Top advocate-on-record (AOR) and Supreme Court powerhouse Agarwal Law Associates (ALA), which has around 50 lawyers, has announced a cut in fee-earner salaries of 30% on those earning more than Rs 40,000 per month at least until 14 April, after closure of the courts and social distancing measures have caused court work to fall off a cliff.

In 2018, ALA had been the busiest law firm in terms of making AOR filings before the Supreme Court, according to our data.

As such, it is no surprise that the firm would be especially hard-hit by the closure and it is unlikely to be the only litigation firm feeling the pinch.

According to an internal WhatsApp message (see below) circulated by management amongst fee-earners, the there was “no clear visibility on when the lockout will end and when the courts will resume functioning normally”.

The immediate cut in compensation was “harsh”, admitted the message, but hopefully “temporary”.

ALA has five partners, with mammoth AOR filer EC Agrawala and Mahesh Agarwal leading the firm, alongside Rishi Agrawala, Chitra Agarwal and Shally Bhasin.

Then there are two associate partners and 44 other fee-earners, according to its website.

One of the partners commented, on condition of anonymity that the firm could lift the temporary pay cut after 14 April, when the government-announced shut down would end.

We understand that all ALA fee-earners are currently working from home but since the firm primarily does litigation work, and the Delhi courts having begun effectively shutting their doors to most hearings since 13 March, there is currently very little billing.

We have reached out to the firm for comment.

Double whammy

Full-service corporate transactional firms have so far been aggressively bullish in keeping fee-earners in the money - with some even paying record bonuses early.

However, it is increasingly likely that their businesses too will not be immune for long during the coming economic downturn, which is all but certain to hit the world.

Full-service transactional firms normally have a hedge during recessions, which can mean an uptick in restructuring and disputes work that can pick up at least some of the slack in lower transactional billings as creditors seek to claw back funds or parties try to get out of contracts and obligations.

However, the current situation is somewhat atypical for law firms (as for the world, no doubt), in that disputes have been hit even before transactional work.

Despite working-from-home and corona-related uncertainties, transactional work still has the advantage for now of being able to continue under its own momentum, as well as benefiting from clients seeking advice on how to deal with a changed world and regulations.

However, with the shut-down of the courts and tribunals, at least for now, the legal industry’s one-two-punch of a recession has clearly already started, much earlier than in prior financial crises.

ALA hopes for quick return to form

Agarwal Law Associates, meanwhile, vowed in its message to fee-earners to be “first off the block when normal court activity begins”.

It is a safe bet that disputes will not disappear overnight, though this also requires courts adapt to this potential age of social distancing, perhaps with technological innovations, instead of it disrupting more this year’s court calendar.

ALA noted in its WhatsApp message:

“Dear All

The world has changed in an unprecedented manner in the last few weeks. There’s practically no one in the planet who has not been impacted by Covid 19.

At Agarwal Law Associates, we are fortunate that all of us and all our loved ones are safe and healthy. We hope and pray that this continues to be so.

Unfortunately, the business environment is not very favourable for us. The closure of all the courts and tribunals after first week of march of this month has crippled the work. There is no clear visibility on when the lockout will end and when the courts will resume functioning normally.

In light of these developments , we are compelled to take some harsh, but hopefully, temporary measures. With immediate effect, we are compelled to reduce compensation of all by 30 per cent(except for those under 40000)

We hope to restore to full levels as soon as the wider environment permits. As you are all aware, we are one of busiest and most productive law firms. We will therefore be the first off the block when normal court activity begins.

We have all grown together in good times. Hopefully, this phase shall pass soon.

Thanks ?”