our journey and add more glory to it.

Warmly, as ever,

Rajiv

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