CONSIDERING LITIGATION IN INDIA | PART II – KNOW YOURSELF AND YOUR OPPONENT BEFORE PICKING A FIGHT!

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This article is in continuation of the earlier article where we outlined the challenges associated with pursuing a litigation in India. As highlighted in our earlier article, litigating in India can be a time consuming and relatively expensive affair. Anyone planning to engage in commercial litigation in India should utilize litigation only as a means to achieve a desired settlement. In this context, one should be mindful of certain factors that may determine the strategy to achieve the desired settlement. These become more relevant for mid-market businesses, given the constraints on capital and man-power at their disposal. Some important aspects for anyone to consider before engaging in a litigation are as follows:

  • What is your capacity to litigate?

Understanding one’s capability and exploring options accordingly may seem to be a simple and logical approach. But, this is rarely ever seen in practice. Many businesses jump headlong into litigation and halfway into the battle realize various shortcomings. The first step for any business is to identify a potential dispute at the earliest. The next logical step would be to decide upon the commercial objectives to address the likely dispute. Thereafter, strategize a plan of action to achieve the desired commercial objective. But, to effectively assess its options, the business should reach out to its financial, commercial and legal advisors. This approach would assist in formulating a strategy based on estimated costs, timelines and probability of success in any litigation. Given the delays and costs involved in litigation, any business should have a reasonable assessment of the costs, timelines and resources that need to be deployed. It is only after one has assessed their capability to engage in a litigation should a strategy be devised accordingly.

  • What is the capital that a person can expend for litigation?

Charges for litigation, in major metro cities (Mumbai, Delhi, Bangalore etc.) are usually lumpsum for filings with the concerned court and thereafter for the number of appearances required in court. The charges for lawyers to assist in a civil action can be upwards from INR 25,000 to INR 10,00,000, at the higher end, for preparing the relevant papers for preliminary filing. The per appearance charges for a counsel to appear on a matter may range from INR 15,000 – INR 5,00,000. If the matter is complex in nature and the client wishes to engage a designated senior counsel, their costs could range from INR 1,50,000 – INR 15,00,000 per appearance. Of course, some of the most reputed senior counsels could charge more depending on the nature/type of matter. The costs described above are for metro cities like Mumbai and Delhi, and charges in tier II cities would be much lower. The case itself could involve multiple hearings before the parties arrive at some form of settlement and the total costs involved will vary accordingly. Hence, it is important to be mentally and financially prepared before commencing any form of litigious action. The logical sequence to the first part is to stay the course once the plan is put into motion to obtain the desired results. These costs would escalate if the initial dispute resolution mechanism is an international arbitration in a foreign location.

  • How much time can a person spend to pursue the litigation?

As discussed in the earlier article, litigation in India could potentially take a few years if the parties have not reached a settlement. Businesses should be able to dedicate personnel to support the litigation lawyers as needed with relevant facts and details. This could take a toll on smaller businesses that may be stretched for resources. Hence, it is imperative to dedicate a member of the business team to coordinate all aspects regarding the litigation with the lawyers and the other business team members.

  • Who are you up against? Are you litigating against an Indian business or a foreign business operating out of India?

A company with a turnover of INR 10 crores deciding to take on a business with INR 1,000 crores turnover in a conventional litigation is an ill-advised strategy. They would have far greater resources and capital to deploy, that could exhaust a smaller business. At the same time, foreign corporations do not like to get dragged into litigation in India. Many a times larger corporations may not be comfortable with the negative publicity that surrounds a litigation. That could become an important factor for them to agree to an expedited settlement. In a different scenario; a large multi-national corporation may nonetheless decide to burn out a smaller opponent in a litigation game. This could be because a large foreign corporation may decide to fight out the litigation to avoid appearing to be pressured down in a new market. The opponent in a potential litigation will many a times determine the strategy to be adopted.

  • Which judicial forum would you be approaching? Some forums are more efficient than others?

The type of case that is planned to be filed and the court before which the party plans to file, has great relevance in determining the strategy and approach. For instance, in the current scenario, approaching the company law tribunals under the Insolvency and Bankruptcy Code, 2016 (Code) to try and get a defaulting debtor to repay funds is an efficient method. The company law tribunals generally tend to decide matters under the Code at a much faster rate compared to conventional Indian courts. The High Courts with original jurisdictions in Mumbai, Delhi, Kolkata and Chennai are a much better forum to litigate in, than district courts in other locations. A foreign arbitration may be more efficient but would also be relatively more expensive. So, the forum of dispute settlement would also determine the strategy and could very well become the determinative factor. For large businesses in the consumer goods space, a negative decision from a consumer court/forum could have an adverse impact on their brand reputation. In such situations, the corporation may decide to settle the matter to avoid negative publicity.

The above points are not exhaustive but are important factors to be considered before initiating litigation against anyone in India. Impulsive decisions or decisions arising out of bruised egos do not achieve much in terms of results. The above factors become more relevant for mid-market businesses since they do not have the luxury of extensive capital or personnel to deploy in a litigation. While, the above factors will play an important role in determining the strategy, one must not ignore the importance of the facts of any dispute. The facts at hand determine the merits of the dispute and will eventually have a bearing on the core strategy. Not having the appropriate facts could mean that initiating any form of action itself would be a pointless exercise and should be avoided. In our next article, we will discuss strategic steps to strengthen fact patterns before an impending dispute. One cannot undo existing facts, but one can always steer the course to ensure that subsequent events are favorable. This could go a long way to sustain a successful litigation strategy.

Ajay Joseph | Partner, Veyrah Law; Anshu Bhanot | Of Counsel, Veyrah Law

Views expressed in the article are not to be considered as legal advice and are solely for informational purposes.

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