Delhi High Court resolves differences between L&L Partners' bitter dispute

Delhi High Court resolves differences between L&L Partners' bitter dispute

The Court advices against bad-mouthing and says services of no lawyer shall be terminated for 45 days

The Delhi High Court has spelt out details under which two warring partners of L&L Partners will part ways after the two parties failed to reach any kind of compromise on the measures that will come into effect following Mohit Saraf's exit from the firm.

The Division Bench of Justices Rajiv Sahai Endlaw and Sanjeev Narula on 2 June tried to resolve the deep differences between Rajiv Luthra and Mohit Saraf regarding the manner the existing lawyers of the firm will join either Luthra or Saraf, transfer of data belonging to the firm, and several other issues.

The two parties opted for the HC to resolve the issue after they failed to reach a consensus.

The HC bench made it clear that Saraf will be entitled to only those claims which are in accordance with the law. As per the Court's earlier order, Saraf would be entitled only to monetary claims against Luthra and/or the Delhi and Mumbai offices of L&L Partners. The types of monetary relief that Saraf will be entitled to include compensation and/or value of goodwill of L&L Partners.

Luthra had offered to pay Rs 52 crore and the bank guarantee of Rs 25 crore to Saraf as an interim payment. The bench said that once the payment is made, Sharaf will not be entitled to reinstatement to the firm.

The Court has restrained Saraf from using Luthra/L&L as part thereof for his independent practice. He, however, will be entitled to describe himself as an erstwhile Senior Partner of the firm.

Both Luthra, as well as Saraf, shall be entitled to claim credit for all work done and accolades won by L&L Partners, from the date of inception of the firm till the date of payment of the amount and bank guarantee.

The bench also clarified that since Saraf was giving up his claim to be reinstated on payment of Rs 52 crore and the bank guarantee, he will only be entitled to profits of the firm accrued till the date of this payment, and not thereafter.

The High Court decided that Saraf will be entitled to only the data of a client who opts for his services. Clients wishing to transfer their business to Saraf's new entity may send a communication to L&L Partners asking for the transfer of their database/files to Saraf. The existing firm shall immediately comply with the same and shall not retain or misuse any part of this data.

The Court noted that the split is bound to witness many lawyers at the existing firm moving out and laid out the parameters under which it will be conducted. Under this, Luthra shall not terminate the services/contract of any lawyer or staff of the firm for a period of 45 days from the date of making the agreed-upon payment, including the bank guarantee.

During this period, Luthra shall not relocate the clients/work being done by the lawyers/staff of those who opt to join Saraf to another lawyer/staff. Luthra was also directed not to come in the way of the clients being serviced by the said lawyer/staff if they are desirous of moving along with the said lawyer/staff.

Clauses in the employment contracts of the said lawyers/staff prohibiting them from dealing with clients they serviced during the employment/association with L&L Partners, shall not be enforced during the 45-day period. Luthra, however, will be at liberty to enforce the said clause if any lawyer/staff joins Saraf after the period of 45 days, subject to the defence of the said lawyer/staff that he/she is not in breach thereof.

The electronic identities used by Saraf when he was part of the firm shall be blocked on the date of making payment and furnishing of bank guarantee. Similarly, the electronic identities/addresses of the lawyers/staff who opt to join Saraf shall be blocked from the date of termination of their contract/employment with L&L Partners.

The HC had some suggestions to make regarding the future behaviour of the two partners after having witnessed the bitterness between them. One of them was to bury the hatchet and behave like a gentleman and an advocate.

"It is also directed that both, RL (Rajiv Luthra) and MS (Mohit Saraf) are restrained from doing any act, deed or thing harming the professional reputation or causing any unlawful loss to the other," the Court said and added that the professional competition between them, agreed to in 1 June settlement, shall be a healthy one, without denigrating the other.

Further, the bench urged Luthra to act like a gentleman and an advocate when it comes to the choice agreed to be given to clients, lawyers and staff of L&L Partners.

"Both MS and RL, though in future shall compete for work and legal and paralegal talent, shall not indulge in unhealthy practices, commonly known as, bad-mouthing," the HC advised.

The Court also directed Saraf to unconditionally withdraw the objections preferred by him before the Registrar of Firms regarding the changes in the constitution of L&L Partners before the income tax authorities, banks, etc.