On December 18, 2019, a ruling by the National Company Law Appellate Tribunal (NCLAT) sent shockwaves across the country. In boardrooms, offices, living rooms and everywhere else, one topic dominated the conversation: the restoration of Cyrus Mistry as Tata Sons chairman by the NCLAT. More than anywhere else, the ruling—held in abeyance for four weeks to let the Tata group file an appeal—was discussed and dissected threadbare in corporate law offices.
While Mistry had not personally sought to be reinstated as chairman, Cyrus Investments Pvt Ltd and Sterling Investments Corporation Pvt Ltd—two investment firms backed by his family— had approached the NCLT Mumbai, alleging oppression of minority shareholders and mismanagement by Tata Sons.
They had also challenged Mistry's ouster in a boardroom coup on October 24, 2016. After suffering a series of setbacks at the NCLT Mumbai, the two companies approached the NCLAT. The tribunal agreed to hear Mistry, too, in his personal capacity.
The NCLAT ruling sent the Tatas into a tizzy given its ramifications and the huge stakes involved. For starters, it meant that the appointment of N Chandrasekaran as Tata Sons chairman and of various group companies and entities was invalid. It also meant that all decisions taken after Mistry's dismissal were bad in law.
In a statement, Mistry said the ruling was a moral victory and a vindication of his stand against the Tata Sons’ board: “Today’s judgment is not a personal victory for me, but is a victory for the principles of good governance and minority shareholder rights.”
The worried Tatas went all out to get the ruling reversed. The group enlisted the services of a battery of legal eagles, including Harish Salve, Kapil Sibal, AM Singhvi and Mukul Rohatgi. Mistry, too, had some sharp minds in his corner, with CA Sundaram, Shyam Divan, Maninder Singh and Neeraj K Kaul representing him.
The Tatas got a stay on the NCLAT order, filed an appeal and eventually prevailed in the Supreme Court. Its lawyers had saved the day.
That case—one of many in recent years—brought home why corporate law practitioners are among the highest-paid lawyers in India. Unlike cases involving individuals, whose means are limited, corporate law is a lucrative practice because of the paying capacity of the litigants.
Big corporates litigate over various issues, says Sriram Parakkat, an advocate on record practising in the Supreme Court. “They fight over the right to use a mark or over non-disclosure of vital information to a competitor etc… and the stakes are invariably high.” It is these high stakes that make the practice that much more lucrative for practitioners.
“The necessity of minute detailing in litigation is very high in this sector and so clients pay lawyers well and this makes the corporate litigation lawyer richer than his counterparts in traditional litigation,” says Parakkat.
Big bucks
Salve is perhaps the most expensive counsel practising in Indian courts. He is said to charge nearly Rs 20 lakh an appearance. While Rohatgi’s per-appearance fee is said to be between Rs 10 and Rs 11 lakh, Sibal is said to charge up to Rs 15 lakh. Gopal Subramanium’s services come with a Rs 15 lakh fee, while Singhvi is said to charge around Rs 7-8 lakh on an average.
Others, including Janak Dwarkadas, Darius Khambata and Navroz Seervai practice primarily before the Bombay High Court, which, along with Delhi, sees a sizeable chunk of corporate litigation cases.
Dwarkadas, with his vast legal experience spanning several decades, is said to charge around Rs 14-15 lakh for an appearance before the high court, His fee increases if he has to argue cases before any of the tribunals in the city. Dwarkadas also represented Cyrus Mistry in his battle with Tata Sons and argued for Invesco in its battle against Zee Entertainment.
Senior Advocate Arvind Datar explains that typically a consultation takes place between a client and their lawyer (or firm), and depending on the nature of the dispute a senior advocate with expertise in the domain may be approached.
Some counsels such as Datar and Gopal Subramanium specialise in tax dispute cases among others, while the likes of Ramji Srinavasan are the go-to resource for insolvency cases. A lawyer with an in-depth practice in intellectual property rights may not be a good fit if the case falls under the Companies Act and vice versa. Ultimately, the choice of counsel will depend on expertise and affordability.
Explaining the factors that determine how much a senior counsel will charge, Parakkat says, “The sector of law that a case falls within plays a major role in determining the fees of the counsel.” For instance, individual fighting to secure bail may not have the financial wherewithal to pay high fees but a corporate giant fighting to safeguard its business interests, as the Tata group was doing in its battle with Mistry, will have deep pockets.
However, the fee charged by an arguing counsel, who becomes the face of a client before a court, is only one facet of corporate litigation. There are a host of other charges, such as the bills of law firms, retainers for blocking lawyers and conference time of arguing counsel, and they do not come cheap.
Law firms adopt a variety of models to charge clients. While a huge percentage of the firms raise bills of lumpsum amounts, the Tier-1 law firms have adopted the popular western model of charging by the hour. For firms such as L&L Partners, a hybrid method for billing is adopted, explains the firm’s managing partner Rajiv Luthra.
A sizeable chunk of all corporate litigation goes through Tier-1 firms, which include the likes of Shardul Amarchand and Mangaldas and Co, Cyril Amarchand Mangaldas, Khaitan & Co, and AZB & Partners.
Beyond litigation
Corporations frequently get entangled in legal disputes, be it over internal corporate governance matters or against competing brands over violations of intellectual property rights or with the tax authorities challenging their orders. So, those engaged in this practice are easily among the highest-paid lawyers in the land.
But corporate law does not involve only commercial litigation. While litigation is the backbone of business for many law firms, practices such as mergers and acquisitions (M&A), and due diligence rope in a significant chunk of revenue, with some smaller practices playing an important contributing role.
Explaining this role, Abhishek Rastogi, Partner at Khaitan & Co, says that while litigation and big-ticket transactions and deals remain focus areas for most firms, smaller practices play a vital role in full-service firms. “When smaller practices are doing well, they also refer and bring in a lot of bigger transactions and deals for the firm, so smaller practices contribute from that perspective also.”
These services are provided by dedicated teams and require a specialised skill-set considering the nuances involved. Due diligence, for instance, would require a risk assessment for clients considering mergers, acquisitions, financing, etc to ensure a smooth and dispute-free transaction. Similarly, a mergers and acquisitions team would work towards executing a watertight transaction to safeguard and maximise the interests of a client.
“M&A and due diligence are some of the biggest practices in almost all law firms… They are bigger than litigation and law firms have very large teams for these practices,” says Rastogi.
The typical model for billing by Tier-1 firms for these practices is by-the-hour billing. However, on occasion, consolidated bills may also be raised, depending on the market dynamic and the firm’s relationship with corporate clients.
A partner in a Tier-1 law firm, who did not wish to be named, says that the average hourly rate charged by top firms ranges anywhere between Rs 25,000 and 30,000 and could go upwards of that.
Lawyers working on the alternative dispute resolution practice work with corporate clients to resolve disputes through alternative means such as arbitration or mediation for quick resolution without having to knock on the doors of the court, thereby avoiding litigation costs.
Newer practice areas that have emerged have also seen high demand. These include practices to support clients with regulations involving data privacy, technology, blockchain and cryptocurrencies to name a few.
L&L Partners, for instance, has introduced novel practice areas, says managing partner Luthra: “The firm has initiated new practice areas such as ESG, blockchain, internet of things, and estate planning.”
Helping keep the lights on
Judicial services came to a complete halt when Covid started spreading and lockdowns were imposed. Even corporate and full-service law firms had to struggle as business and economic activity came to a complete halt. But, thanks to providing services beyond litigation, law firms managed to withstand the worst of the meltdown.
L&L Partners’ Luthra says the M&A practice was one of the most important areas for his firm and accounted for a large chunk of the revenue it earned through the pandemic.
Shoubhik Dasgupta, Partner, Pioneer Legal, told this writer recently that “a lot of corporate transactions, including mergers and acquisitions, equity investments etc were (also) put on hold.” This meant reduced legal and regulatory work on big-ticket transactions.
But by the end of 2021, it was business as usual for most corporate law firms. “Firms got their share of work because a lot of business consolidation and resolution took place through the pandemic,” Anand Desai, Managing Partner at DSK Legal told this writer recently. “These moves required a fair amount of legal work, where larger law firms were involved."
“The pandemic saw a rise in the number of insolvency resolutions, real estate financing and mergers and acquisitions, which essentially drove the business at law firms,” Desai adds.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
