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Delhi HC in Saraf v Luthra: No injunction, mediate! [READ ORDER] • With AM Singhvi, NK Kaul, Nigam, Dayan Krishnan, ex-Trilegalites Das, Mukherjee

Saraf, Luthra to be heard before Justice Kameswar Rao tomorrow
Cause list item 4 tomorrow: Saraf v Luthra
Cause list item 4 tomorrow: Saraf v Luthra

Surprise: The court orders... mediation!

19:27: Apologies for the slight delay in updates. The order is out and has told the parties to mediate with Sriram Panchu tomorrow (Saturday 17 October) or by Sunday (18 October) at the latest, but without granting any stay orders to Saraf (which puts him in the position where he is locked out of his firm email and Luthra has notified all clients that they can’t work with him, even on ongoing matters).

Read the full order here (PDF).

The court ordering mediation and staying out of it is not surprising, particularly since counsel on both sides said they were happy to mediate.

But considering both parties have been ‘mediating’ for nearly a year now, it’s anyone’s guess whether that will yield significant results beyond what has to date been achieved (to use the term loosely).

The court will hear the interim injunction petition again on Tuesday, 20 October.

If mediation fails, it is possible to court will get stuck in but that could very well be usher in a more drawn out process.

Justice V Kameswar Rao noted:

2. In substance, the petitioner has challenged the notice, issued by the respondent No.1 terminating the petitioner’s partnership with L&L Partners, New Delhi.

3. I have heard Mr. Arvind Nigam, learned Sr. Counsel for the petitioner, Dr. Abhishek Manu Singhvi and Mr. Neeraj Kishan Kaul, learned Sr. Counsels for respondent No.1 for quite some time.

4. During his submissions, Mr. Nigam has stated that the petitioner is ready and willing to work out differences with the respondent No.1 before a learned Mediator, provided a status quo ante is granted.

5. On the other hand, Dr. Singhvi and Mr. Kaul both have stated that even the respondent No1. is not averse to the mediation process but without any order of status quo ante.

Live blog updates of the hearing from earlier in the day below.

Liveblog of the hearing

Update 16 October 10:58: We understand that the hearing is due to start shortly (for earlier background to the hearing, please scroll down).

11:03: Also, we have been told that Luthra has published advertisements in newspapers warning “members of the public” that they should not deal with Saraf as a “representative of L&L” (see picture below).

Newspaper ad published by Luthra about Saraf
Newspaper ad published by Luthra about Saraf

11:29: The hearing has still not started though is expected to soon. In the meantime, here are some possible options for what could happen:

  • Justice V Kameswar Rao could decline to get involved (as the judiciary has often been loathe to interfere in law firm politics) and instead ask the parties to mediate their differences first (or proceed to arbitration), or
  • the judge could order Luthra to reinstate Saraf as a partner, pending the arbitration / mediation of the parties, which is presumably what Saraf will be asking for.

Please share any other speculation or thoughts in the comments.

12:15: The court is running rather late today, as far as Saraf v Luthra, which is item number 4 on the list, is concerned. The court is currently still hearing item 2.

12:42: According to Bar & Bench on Twitter, Saraf has senior advocate Arvind Nigam appearing for him, with Luthra having senior counsel NK Kaul and Abhishek Manu Singhvi on his side.

According to Bar & Bench’s live tweets on the case, Nigam said for Saraf that it was really not a matter that should have come to court.

12:46: Court has passed over the matter, according to B&B:

It appears that the first doc.. the earlier volumes are not here: Court

Then the Court doens’t have the first two volumes: Nigam

Court may pass it over: Nigam

We can have it on Monday: Singhvi.

We’ll pass it over. You also pursue : Court.

Matter to be taken up in some time.

In other words, after that missing document volume 1 is supplied to the court (presumably having been unavailable to the judge due to some technical issue or other), the matter might get heard later today (though the court’s timetable is already running late, so who knows).

Saraf's counsel Nigam explains history of partnership

13:10: The matter has restarted, with the judge having received the file. Also, by way of update, we understand that senior counsel Dayan Krishnan (the second NLSIU Bangalorian who became a senior), is also acting for Saraf.

13:12: Bar & Bench is live tweeting Nigam going through the background of the case, which is mostly in the public domain following our previous reports, going through the 1999 partnership deed between Saraf and Luthra.

13:18: The genesis of the dispute was the clause about induction of new partners, explains Nigam, referring to when Luthra unilaterally began making new partners. Nigam states there was no unanimity between both partners on this induction. The court has taken a break for lunch now.

13:20: For context and background, in terms of inducting new partners to the firm, the 1999 deed stated that Luthra could unilaterally share his profits with others, though if those others were to have management rights, Saraf would also have to agree:

In the event it is deemed necessary and feasible to induct new partners in the Firm, the same shall require the unanimous consent of RKL and MS. In the event of an induction being agreed upon, the percentage interest that is allocated to such new partner shall initially be only a nominal percentage and shall be contributed by reducing hte existing percentage interest of the Parties, pro-rata.

It is further agreed that if RKL and MS do not agree upon the induction of a new partner, RKL may elect to nominate someone, who will be entitled to receive a portion of his profits, which should have accrued to RKL, by giving a share from his own percentage interest, provided however, such new person shall not have any rights in the management of the Firm. However, if any such person has been part of the Firm for a continuous period of five (4) years, or practised law for seven years such person may also be admitted to the benefits of partnership with management rights. The extent of management rights would need to be unanimously agreed by all the Parties

Post-lunch resumption: Nigam for Saraf

14:19: The court has begun its hearing again, with Nigam continuing to lay out the deed for the judge, according to B&B on Twitter.

14:21: Nigam argues that it is Saraf’s case that Luthra withdrew from the firm and gave notice to to the firm to terminate his partnership (as Saraf had previously also stated in internal emails to the corporate partnership). Nigam outlines the same purported 6 January notice by Luthra, which Luthra then allegedly extended on 4 April, 30 April and 30 August via WhatsApp messages. According to Nigam, Saraf then accepted Luthra’s withdrawal on 12 October (as per Saraf’s internal email).

14:25: The court is asking the right questions, requesting the purported 6 January notice from Luthra.

14:33: Several interruptions, due to Justice Rao video feed dropping repeatedly, meaning Nigam has still not gotten around to reading out the notice to the court (which seems like it’d be a crux in Saraf’s contention that Luthra resigned and Luthra’s denial that he had not).

14:36: The messages from Luthra, apparently go into how much Saraf would pay him to resign from the partnership (under the goodwill payment provisions of the deed, presumably). According to B&B, which has not quoted the text of the notice:

In the communication, Luthra seeks to know the amount that would be paid to him. The communications go on between the parties: Nigam

Nigam reads another communication on deferring automatic dissolution.

I [Saraf] never wanted dissolution and termination of the firm. I wanted to induct new partners. Luthra has practically been a sleeping partner this year: Nigam

14:40: Nigam is claiming that Luthra had extended this notice several times after that, and Saraf allegedly replied that he accepted Luthra’s withdrawal and while there had been “material breaches” of the 1999 deed by Luthra, he had “no intention of depriving him from any amount legally due to him”. (That does sound like some negotiation over the goodwill amounts took place: as a reminder, under the deed Luthra on leaving the firm might have been due around 45% of one year’s revenue of the firm.)

14:44: According to B&B’s Twitter, Nigam is reading out one of Saraf’s communications to Luthra (which we assume had not been circulated to the entire firm):

It was always been your intent to terminate the association with the firm... It was always been your intent to terminate the association with the firm... You have remained adamant on safeguarding your pecuniary benefit... Your sole motivation was not the benefit of the firm.. your announcement of giving away your equity share was nothing but a facade.

14:46: Now Nigam is going into Luthra’s termination of his client, for which he states that besides removing his name from the website, he has also blocked all IT infrastructure including emails (as we had suspected but could not authoritatively confirm in our earlier report). “I accepted his resignation but I did not block his access. A partner remains a partner till accounts are settled. He has barred me from the assets for the firm which he cannot do. He was published it in the newspaper,” said Nigam, according to B&B.

14:48: Nigam prays to the court that Luthra can not dissolve the firm (unilaterally), and that “irreparable damage” (invoking the magic words) would be caused to firm, its lawyers and clients, giving Saraf the balance of convenience. He is also asking for Luthra to be restrained from interfering in the functioning of L&L Partners. The other respondents besides Luthra (which includes a number of administrative staff in accounts and technology), were included in the case to give effect to the court’s orders.

14:53: Nigam says that Saraf wants his access restored, and the “bouncers deployed” at the office to be removed and for L&L to continue. Nigam then reads out emails Luthra has sent to clients.

14:54: “I‘m sorry that this matter has come to court. It should have been mediated and settled .. I’m willing to go to a time-bound scheduled... I’m willing for meditation subject to status quo ante,” notes Nigam according to B&B on Twitter.

Luthra's counsel NK Kaul begins arguments

14:56: Kaul, arguing for Luthra, says that there had been “cherry picking of lines” by Saraf, tweeted B&B. “The man who created the institution, started in 90s. Impression is being given that suddenly in Jan he decided to leave.” It was a “bizarre interpretation” of Saraf’s that Luthra had withdrawn. He also added that 90% of partners were supporting Luthra.

14:59: Kaul is claiming that “confidential information” has been leaked and that in the petition Saraf claimed he couldn’t work with Luthra anymore. The way out was for Saraf to leave, therefore, and Luthra to pay him what he was entitled. Kaul is now summarising some clauses from the deed, notably that Luthra had notable veto and other powers retained by him under the deed intentionally. “Now they say that suddenly you are out .. there has been a cherry picking by them,” Kaul repeats.

15:10: Kaul summarises the parts of the deed (as described earlier) relating to the wider powers that Luthra has, vis-a-vis Saraf, on termination, inducting new partners, and casting votes in certain areas. According to B&B, Kaul said: “I was interested in Saraf leaving the firm and not destroying the firm that I created... The entire exercise that Luthra carried out from Jan was the attempt to terminate Mr Saraf’s partnership.”

15:17: What of Luthra’s 90 days notice to leave, asks the court. Kaul responds that he’d get to it but Luthra had the sole right to dissolve and terminate the partnership. As per B&B:

The emphasis is on “resolve”.. everything was in the direction of resolution before termination. If Luthra was interested in termination, he would have done it right away. He has always taken people along with him. He has mentored three generations of lawyers.

15:17: Kaul now comes begins explaining exactly under what provision of the deed Saraf had been terminated. As predicted in our earlier report, Kaul is arguing that Saraf’s “conduct was unbecoming of a lawyer. He leaked WhatsApp messages” [unclear]

“What option do I have today in view of the letters that receive. Can I let you ruin the partnership? The remedy is damages in such case. He cannot bring the Partnership to its knees,” adds Kaul according to B&B.

15:21: Kaul is claiming that Saraf had made “selective appointments and had no power to induct new partners” (we are not sure whether Saraf has inducted new partners already or just threatened to). Kaul says Luthra would not agree to restoring Saraf to the status quo, since the firm which had hundreds of cases would come to a standstill.

15:25: Saraf had no rights other than clearing his accounts under the agreement, says Kaul, and Luthra could only withdraw or go on retirement under the agreement, he explains, after prompting by the judge.

15:26: Luthra had never given any indication of wanting to retire or withdraw, argues Kaul and Saraf had chosen to wrongly interpret the WhatsApp messages, for instance. Kaul claims that the message was about “hurt of a person who mentored” Saraf, not that Luthra was leaving.

15:45: Kaul argues that Saraf’s quoting of WhatsApp messages was out of the context of ongoing conversations and reiterates that Saraf has been leaking those conversations to the detriment of the firm. (it is not clear which WhatsApp messages have been leaked.) “The cheque is ready,” he adds, for Saraf to leave.

15:54: “It’s a fact that they can’t work together,” says Kaul, according to B&B, reiterating that they’re ready for mediation.

15:58: Three-way argument between judge and lawyers. “You people should sit together and work it out,” says Justice Rao. At this point, Manu Singhvi pipes up for Luthra the first time: “Nobody can object to the spirit of working it out.” Nigam responds for Saraf: “Don’t precipitate the matter. Give me my documents.”

Singhvi shoots back: “It is too far gone”, noting that the court’s can’t give directions in such cases.

16:12: Singhvi now on a roll, argues that Saraf has been making things worse for nine months and has purported to kick out Luthra. Is this a way to conciliate? Luthra’s retirement was a “red herring”, and Luthra’s side strongly opposed the court making any order.

Nigam says on behalf of Saraf that termination could only happen when both are unanimous and that Luthra might not like him but he he had no power to throw him out.

16:33: Court orders mediation, adjourned till Tuesday, 20 October. According to B&B: “Let them not delete or access my email: Nigam. I’m not saying anything but don’t access his official email: Court”.

Original story of 15 October

L&L Partners senior partner Mohit Saraf has filed a case against managing partner Rajiv Luthra in the Delhi high court today, as first pointed out by a Legally India commenter.

Nigam specifically mentions the goodwill payments due to a leaving party, which we had analysed in detail earlier this week (the deed has several provisions about what happens within 4 and 12 years of signing and thereafter, with respect to goodwill and who gets to keep what).

Nigam now outlines the majority vote and casting vote powers of Luthra that we had reported in more detail, which after 2010 were restricted to only some very specific areas.

Saraf’s advocate-on-record is Sandeep Devashish Das, according to the case status of OMP(I) (COMM) 339/2020.

Sandeep D Das had left Trilegal in 2013 to become an independent litigator (Das is also one of the lawyers who is part of the firm-cum-chambers of former Trilegal co-founding partner Anand Prasad, though we believe according to multiple sources that neither Prasad nor the AP & Partners firm is not involved in this case).

However, we understand from two sources with knowledge of the matter that Sitesh Mukherjee - another former Trilegal partner and its former litigation head, who went independent in April 2020 [CORRECTION] - has been instructed by Saraf.

We have not yet been able to confirm which senior counsel will appear for each side (a number are understood to be instructed on both sides).

The 1999 partnership deed between the sole equity partners of the corporate firm includes an arbitration clause, stating:

Any dispute or difference arising amongst the Parties, pursuant to this Deed shall be resolved by Arbitration. Upon any difference or dispute arising amongst the Parties they shall first endeavour to resolve the same by mutual discussions, for a period of sixty (60) days the same shall be referred to arbitration in accordance with the procedures laid down under that Arbitration and Conciliation Act, 1996, of India. The venue of the arbitration shall be New Delhi.

It appears likely that in light of the case type and the arbitration clause, Saraf will be seeking an interim injunction against Luthra, under section 9 of the Arbitration and Conciliation Act.

The case is listed for hearing tomorrow for a virtual video hearing before Justice V Kameswar Rao as the fourth item in the list.

We have reached out to Saraf and Luthra for comment.

We will update this story once we get further details, if any.

For the most recent events until now, read our article from earlier today: Analysing the partnership deed, as Rajiv Luthra makes termination fait accompli in client emails, erases Mohit from website, posts armed guards.

Case status of Mohit Sarav vs Rajiv Luthra
Case status of Mohit Sarav vs Rajiv Luthra

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