Saraf v. Luthra: Delhi High Court asks lawyers to come up with interim arrangement for L&L Partners pending appeal

The Delhi High Court today began hearing the appeal filed by L&L Partners Founder and Managing Partner Rajiv Luthra against the Single Judge order calling for a stay on Senior Partner Mohit Saraf's removal from the firm's partnership..The matter was heard by a Division Bench of Justices Rajiv Sahai Endlaw and Sanjeev Narula..At the outset of today's hearing, Justice Narula conveyed to the parties that he had a relationship with one of the partners. Counsel on both sides did not object to his hearing the case..Appearing for Luthra, Senior Advocate Abhishek Manu Singhvi began his arguments on merits. He showed the Court how the clauses of the partnership deed of the firm were weighted in favour of his client. He argued,"Never force two people to work together. The Single Judge finds this argument attractive, but proceeds to rule differently...The Court has been asked to create a disaster by allowing an injunctive mandamus.".Singhvi went on to cite clauses in the partnership deed to show that only Luthra has the power to effect dissolution of the partnership..He also brought to the Court's notice a letter sent by Saraf to Chief Financial Officer of L&L Partners Rajeev Bhasin two days before the Single Judge's verdict was pronounced. The letter stated,"I hope you know that 1/3 of your salary an 1/3 of computers are owned by me. I will take care of you next week.".Singhvi also highlighted a public notice published in newspapers by Saraf days after the Single Judge ruling. In the background of the High Court's ruling dated January 18, the notice states,"In these circumstances, members of the public should exercise caution in dealing with Mr Rajiv Luthra and not rely on his misrepresentations. Any person dealing solely with Rajiv Luthra in relation to the affairs or assets of the partnership do so at their own risk.".After Singhvi's submissions, the Court proceeded to urge the counsel for both parties to come up with an interim arrangement for the firm, pending the disposal of the appeal. The matter will be heard for an hour tomorrow solely on this aspect..On January 18, the Single Judge stayed the termination of Saraf from the firm's partnership pending the conclusion of arbitration proceedings between him and Luthra..On the issue of the status of Saraf and Luthra as partners of the firm, the Court held,"I agree with the submission of learned Counsels for the petitioner that partners in the firm stand on equal footing. One partner acts as an agent of the other(s). Together they constitute a firm. The partnership per se is not a distinct legal entity.".Justice V Kameswar Rao took the prima facie view that the only purpose for the word "termination" in clause 7A of the partnership deed was for termination of equity partners who would be inducted by Luthra from his equity share, and does not contemplate termination of Saraf from the firm.The Court also agreed with Saraf's contention that his termination from the partnership of the firm was not in good faith..Luthra and Saraf have been embroiled in a dispute over dilution of the firm's equity. Saraf had moved the High Court in October last year after he was removed from the L&L partnership by Luthra..Whereas the High Court had initially suggested that the parties refer their dispute to mediation, the matter found its way back in Court after talks failed to make any headway..On September 24, a firm-wide Zoom conference turned a bit ugly, with Luthra and Saraf both making allegations against each other. Luthra openly spoke against Saraf and his future plans with regard to the firm, while Saraf retaliated and made some nasty remarks against Luthra..Even as Saraf rejected Luthra's proposal that all partners holding equity dilute their stake in the firm, the latter went on to induct two equity partners into the firm.