Considering Litigation in India | Part III – Anticipate the dispute & strategize!

This article is a continuation of the earlier articles where we outlined the challenges associated with litigating in India and the considerations that one must bear in mind before getting into a ‘fight’. As recommended in the earlier article, parties to commercial disputes must at all time seek to settle rather than litigate endlessly before courts in India. The desired settlement for each business may differ based on their own perception of the issue. But, the terms of any settlement always depend on the bargaining position of the people involved. One of the first steps to ensure a strong bargaining position in commercial disputes, is to spot the deterioration in relations early. Foreign businesses that operate in developed markets tend to fare better at the anticipation game than domestic Indian businesses. Domestic businesses have traditionally relied on good faith and relationships in doing business rather than on the strength of the agreements exchanged between their business partners. Anticipating a dispute early provides a business the much desired ‘first movers’ advantage.

Spotting a dispute early

Once the business teams identify that a situation could worsen, they can immediately commence working on a strategy for various possible outcomes. Strategizing a plan of action well in advance will allow the relevant business to be better prepared to direct the course of the possible dispute. Assessing the other side’s weakness at early stages can be invaluable for determining strategy. It would always be more advantageous to have the other side react to your steps than to respond to their actions. Dispute resolution strategy is not only about the appearances in a court room; the strategy for all spheres must be developed well in advance to work out the possible outcomes and prepare for them. This could include the approach to public communications with respect to all third parties. Commercial disputes are also inextricably linked to the reputation of a business and to that extent a well thought out strategy must address all these aspects. Unfortunately, many litigants in India approach the litigation process as a last resort and rarely have a detailed plan of action. In some sense, dispute strategy is like a game of chess!

Importance of documents

Commercial litigation relies greatly on the supporting paperwork and facts that can be submitted in court and of course the skill of the lawyers involved. But, the best of lawyers cannot undo poor facts that weaken a litigant’s case. Many a times, it is the case that businesses that engage in litigation have poor documents on either side. A skilled orator may be able to ‘save the day’ on one occasion, relevant mostly in cases of intermediate reliefs. But, in the long run the side with the better documentary evidence will prevail. The recent entry of the Insolvency and Bankruptcy Code related cases into the judicial system has brought the spotlight back on fact-based details into play. The decisions that are emanating from the National Company Law Tribunal at the first level seem to suggest that the trail of communication, the documentary evidence and other correspondences exchanged between the parties to a dispute can go a long way in determining the outcome of the case. This is predominantly relevant to cases involving claims by trade creditors where the pre-existence of a dispute can determine the outcome of the claim. The existence of a prior dispute is itself a subjective test based on the facts and correspondences exchanged between the parties.

Involving specialist advisors on time

In addition to documents, it is also useful to have advisors that have specialized knowledge of commercial disputes. A shareholder dispute between shareholders of a company brings into focus the history of the corporate governance of the business, the compliance with secretarial norms, the documentation of corporate records and a whole host of other aspects that need to be looked into. A dispute in an M&A transaction, such as an acquisition or a business transfer, can create complex scenarios of warranty breaches, misrepresentations and corresponding indemnity claims. Historically, the Indian market was not accustomed to complex commercial disputes in the M&A space. But, given the amendments to the arbitration law in India and the non-interfering approach adopted by Indian courts towards foreign arbitral awards, things are changing. If recent publicly reported cases such as the Tata Docomo dispute, the Daiichi Ranbaxy dispute etc., are any indication; the Indian market may be witness to a whole new type of dispute landscape. Hence involving specialized advisors in early stages will allow a business to extract all relevant information to the dispute and develop the appropriate strategy.

This brings us back to the importance of anticipating a dispute well in advance. Anticipating a dispute well in advance and getting relevant advisors involved in the early stages will keep a business ahead of its opponent in any dispute situation. Advisors should preferably prepare or review all communication exchanged with the other side. This is because any communication before a matter reaches court can be used as evidence to demonstrate a client’s claim. Further, if a client suspects a potential dispute in the horizon, it should be mindful of any interactions with third parties involved in the matter.

Preliminary steps

Some key steps we would recommend to better equip oneself for a dispute are:

  • Identify the likelihood of a dispute well in advance. It is better to be safe than sorry;
  • Seek appropriate assistance from ‘trusted’ specialist advisors once you anticipate that a potential dispute is developing;
  • Secure control over all communications with the other side and avoid sending communications without having them cleared by legal teams;
  • Understand shortcomings in the merits of issue and seek advice on restoring the position by way of subsequent communications;
  • Plan a strategy for addressing the developing situation;
  • Prepare contingency plans for scenarios; litigation or possible settlement;
  • Understand the costs, timelines and probability of success if the matter lands in court;
  • At all times, explore avenues for a beneficial settlement but continue planning for a litigation.

Anticipating a dispute beforehand will allow a party the ‘first mover’s advantage’ in any dispute. They would be able to put in place a strategy for dealing with the issue to push it towards an amicable settlement or a litigation. Even if the matter moves to litigation, the strategy would be in place to bring the other side to a negotiation to arrive at a settlement. As discussed earlier, planning well in advance for all eventualities is the key to successful resolution of a commercial dispute. A very important part of dispute strategy is to review the existing facts and identify any missing bits. In our next article, we will discuss the importance of facts and how they can be developed to a litigant’s advantage.

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

Views expressed above are for information purposes only and should not be considered as a formal legal opinion or advice on any subject matter therein.


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