[Exclusive] Rajiv Luthra unilaterally dilutes equity to make 2 new Equity Partners despite Mohit Saraf's rejection to dilution proposal

L&L Partners Founder Rajiv Luthra has yesterday inducted two equity partners - Aniket Sengupta and Harish Kumar - into the firm.

The development takes place even as Senior Partner Mohit Saraf rejected Luthra's proposal that all partners holding equity dilute their stake in the firm.

Last Sunday, Rajiv Luthra had decided to go ahead with the dilution of his equity without any further delay. In an email sent to all corporate partners of the firm, Luthra had requested Mohit Saraf to dilute his equity proportionately and to give his consent within 24 hours.

He also clarified in his email that if Saraf doesn't agree, he will dilute his equity alone. In his email, he says,

"...as per terms of the Partnership Deed governing L&L Delhi, it is possible for me to give away equity out of my share even if Mr. Saraf refuses to give away his equity."

Saraf, however, rejected Luthra's proposal (as reported by Legally India) and stated, “...for the record, you do not have my consent, you have not sought my consent and I do not consent to your proposal for the introduction or induction of a partner into the Firm.”

In his reply to Luthra, Saraf also stated,

“Just to be clear, you could of course share some of your profits earned by you during a year with certain persons provided we have discussed and not been able to arrive at a consensus on having such persons as equity partners."

He further added,

“Such persons would not however be an equity partner of the Firm and would have no say in the Firm and would not be partners for the purposes of the Partnership Act and partnership deed, and for both of which, the partners would be only you and I.”

Saraf ended his email by saying, “There was a simpler way of doing this and that is for you (Luthra) to have a civilized discussion by first responding to, and acting on, my past communications including the ones dated 31.08.2020 and 21.09.2020 which contained important points on equity dilution and the proper steps.”

Despite a lack of consensus between the two equity partners, Luthra has gone ahead and kick-started dilution of his equity. In an email to the corporate partners, Luthra mentioned that this is just the beginning and more equity partners will soon be inducted.

"This is just the initial step, as I continue to identify and decide upon more eligible candidates. As I had mentioned earlier, I am sure we are shortly going to make this a far more broad-based exercise, where a more comprehensive eligibility criteria shall be applied and a larger equity-holders’ base shall be created."

As per Luthra's previous email, the reasonable expectation from new equity partners will be their commitment to be with the firm and act in best interest of the firm. For immediate exercise, the following norms have been proposed by Luthra:

1. The person must be a lawyer eligible to practice law in India and must have submitted his credentials in this regard to L&L Delhi.

2. The person must have signed the latest version of the retainership agreement with L&L Delhi.

3. The person must be a professional with 16 years of standing at the Bar and on a fair assessment, would be seen as an important contributor to the firm.

These considerations may be relaxed to accommodate women as equity partners.