A plan to merge two of India’s oldest law firms — Fox Mandal and Co (FM) and Little & Co — have failed after four years, ending in a legal battle with each filing cases against the other in the Bombay High Court.

Som Mandal, who would have been the largest shareholder of the merged firm with a 14% stake, has filed a criminal petition against the Little & Co management committee for cancelling the memorandum of understanding (MoU) signed between the two in May 2006. The Bombay High Court had earlier appointed noted lawyer Iqbal Chagla as a mediator to resolve the issue.

Mandal did not comment on the issue. “It is sub judice,” he said.

“Disputes are there,” Ajay Manharlal Khatlawala, a senior partner in Little & Co, told FE over telephone. “It is not fair to comment on it.”

Mandal had earlier filed a petition in the court of the district judge at Noida, in Uttar Pradesh’s Gautam Budh Nagar, pleading against several actions including the appointment of the interim management board, and restraining Little & Co from altering the original partnership agreement.

The two law firms announced a plan to merge four years ago. In May that year, both firms signed an agreement where 55% of the equity of the merged firm — christened Fox Mandal Little — would be owned by Little’s eight partners and rest 45% by FM. In Delhi, 90% of the profit was to be shared by FM partners and rest was to go to Little’s partners. Little’s partners were not to have any equity share in the Delhi firm.

Mandal, one of FM’s senior partners, had the option to purchase another 5% stake in 2009 from Little to make it an equal equity venture at a mutually agreed price. FM Delhi paid Rs. 6 crore in seven instalments between May 1, 2006, and April 30, 2008.

The profit from Little was to be deposited in a separate bank account to be operated by the partners.

In December 2009, Little cancelled the MoU, but later withdrew the cancellation. An interim committee was formed to run the law firm with representatives from both the sides. But problems again cropped up.

FM approached Little, seeking to call off the merger if Little repaid its money. But with no sign of a truce, both parties went for arbitration.

“Indian law firms never build an organisation, they develop only practices,” said a senior lawyer who quit a large firm and started his own.

“There is no common vision, too much ego among lawyers and not many own the organisation,” said the senior lawyer. He asked that neither he nor his firm be identified, citing the sensitivity of the issue.

Indian legal firms are trying to shift away from the traditional family-owned and family-controlled structure to collegial partnerships. “We have not gotten out of the proprietorship and are running firms like fiefdoms,” said Jyoti Sagar, who started JSA Advocates and Solicitors in 1991 and has moved to collegial partnership. “This is why India does not have large legal firms like in the US or Japan.”

JSA's brand and goodwill have been transferred to a trust owned by the firm's partners, who retire by 65.

“The challenges for law firms are many. Law firms needs to build a robust, transparent organisation with the nature of partnership open,” the senior lawyer quoted earlier in the story said. “Lack of transparent structure will disintegrate firms.”