Manan Lahoty, head of the crack capital markets team that is set to join IndusLaw soon, has won a major victory in the Bombay high court yesterday in a multi-hour hearing against his as-of-now-still employer L&L Partners.
According to Bombay high court sources with knowledge of the hearing, L&L, formerly known as Luthra & Luthra, had obtained an ex parte arbitration order against Lahoty last week, on 28 September, allegedly without giving him sufficient notice.
The ex parte order is understood to have been made by a sole arbitrator who had been appointed by Luthra to settle certain issues relating to Lahoty’s departure (more details below).
However, Bombay high court Justice GS Kulkarni set aside that arbitral order yesterday after Lahoty approached the court, eventually leading to both parties to reach an agreement, recorded by the judge.
Furthermore, Kulkarni held that the mandate of the sole arbitrator should be terminated, with Justice BN Shrikrishna substituted as sole arbitrator instead.
Update 11:29: Something we had missed earlier and that has been pointed out in the comments: L&L has arguably partially won with a statement made by the judge in the order that could prima facie hamstring Lahoty starting out at Indus, at least initially, with the risk that existing clients approaching him being run past the new arbitrator first:
6. Apart from what is agreed above, as there are still some issues, in my opinion, it is in the interest of justice, that in the event the petitioner intends to accept any professional work in regard to the existing clients of the firm which is not part of the existing professional work, already in hand with the firm, such issues be raised before the arbitral tribunal and appropriate orders thereon be passed by the arbitral tribunal, after hearing the parties.
All contentions in that regard are expressly kept open.
Messages sent to both Lahoty and L&L senior partner Mohit Saraf have gone unanswered as at the time of publication.
Also read:
Arbitrator
On top of that, Kulkarni held that:
The learned Arbitrator shall make a disclosure as per the requirement of Section 11(8) read with Section 12(1) of the Arbitration and Conciliation Act,1996 before entering the arbitration reference.
Under section 11(8), the appointment of an arbitrator should be done with due regard to “other considerations as are likely to secure… an independent and impartial arbitrator”. Section 12(1) of the Act further specifies that:
When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose in writing any circumstances likely to give rise to justifiable doubts as to his independence or impartiality.
Those two sections make potentially quite an indictment of the initial arbitrator (who is, fortunately for them, not named in the order) as well as potentially of Luthra, which had appointed that arbitrator and apparently obtained a favourable order from him or her in the first place.
However, in a separate petition under section 14 of the Act, Lahoty’s counsel Thakker said that “statements and allegations as made against the learned sole arbitrator stands unconditionally withdrawn”.
Non-solicits, status quos continue
In addition, perhaps providing a clue as to what the original arbitral award was relating to, Lahoty’s counsel Nitin Thakkar made a statement to the court that Lahoty “would not solicit any retainers”, which is a fairly standard clause of most law firm partnership agreements not to actively poach fee-earners.
Also recorded in the order is Thakkar’s assurance that “as regards the existing clients, the arrangement which prevails today in respect of professional work in hand shall continue to operate”, unless decided differently in future orders by the new arbitrator.
Finally, Kulkarni basically left it up to the parties to settle any future disputes about clients via arbitration, noting that “in the event the petitioner intends to accept any professional work in regard to the existing clients of the firm which is not part of the existing professional work, already in hand with the firm, such issues be raised before the arbitral tribunal and appropriate orders thereon be passed by the arbitral tribunal, after hearing the parties.”
The two sides had argued at length for several hours, according to accounts from the high court, with the order recording that Lahoty was represented by senior advocates Nitin Thakkar and Gaurav Joshi, advocate Rohit Gupta and instructed by Sagar Kesar; Luthra had briefed senior advocates Darius Khambata and Dipen Merchant, and advocates Chirag Kamdar and Mehul Shah.
Eventually, according to the order, however, “the parties have agreed to arrive at an interim arrangement”, which Kulkarni accepted.
Arbitration order had ‘restrained Lahoty from alienating assets’
Update 05:14: Bar & Bench has just reported about the Bombay high court order, particularly with a few extra details on the original arbitration.
Apparently, according to B&B, Lahoty had been given a day’s notice of the arbitration before it made its ex parte order, having been asked on 27 September to appear on 28 September at 2:30. Mumbai-based Lahoty did not appear (presumably for the Delhi-based arbitration) but raised objections by email, including on eligibility of the tribunal.
B&B has also confirmed in its story that well-known arbitrator and senior advocate AS Chandhiok had been the (unnamed) sole arbitrator appointed by L&L (though the B&B story is silent on the high court’s findings vis-a-vis the arbitrator).
However, B&B had more details on the original arbitration, noting that L&L had claimed Rs 70 crores against Lahoty, including a refund of 40% in retainer fees due to him for his billings according to his contract, as well as the rest in damages.
The arbitrator had found in favour of Luthra on the basis of “prima facie evidence pointing to” Lahoty breaching his non-compete and non-solicitation clauses (which purport to be binding for “three years”), according to B&B. The arbitration order (quotes all B&B’s):
- held Lahoty had “induced seventeen lawyers of the Capital Markets practice at L&L Partners to terminate their engagement with the firm”, and
- “restrained Lahoty from alienating any of his assets” (which could be code for freezing of his bank accounts?).
Comments
If the next arbitral award upholds the non-compete and non-solicitation clause, and I am an existing Luthra client, will that prevent me from engaging Manan after he moves to Indus, even if he makes no explicit approach to get me to hire him?
If the answer is yes, could someone explain the legal justification that causes a dispute between two unrelated parties to end up restricting me from dealing with a cap market lawyer of my choice?
On another note, everyone who has worked with Manan will tell you he is a great guy who deserves better. Lawyers move all the time. Luthra should show a little more grace, they are not helping their reputation with this public dirty linen laundering.
If it showed in my tone, I was just angry on behalf of an old work acquaintance and one of the few lawyers who I really liked as a person. But thank you for your sincere response and taking the time even if you thought it was a troll post.
Anybody present in HC yesterday would tell you how clearly the case of breach of non-compete and non-solicit was made out.
So the 17 leaving have no brain of their own?
Shocking that they would choose to leave when Luthra’s only Chambers Band 1 partner is leaving!!!! Instead they should have stayed around in the firm that sues retainers who have resigned, imposes lock ins on promoted retainers and doesnt pay increments even two quarters into the fiscal?
It is time they reflect on why not even one associate from the mid or senior levels decided to stay back, despite repeated insistence and coercion. Was there something wrong with rest of the team that stayed behind? Were associates not sure of the team's future? The firm should have an internal review and look at these issues. Maybe take an honest exit interview from people who are leaving.
A couple of young kids can be sellouts. It would, however, be unreasonable to say that all 17 are moving just for the money.
How to get out of this situation now?
Drama hai! Action Hai! - this (if L&L has its way) may open a road for all the sulking firms (and their ungracious Partners) who have an unexpected/untimely/shocking departures. Manan did a lot in building the Mumbai practice for L&L. L&L should have accepted departure this more gracefully.
It is a very sad reflection on the state of the legal profession.
If you knew litigation, you would know that urgent matters are ‘mentioned’ in courts everyday and orders passed on the same day.
If you knew law, you would know that you never make remarks on an order unless you have seen it.
If you knew arbitration, you would know that emergency awards can be passed
If you knew arbitration, you would know that institutions such as SIAC have passed emergency awards in under 2 days
If you had ever entered court and realised the relationship between bar and bench, you would know the great respect the arbitrator must have for the court not to name him
If you had clients of your own, and they called the next day, you would take the next flight chasing their rupees
If you had gone to law school, you would know that if a court/tribunal summons a party to appear and chose not to, the court may proceed without waiting
If you knew how to read, you would know that all statements and allegations against the arbitrator were unconditionally withdrawn
If you knew how to read, you would see that the order was set aside by consent and not merits
If you knew how to read, you can see that Bombay High Court passed the same order in substance
If you knew how to read, you would know that Mohit Saraf had the last laugh at the cost of poor Manan’s adventure
If only…
Do you know when increments are coming?
There is a difference between being literate and being educated. Do work on it.
Cap markets bhul jao- clients please think about what advice the litigation teams are giving YOU
Knowing Luthra as I have worked there for some time, initiating arbitration against a retainer means something really bad must have happen. They are liberal. Most of the time. That said, going after one of their own, does not reflect the magnanimity Luthra is known off.
It does seem like at least a partial victory for Luthra on that front, though you're right, if the firm forces the issue a client who wants to move is not going to look charitably at the situation...
. Their claim was against Manan and Manan alone for being the brainchild and having acted in breach of their non solicitation provision by reaching out to existing clients of the Firm that they will continue to be represented in Induslaw. L&L had actual proof of the same
Manan was well aware of the obligation as had signed upto it. Similar non-solicitation provisions have been upheld in the past by several High Courts and the Supreme Court . Hope you read up well on holiday. L&L has got what they wanted
Arbitration proceedings shall continue and Manan would be constrained in reaching out to any of Firm's existing clients, which he would have shown off to Indus as his book while negotiating his and team's package!!
If its 1) I suggest the troll army stfu. If its 2) then the people being recruited as replacements should really be worried.
Waise, since you seem to know so much about the “lAw”, please tell us, how is solicitation proved? Is saying “dont worry your deals will go on smoothly” solicitation? Or is “I am moving to Indus” solicitation? I dont know if Manan has made these comments but hypothetically cant see what would qualify.
And basis what I have read in comments relating to L&L, please spent less time gloating about the loss of book whichwas used to negotiate packages for his team, and more time worrying where your increment is
If u quit in sept/ oct or later in a FY, you forego increment for that year even for the period u have already performed. even though increments are wef from april 1 of the FY, you dont get paid for the period you have already served (anyway their increment payouts dont happen before oct - so its very easy for luthra to cut this "accrued" payment also ! many many many young lawyers have been docked 50k - 3 lakhs on this pretext.
This is in addition to not getting paid bonus for the past year (where u have already done ur part of performance)
2) lets be real. Luthra has poached entire team of partners and associates (and their running matters and clients) many times over. these partners also navigated tough contractual provisions of their previous employers (none of whom sued them btw). luthra built most of its practice by poaching entire practice area / partners who poached from their previous firms. now suddenly luthra is behaving "moralistic". clap clap.
3) non solicit makes (some) sense when these are clients that are the firm's clients. in most cases, the firm only gives work to those partners who suck up to the management. manan built a formidable CM practice , with his own reputation and good will in the market (even when madhurima left luthra "suddenly"), and ofcourse some support from luthra. but much of the clientele was ppl who knew manan from before he came to luthra. so he isnt really "soliciting" ! rather taking what he brought with him. even if they were not his clients and firm's clients, if the clients are not happy to stay with luthra, then luthra needs to introspect (and not make work more difficult for these clients).
4) if young lawyers dont wanna stay with luthra (as they dont see a future with the firm, its leadership) you cant blame manan for that. anyway attrition at luthra since 2013 has been SUPER high, and most associates dont stick there beyond 6-14 months. this time its seems stark as we are seeing aggregate nos (CM team), but the overall attrition is much higher if you were to calculate the individual nos.
While it is important to pay attention after the 1st year of college, what's more important is to be able to implement what you were taught in law school, IRL. okthanksbye.
Manan, godspeed!
Am honestly not sure what are the other partners in the firm are doing. Either they are so careless that just don't care what is happening to the firm just because of one man's ego. Or they are simply scared to raise their voice and are seriously incompetent to protest against this tyranny and joke that the firm has made out of itself. Guys, wake up!! Today what is happening to Manan will happen to you also tomorrow. I've spent such a large part of my professional life in this org and I can surely say that the so called drivers and senior team members of the firm are now reduced to nothing but self righteousness, pity for their colleagues and peers and hatred in general. No one is happy in the firm and everyone is trying to fight for survival by either pushing someone else down or is simply waiting for some good offer to come their way so that they also make an exit.
[...] This was obviously sanctioned by the every member of their executive committee. Time these two retire and let young guns take charge
This episode shows that the baton in Luthra has shifted from the magnanimous, large hearted Mr. Luthra to the egoistic, self centred younger generation. Rather than taking this to court, they should have spent time introspecting on why he is leaving and had had the confidence in the brand to be able to build this practice again fairly quickly.
Vinashkale Vepreet Buddhi!
1. Why partners were not kept in the loop. Why is it that we get to know this through press;
2. Who has decided to pursue arbitration(?);
3. Was EC kept in the loop? If not, why;
4. If all this is strategized by one person, does this not mock the entire governance and management system the firm assured of when it rebranded itself;
5. Even if this is a call taken by one person, didn't they have the courtesy to inform the partners during the last partners meet - instead the focus was more on discussing regular stuff for which year on year people are discussing but no one is taking it to execution;
6. Lastly, when so many collective hours of partners are spent on less fruitful exercises, didn't the firm ever think to hear what its partners have to say. Afterall the aftermath of this action will be borne by partners - be it in terms of market reputation, work or recruitment.
High time L&L should figure this out. People still don't come on time, despite repeated discussions during partners meeting. The ten hour downtime is still a mockery. And the consultants who are hired to make firm a better place are sacked without consultation, as always.
Somewhere this entire exercise seems to be an ego issue for some and those are ready to go down any path and at any cost.
What were you expecting to gain out of this? Did you think that the clients will stay back and give YOU work? Did you think the associates will stay back without Manan? Did you actually think that you will prevent an individual from carrying out a legitimate profession after he has quit the organisation? In how many instances has someone been able to prove a case of solicitation of employees/ clients before Indian courts? Did you assess the ramifications of this and the bad press it will bring?
Now what did you actually gain out of this? Did you gain the respect of your peers? Will the clients (whose work may/ may not get affected because of this order) be kind to you? Does this show well on the litigation team? Did you inspire and motivate your counsels to stick with the firm? Did you send out positive vibes to people who were thinking of joining the firm? Did you actually expect to make money by claiming damages from Manan?
Despite all that has happened over the years and the last few months, a few simple thoughts continue to delude you. The maalik - naukar environment is NOT working anymore. Your so called master plan of trying to keep counsels happy with pointless gifts and extravagant parties, without paying them timely increments and bonuses or treating them with dignity is NOT working anymore.
For God sake, start treating people better and get your house in order so that people are encouraged and NOT forced to stay within the firm!!!
But from what I hear, you guys are incorrigible. You guys failed to understand that going after Manan was never a good idea because of the reputation he enjoyed (both internally and externally). You have now made yourself look like a tyrant!!!
This is a classic case of one bad apple spoiling a whole bunch.
Indian law firms need stronger governance mechanisms given the liability that all partners are exposed to when management decides to be egoistic and arbitrary. Complete loss of face and reputation for L&L. Manan will likely counter sue at some stage.
It says for firm clients, with whom the capital markets team is not doing any deals currently, Lahoty will have to approach arbitrator. Seeing how wide the net of capital markets deals are (given each deal has multiple banks and the time period involved which means there may be a year old stagnant deal) and how narrow the net of THIS firm’s clients is, may not have cause as much damage as the counterparty hoped it would with this nonsensical dispute.
No idea who is correct, but this proves that young lawyers and professionals shouldn't be afraid of organisational might of rogue private organisations.
Be brave, prove your worth, don't be afraid of unmeritorious organisations who think humans are slaves.
PS. [...]
For all the protestations of senior management, that policy making geared at addressing the exceptions is bad, that is exactly what they end up doing. In the process, they keep eroding the ability of the Firm to attract talent at any level.
Look at what happened with the 3 year lock in, thst policy was implemented because kids joined without disclosing foreign contracts and then left midway to go abroad. After implementing this policy for a few years, what happened? The Firm realized that no half decent kid wanted to join the firm. The short term loss was that the Firm lost face and didnt get good juniors, and the long term loss was the gaping hole in the mid level of the Firm that still persists today. I remember that in Mumbai the hiring market for the Firm was completely destroyed because of notices being issued etc. and it was difficult to attend any lawyers gathering without the standard jibes of peers on lock-in etc.
Now, look what is happening in the aftermath of Manan & Co exit. Everyone is being handed completely unreasonable contracts which border on the unconscionable. Not only will this abomination in the name of a contract lead to a massive confrontation at the Firm (already brewing), which will not be without casualty for the Firm, but it will also cause people in the process of joining the Firm to fill the cap marks gap to rethink. This litigation will only make matters worse as the people will look at their new contract and look at what is happening to Manan, only to decide that its better to quit now than to sign up to the new contract.
This litigation has taken away the argument of the management that please sign up the new contract as it is for protecting the interests of the Firm and we will never enforce it.
Very very slow clap to the Luthra management.
Main to sign nahin karungi.
So which firm do you suggest Manan should join - since no one in their right frame will stay/join L&L ofcourse (considering L&L's part in this drama). But besides, I'd also like to know which firm has the least attrition and the best partner to non partner ratios, and clean practices ofcourse. Both Manan and I would be much obliged if you could reveal the name of this "secretly" existing firm.
On another note - presumably the Indus disputes team supported Manan in this drama. Considering that, Manan and team are all looking at a very long inning I would think.
2. All the replacement capital markets guys will think a hundred times before joining and these new contracts with 6 months notice period.... No right thinking lawyer will ever sign this.
3. Who is it that advises this law firm's management, do they seek advice from ground floor of Ashoka Estate or some Tier 3 law firms to save money?
If the obligations are not enforceable in law do they still have to be complied with?
Which paragraph has HC confirmed relief?
Did Kulkarni J., give judgement basis substantive arguments?
Why was the arbitrator replaced if his interim order did not reflect any procedural bias?
Why are you so jobless?
When is your increment coming?
Are you a climate change denier?
I will not give any of my other partners any heads-up - I am not legally obligated to do so (and if I did, it would leave you a chance to “resurrect” the practice, which I mean to kill).
I will take all the associates with me (since half of them don’t think on their own and will herd along and the rest I have hired or made up to partners/ senior associates).
Since I don’t believe in the concept of notice period (and nor do my “sheep” associates), we can plan to leave the day after the news breaks.
I will send messages to all my clients and all issuers - instill the fear in them that their deals are going to suffer - if my new firm is not empaneled, this will ensure that it does happen fairly quickly. Many of them I don’t need to convince anyway since they anyways like me and will engage me irrespective.
But I need to ensure that my ex-firm is left with nothing. So in addition to leaving no mandates behind and no lawyers behind, I need to launch a campaign to convince others that I am the victim in that scenario. They will crash and burn eventually, but if the public opinion can be influenced, it can be accelerated.
All the associates need some work during the transition period - I have my troll army ready and my new firm will also lend some trolls.
Despite the fact that i was at the helm at my ex-firm (and was privy to all matters), if I convince myself that they were all my clients from the beginning, then I don’t need to acknowledge the firm and it’s contributions (I can just tell myself that i was anyways running a firm within a firm).
Fine - so I didn’t solicit any clients and I didn’t poach any associates (all of them technically resigned within 5 minutes of my own resignation - which was on WhatsApp BTW - hehe). Looks like I am sorted. I should leave some things to do for the ensuing confusion and I anyways know that the senior partners at my ex-firm don’t know how to react to a situation like this- they’re still a lala company and they will make some mistakes along the way. Right, again, I am sorted.
Just one tiny question-don’t mean to nag- why are the sheep associates still in Luthra working through their notice period? I mean, that does kinda make you wonder what other factual inaccuracies your conspiracy theory has no sir?
But what do I know- Im just a sheep after all.
Is the firm not getting paid for the working I am doing while here? Are they giving me money for nothing? If so, why dont they waive my notice period and send me on my way? If they want me to sit around and get paid for nothing, then I may be a sheep but they are a bunch of donkeys.
Really disgraceful how far people will go to defend false gods. Competition is a good thing- and we should encourage lawyers who leave for better work environments and pay. Let us not fall prey to capitalist traps of loyalty.
Well done! Trident Mumbai awaits you.
Can a law firm fire a partner or associate without any notice without cause?
How did the claimant arrive at 70 crore number?
Yep, really bored today.
On the question why the associates are still working through their notice period - well isn’t Manan still in the building? What will they do in Indus when their boss is still at Luthra?
Can we leave the negativity behind and Focus on seeing how Manan and Luthra recoup after this drama.
I have realised recently (albeit quite late) that its very important for me to be selective about information that I choose to flood my brain with. Only then will I be able to achieve the elusive ‘ZeN’ state among all the pandemonium that tend to intrude into my personal space and time.
I am concluding because I am simply too lazy to type and have neither the patience nor the inclination to waste another 10 -15 mins of my precious time on someone’s futile opinion on something that hardly concerns me, will never have any impact on my life or my livelihood or contribute to my wellbeing and self preservation. In other words ‘Abbey Paka Mat. Hawa Ane De’.
Naptime....
Spicejet Legal ;)
You are right, this seems to be an ego issue for the luthra management. Sorry to hear your tone, where a professional change in organisation is seen as “betrayal”. This is not a zamindari system.
People of manan’s caliber deserve more than a nominal EC post. Do U know others firms have given equity to 2005/2006 graduates. While 1997/98 graduates, who made partner in 2005 in luthra are still waiting (samir dudhoria / sundeep Dudeja) for example. If the firm is not moving with the times, why will ppl stay ?
Hope the A0s were told during recruitment about all the bad policies at luthra !! Did they know their seniors don’t get paid increment till oct ??
Prol e
Are u kidding me ?!? Did u take a vote on the alumni group ?
Your statement shows exactly what I have been trying to say, no value for professionals -expect only slavery.
But now deal with it and please be done sulking and making a mockery of yourself!
Slyly isolating the team and clients from the firm for years, taking advantage of the trust which RKL & MS put in him by throwing their weight behind him while he restarted his career in India, is completely lack of integrity!! Irrespective of what his defense is, he should have announced it to the management and let the team take an independent call, after the announcement, whether they'd follow suit or continue.
Inducing = before announcing it to the management, creating fear amongst team members about bleak future in continuing and strategic mass exodus is sly. This has been efforts of years not months, he blindsided the management by being self designated spokesperson for team and clients and blindsided team and clients by being self designated representative of their voices ("the management was of the view that you need more time for that promotion, however I feel you'll learn on the way"). He thoroughly enjoys this false demi God status amongst naive team members.
If anything, it is manipulative, false benefactor has burnt bridges multiple times with meritorious people (unpublished stories). His closed personality ensures no-one knows his true self, while RKL & MS both are big-mouths (atleast not sly).
This episode will only make MS & RKL further distrust and want deeper control by micromanaging. Atleast this thought should have crossed the mind of Mr. extraordinary human being i.e. to leave the place on a good note for hard feelings result into massive destruction.
MS & RKL - its a brand worth saving, hire professional management and focus on growth.
Anyway what is the big deal? Bonus is for previous year and they had worked the whole previous fiscal and then some.