Mohit Saraf v. Rajiv Luthra: Delhi High Court refers dispute over equity to mediation

The Delhi High Court on Thursday referred to mediation the dispute between founder of Luthra & Luthra Partners Rajiv Luthra and former Senior Partner Mohit Saraf over the firm's equity [Mohit Saraf v. Rajiv K Luthra & Ors]..Justice Prateek Jalan passed the order after all the parties agreed to try mediation, with Senior Advocate Rajeev Virmani acting as the mediator."Counsel for all the parties submit that they would like to attend a resolution of the claims raised by the petitioner under the partnership deed dated April 1, 2002, by mediation. For this purpose, they request that a mediator be appointed," the Court said..In case the mediation talks fail, the matters will be referred to arbitration under former Supreme Court judge, Justice Deepak Gupta, who is already seized of a dispute between Luthra and the heirs of late Partner Vijay Sondhi. The Court requested Justice Gupta to defer entering into the arbitration reference until October 1..The Court also made it clear that it would not enter into any controversy between the parties and all issues including those with regard to maintainability and arbitrability of the claims were being left open for adjudication by the arbitrator..The Court was hearing a petition filed by Saraf after the litigation arm of the firm that was set up by him along with Luthra, Chandhoke, Sharma and the late Sondhi in 2003, was dissolved in July this year. The plea stated that these partners acted together and “wrongfully and illegally expelled” him from the firm, thereby preventing him from conducting its business and affairs.In March 2021, a dispute and arbitration notice was sent by Saraf to the respondents and Sondhi suggesting that the arbitral tribunal constituted in relation to disputes between him and Luthra be invited to adjudicate the disputes that have arisen in relation to the L&L Partners litigation firm as well.The following month, Saraf stated, the partners sought to initiate settlement discussions with him. However, after Sondhi passed away in January 2022, the Partners delayed the same, due to which another notice was sent to them. The new notice stated that the partners had illegally distributed the profits of Luthra & Luthra Law Offices Litigation without settling Saraf's claims and that there was an attempt to distribute his shares in the firm.Saraf further said that the according to information available with him, Chandhoke and Sharma acquired a new office in South Delhi, were actively soliciting clients, and were attempting to transfer the existing business and property of the firm to the new office, which directly affects his rights.The plea further alleged that when they met to resolve the dispute in April and May this year, Saraf was offered only a meagre/paltry sum, which he refused.At this juncture, Sondhi’s legal heirs approached the Court staking a claim to be inducted into the firm's equity partnership. They had also prayed that the 18.5% equity stake held by Sondhi not be diluted by the existing Partners. A judgment was passed in that matter appointing Justice Gupta as the sole arbitrator..During the hearing of the matter on Thursday, Senior Advocate Rajiv Nayar, appearing for the Chandhokes and Sharma, apprised the Court of the recent developments in the ongoing tussle between the Sondhis and the firm."Although we filed a reply, some proceedings in the contempt matter have reached Justice Sachin Datta. The chamber hearings are taking place in lieu of settlement at this stage," he said. Appearing for Saraf, Senior Advocate Jayant Mehta responded,"Good for them and I hope they are able to reach a settlement quickly but they can't withhold my claims.".Nayar then said,"My lord, if we wait till Monday, heavens will not fall. We are at the cusp of...there is a very little difference. I don't want to say more."The Court then said, "It's not a question of heavens falling, Mr. Nayar. If I can just understand how that will impinge upon Mr. Saraf's rights, then we will have a reason to do that. If it doesn't affect his rights, then I see no reason to interfere."Advocate Haripriya Padmanabhan, appearing for Luthra, then said,"Mr. Saraf wanted to stay out of the arbitration with Mr. Sondhi, but now there seems to be a change of mind and he wants Justice Gupta to be appointed as a mediator. My instructions are that without prejudice to any of our contentions about arbitrability of any of the disputes, etc, we have no problem if Justice Gupta is appointed as the learned arbitrator and all contentions are kept open. Secondly, if the other matter with the Sondhis is settled on Monday, then the entire arbitration before Justice Gupta will be infructuous at that point of time.".The Court then suggested referring the dispute to mediation and in the event that it is unsuccessful, the dispute shall further be referred to arbitration.On the consensus of all parties to this suggestion, the Court passed the order.