Delhi High Court begins hearing on Mohit Saraf-Rajiv Luthra dispute #SarafvLuthra #DelhiHC
The Court had earlier asked the parties to try mediation to resolve their differences and appointed Senior Advocate Sriram Panchu as the mediator. On Monday, Justice V Kameswar Rao was informed that mediation had failed.
Senior Advocate Parag Tripathi arguing for Saraf. Speaks about 90-day notice for expulsion from firm.
First 90-day notice is about mutual decision for Luthra to leave the firm. Second 90-day notice alleges misconduct on part of Saraf. Conditions precedent for expulsion of Saraf have not been satisfied.
Saraf entered into partnership for litigation practice of Luthra & Luthra, was a partnership at will: Tripathi
In 2004, profit sharing was altered to 2:1 (66% in favour of Luthra, 33% in favour of Saraf). From 2009-2019, solicited consensus to hire new partners to dilute equity. Unfortunately, Luthra did not agree: Tripathi
Tripathi refers to communications where Luthra expressed intention to amicably leave firm. 180-day notice for dissolution of Mumbai partnership and 90-day notice for dissolution of Delhi partnership
Stance changed from amicability to chagrin, Tripathi. Luthra extended the 90-day notice by 60-day notice.
Deadline extended 31 October, 2020. Once notice has been extended, how can I (Saraf) be terminated by giving 7 days' advance notice? Tripathi
On October 4, Luthra expressed intention to unilaterally induct new partners. Tripathi cites clause on induction of new partners to say that Saraf's consent is needed.
On October 12, Saraf accepted Luthra's exit from the firm and expressed desire to reconstitute the firm with 22 partners, Tripathi.
Luthra claimed that Saraf received kickbacks from a client who was being investigated by CBI. There is no proof of this, it communicates nothing: Tripathi. This is nothing but a simple abuse. But this abuse cannot be basis for throwing me out.
He (Luthra) did not rely on any notice before deciding to expel me, Tripathi. He now says that he need not give any notice.
Do the new partners have any role in the expulsion? Justice Rao asks. Notice of expulsion must be sent to all partners, Tripathi replies.
If am taking a decision to expel someone who has 1/3rd stake in the firm, surely there must be a meeting among partners before that: Tripathi
Tripathi highlights three main issues: Does Luthra have power of expulsion? Does he have an absolute power to throw me out at will? Does he satisfy the bare minimum of bona fides in his actions, as he is statutorily required to do?
Tripathi refers to 4.5 year testing period which expired in October 2003, during which Saraf could be removed. Parties leaving before this period were not entitled to any goodwill of the firm.
4.5 year period is the only time during which Saraf could be expelled by Luthra: Tripathi
Tripathi cites Section 33 of Partnership Act - partner cannot be expelled by any majority of other partners, save in exercise of good faith of powers conferred by the contract.
Deed says that all decisions must be taken with consensus of all partners. Why wasn't opinion of newly inducted partners considered? Tripathi
In lighter vein, Tripathi's junior reveals that the Luthra partnership deed doesn't have the best drafting.
Hearing ends. Justice Rao gives parties option of physical or virtual hearing. Lawyers agree on virtual hearing on Tuesday November 10, at end of board.

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