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A dispute between L&L Partners (Luthra) and its former partner Manan Lahoty has reached the Bombay High Court after the latter challenged an ex-parte interim order passed by an arbitral tribunal.
Manan Lahoty, who was heading L&L Partners’ Capital Markets practice, had resigned from the firm to join IndusLaw along with his team. Post this development, a dispute arose between the two parties regarding various issues including soliciting of associates and clients.
L&L Partners invoked the arbitration clause as per the retainership agreement it had with Lahoty. Subsequently, Senior Advocate AS Chandhiok was appointed as the sole arbitrator to settle the dispute.
On September 27, a notice of arbitration was sent to Lahoty; he was asked to appear before the Tribunal on September 28 at 2.30 pm. However, Lahoty did not appear for the preliminary hearing. Instead, he responded by email raising certain objections including the eligibility of the tribunal to settle the dispute.
After hearing the counsel for L&L Partners, the sole arbitrator passed an ex-parte interim order restraining Lahoty from continuing breach of the retainership agreement with his previous firm. He was also restrained from rendering services to any of Luthra’s clients, without the permission of the firm.
As per the retainership agreement, 40% of the retainer fees are paid to Lahoty for rendering services exclusively to Luthra. The firm is entitled to seek a refund of such fees in the event of any breach by Lahoty.
Before the Tribunal, Luthra claimed that Lahoty had breached the non-compete and non-solicitation clause (which is in place for a period of three years) in the agreement by soliciting clients and engaging employees of Luthra.
The arbitral award also noted that Lahoty had induced seventeen lawyers of the Capital Markets practice at L&L Partners to terminate their engagement with the firm.
On the basis of prima facie evidence pointing to the same, the Tribunal passed an interim ex-parte award granting relief to Luthra.
Luthra had also claimed around 70 crores from Lahoty (which includes the 40% retainer fees paid to him and the rest is damages.) In this regard, sole arbitrator restrained Lahoty from alienating any of his assets.
It was against this ex-parte order that Manan Lahoty moved the Bombay High Court. The matter was listed yesterday before Justice GS Kulkarni, who set aside the ex-parte order passed by the sole arbitrator AS Chandhiok.
With the consent of both parties, former Supreme Court judge, Justice BN Srikrishna has been appointed as the substitute sole arbitrator to decide the dispute and terminated the mandate of the sole arbitrator earlier appointed.
Senior Counsel Nitin Thakker, appearing for Manan Lahoty, informed the High Court that his client will not solicit any retainers. As regards the clients of the firm, the existing arrangement shall continue until the Tribunal passed an award.
The order also states,
“…in the event the petitioner intends to accept any professional work in regard to the existing clients of the firm which is not part of the existing professional work, already in hand with the firm, such issues be raised before the arbitral tribunal and appropriate orders thereon be passed by the arbitral tribunal, after hearing the parties. All contentions in that regard are expressly kept open.”
The matter will be taken up by Justice Srikrishna on October 5.
UPDATE: A separate petition filed in the High Court challenging the constitution of the Tribunal headed by AS Chandhiok has been withdrawn by Manan Lahoty. The order passed in that petition states,
“In view of the order passed on Commercial Arbitration Petition (L) No. 1177 of 2019, Mr. Thakkar, learned senior counsel for the petitioner seeks leave to withdraw this petition. Mr. Thakkar also states that the statements and allegations as made against the learned sole arbitrator stands unconditionally withdrawn.“
Senior Advocates Nitin Thakkar and Gaurav Joshi with Advocates Rohit Gupta and Sagar Kasar appeared for Manan Lahoty.
Senior Advocates Darius Khambata and Dipen Merchant along with Chirag Kamdar and Mehul Shah appeared for Luthra & Luthra.
Read the Bombay High Court order on the challenge to the appointment of arbitrator:
Read the High Court order on the challenge to the award: