Tag: legal practice

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Litigation Skills

Know all available interim reliefs but be smart about using them

JSaiDeepak_OnTrialIn my previous post here, I discussed a few important terms from the Code of Civil Procedure, 1908 (“CPC”). That discussion alone illustrates that mechanical compliance with procedural law is not enough. Even though they are regularly described as the handmaidens of justice, procedural legislations are also statutes to which rules of statutory interpretation apply. If you are still not convinced, just talk to some colleagues about some of the most basic terms and clauses in the CPC and you will see for yourself the varied and equally plausible interpretations they can give rise to. Imagine how much trouble the creative interpretation of procedure can cause!

Let us take the case of interim applications. These are applications filed as an adjunct to the primary suit proceeding and may result in interlocutory orders, dismissals of suits, or decrees. If you represent the plaintiff, you will file along with the suit, a host of interim applications — starting from the seemingly mundane applications under Order 13 of the CPC seeking exemption from filing original documents to the important ones seeking urgent ex parte interim reliefs under Order 39 pending disposal of the suit. If you represent the defendant, you will move applications along with your written statement objecting most frequently to the maintainability of the suit on the procedural and substantive grounds under Order 7, Rules 10 and 11. Clearly, while interim applications are expected in theory to proceed in parallel to the suit, more often than not they interfere with the progress of the suit and vice versa.

More interim reliefs in the CPC, Horatio, than are dreamt of in your philosophy

Because of practice and convention, a few interim applications are invoked more often than others. But lawyers cannot afford to limit their knowledge to provisions that they frequently encounter. In fact, what better way to impress a court than to invoke a less-trod procedural provision and to explain to the court the manner in which it should be construed and applied? For instance, when sued by a foreign party that has no immovable property in India, it might help to test waters by drawing the court’s attention to Order 25 of the CPC to require the plaintiff to deposit security in court. This will help you understand the plaintiff’s will to fight to the finish since an order for depositing security casts an additional financial burden on the plaintiff besides the court fee and legal costs it has already incurred.

Another example is Order 13-A of the CPC, introduced recently through the Commercial Courts Act, 2015. It allows a defendant to seek a summary judgment in any commercial dispute if it is able to convince the court that the plaintiff is unlikely to succeed at trial and therefore no need for a protracted conventional trial. The Commercial Courts Act, 2015 is replete with such opportunities because it is designed to reduce frivolous litigation and expedite genuine litigation.

Know when to press a procedural button

That said, it is also important to appreciate the distinction between the theoretical availability of a procedural option at any stage and the appropriateness of invoking it from a strategic perspective. For instance, interrogatories under Order 11 of the CPC allow a party to put factual questions or questions relating to documents with a view to elicit answers which are not evasive. While this mechanism has certain benefits on paper, it gives the other side a peek at the interrogating party’s potential strategy at trial, besides the obvious advantage of answering questions without being under the pressure of cross-examination. Similarly, while it may seem routine to lodge a caveat under Section 148A of the CPC with a view to pre-empt the grant of ex parte orders, it is important to consider how such a course of action may be perceived and the adverse inference that a court may draw. Once again, this is a question of strategy and a litigator has to strike a balance between knowledge of a provision and the advisability of its application.

Substantive legislations also provide for a host of interim applications addressing various aspects of the subject-matter they cover. For instance, on February 5, 2016, a full bench of the Delhi High Court delivered a decision on the application of Section 124 of the Trademarks Act, 1999 under which infringement suit proceedings can be stayed subject to the satisfaction of the conditions under the provision. This decision is being considered by a division bench in a batch of appeals where Section 124 has been commonly invoked. I happen to be arguing in one of the appeals and hopefully, shall be able to write on this issue once there is more clarity.

In the next post, I will discuss discovery proceedings.

J.Sai Deepak, an engineer-turned-litigator, is an Associate Partner in the Litigation Team of NCR-based Saikrishna & Associates. Sai is @jsaideepak on Twitter and is the founder of the blawg “The Demanding Mistress” where he writes on economic laws, litigation and policy. All opinions expressed here are academic and personal.

Categories
Litigation Skills

[Video] What traits are necessary for a career in litigation?

Apart from the necessary skills and the knowledge required to build and present a case before a judge, everybody knows that hard work is essential for a successful legal practice in the courts. But what else? Are there any other “x-factor” ingredients that successful litigators have but not many others have? We put this question to some of the brightest young minds working in Delhi’s courts. Watch the videos below to find out what attributes of character are necessary for a career in litigation.

So to sum up, a junior lawyer needs to have (a) the fortitude to handle long unpredictable hours, the financial uncertainty, and the mental and physical exhaustion of the early years in the profession; (b) a love for law and the profession; and (c) the skill to network and bring in work.

Categories
Litigation

‘Material facts’, ‘material particulars’ and other common CPC terms that are vital for a trial lawyer

JSaiDeepak_OnTrialThere are some terms that are frequently used in the Code of Civil Procedure, 1908 (“CPC”), and it is important to understand them well because the maintainability of a civil action can depend on your understanding. As you know, the court will not address the merits of a dispute until it is prima facie satisfied about the maintainability of an action.

Cause of action, act, and interest

In Orders 1 and 2 of the CPC, where joinder of parties and causes of actions are discussed among other things, one frequently comes across the terms “cause of action”, “interest”, and “act or transaction”. While Order 1 Rule 1 refers to “acts or transactions”, Order 1 Rule 8, which permits the filing of a representative suit, clarifies in its explanation that those claiming to file a representative suit need only have the “same interest”, they need not have the “same cause of action”. What do these terms mean?

An “act or transaction” is different from “cause of action”. The former gives rise to the latter. An actionable cause arises from an act when the act amounts to the infraction of a party’s right. For instance, selling a patented product without consent is an act which gives rise to a cause of action in favour of the patentee. The same act could also give rise to different causes of action in favour of the same right owner or several right owners. In the example above, the sale of a product could result in infringement of a patent as well as a trademark held by the same individual or could infringe several patents held by unrelated parties.

In contrast to Order 1, Rule 1, which deals with joinder of plaintiffs and Order 1, Rule 3 which deals with joinder of defendants, Order 1, Rule 8,which permits filing of a representative suit, uses the term “interest” to increase the scope for joinder of parties beyond what is provided in Rules 1 and 3. The word “interest” has been used to facilitate adjudication of all questions which arise from the same set of acts or transactions. This provision is intended to avoid multiplicity of litigation where all persons are aggrieved by the same acts or transactions. Importantly, this permits one person to represent all other “interested parties”. For instance, if a host of tenants have an issue with an act or acts of the landlord, instead of filing multiple suits or instead of naming all tenants as parties in one suit, one tenant may represent the rest. Therefore, Rule 8 enlarges the scope of joinder of parties so long as there is a communion of “interest” between the parties.

The distinction between “act or transaction”, “cause of action”, and “interest” affects the maintainability of a civil action. The failure to disclose a prima facie cause of action, for instance, would result in the dismissal of a suit at the outset under Order 7, Rule 11. Similarly, to justify arraying a host of parties as defendants, a plaintiff must set out their relationship inter se, along with their nexus to the transaction which has given rise to the cause of action in favour of the plaintiff against all the defendants. Should the plaintiff fail to justify this, his plaint could be assailed for misjoinder of parties or non-joinder of necessary parties.

Now, let us look at “facts” and “particulars”, two terms that occur frequently in relation to pleadings in Order VI.

Facts, material facts, and material particulars

CPCcontentsOrder VI of the CPC, as discussed earlier, deals with pleadings. It uses the terms “material facts” and “particulars” in different places. Are “material facts” and “particulars” the same? The rules of statutory interpretation and even a common sense understanding of the English language tell us that there is a clear difference. “Facts” refer to the broad matrix or the canvas in the backdrop of which a dispute is contested. “Material facts” are those facts which must find mention in a party’s pleadings in order to establish a claim. “Particulars”, on the other hand, refer to the addition of greater detail to the facts.

The absence of material facts prejudices a party’s case at the outset. The absence of material particulars on the other hand, is curable. The Supreme Court has discussed the distinction between material facts and particulars in Udhav Singh v. Madhav Rao Scindia (1975). In this case, the Court held that “all primary facts which must be proved at the trial by a party to establish the existence of a cause of action or his defence are material facts”. The Court also explained the consequences of the absence of material facts and material particulars.

“The distinction between “material facts” and “material particulars” is important because different consequences may flow from a deficiency of such facts or particulars in the pleading. Failure to plead even a single material fact leads to an incomplete cause of action and incomplete allegations of such a charge are liable to be struck off under Order 6, Rule 16, Code of Civil Procedure.

If the petition is based solely on those allegations which suffer from lack of material facts, the petition is liable to be summarily rejected for want of a cause of action. In the case of a petition suffering from a deficiency of material particulars, the court has discretion to allow the petitioner to supply the required particulars even after the expiry of limitation.”

These terms not only affect the the maintainability of an action, they also influence a party’s prospects at trial when a party is expected to lead evidence with respect to facts in issue. If such facts have not even been pleaded, the party cannot lead evidence to prove such facts. This would necessitate amendment of pleadings under Order 6, Rule 17, which can be a pretty messy affair.

In the next post, I will discuss interim applications under the CPC and the circumstances in which they may be employed.

 J.Sai Deepak, an engineer-turned-litigator, is an Associate Partner in the Litigation Team of NCR-based Saikrishna & Associates. Sai is @jsaideepak on Twitter and is the founder of the blawg “The Demanding Mistress” where he writes on economic laws, litigation and policy. All opinions expressed here are academic and personal.c 

Categories
Corporate

Three points to remember while drafting conditions precedent clauses

Drafting_for_Business_Deepa_Mookerjee.jpgA shareholders’ agreement is a contract that contains the rights and obligations of the shareholders in a company. It typically supplements either a share purchase agreement or a share subscription agreement. You can read more about them in my post on the documents that you will come across during M&A transactions.

Almost every shareholders agreement looks similar. You will see a title, a table of contents, a recital clause, an interpretation clause, and introductory clauses describing the transaction. These clauses have been discussed in detail in myLaw.net’s course on Advanced Commercial Contracts. In this post, I will explain the conditions precedent clause, which is typically seen in all shareholders agreements.

A condition precedent is usually a legal term describing a condition or event that must occur before a contract is considered in effect or any obligations are expected of either party. Here are a few examples.

A is purchasing 100% of the shares in a company whose main business is selling computers to the public. The company does not manufacture computers itself but sells the computers it receives from different distributors. From A’s perspective, the company’s relationship with its distributors is key because if the distributors don’t provide computers to the company, it will have nothing to sell. Many of the distributors’ contracts with the company require their prior approval before a 100% transfer of shares takes place. A would only want his obligation (to purchase shares and pay consideration for them) to be triggered once the company receives these approvals. The receipt of these approvals therefore, is a condition precedent that must be fulfilled by the company before the transaction is effective.

ConditionPrecedentClause

Take another example. B, a non-resident investor who has an investment in an IT company in Mumbai, wants to invest in an IT company in New Delhi. One of the terms of the transaction is that B must sell his interest in the Mumbai-based company before making the investment. So, the sale of those shares in the Mumbai-based company is a condition precedent that B must fulfill before he can invest in the Delhi-based company.

If these conditions are not fulfilled, there will be no deal. Common conditions precedent in M&A transactions include those in relation to obtaining approvals from the regulators, firing or hiring particular employees, ensuring that sufficient cash is available in the company, obtaining approvals from third parties, and ensuring that lease agreements are in place.

On whom is the obligation cast?

Let’s take a closer look at the examples above. You will see that the obligation to fulfill the condition precedent in the examples is cast on different parties. In the first example, the obligation to obtain approvals from distributors is cast on the investee company, that is, the company in which the investment is being made. In the second example, it is cast on the foreign investor. Conditions precedent can thus differ on the basis of the party on which the obligation to fulfill it, is cast. Some obligations can be cast on the investee company, some on the investor, and some jointly on the investee company and its shareholders.

For instance, C is a foreign investor who wants to invest in a company operating in a sector where the approval of the Reserve Bank of India is required for any foreign investment. Typically, the burden of obtaining this approval is cast jointly on all parties because each party’s cooperation is required for obtaining this approval.

While drafting a conditions precedent clause, you must take care to identify the party on whom the obligation to fulfill a particular condition is imposed. This is vital as each party is responsible to fulfill its own obligations in relation to the conditions precedent. While casting an obligation on the investee company, you should examine whether it is also useful to cast the obligation on its shareholders (or at least the majority shareholders) if they control the operations of the company.

The right to waive a condition precedent

Another point vital to this discussion is whether conditions precedent can be waived. Look at the first example. Assume that the investee company has only obtained approvals from fifty percent of its distributors. A, the investor, would really want the deal to go through and should be happy with approvals from these distributors if they are the major ones and would want to waive the condition that approvals must be obtained from all the distributors. Once A has waived the fulfillment of this condition, the deal can go through. The right to waive the fulfillment of a condition precedent is very important in all M&A transactions. Always include this right when you are drafting a condition precedent. The important point to keep in mind is that the person who has the right to waive the condition must be different from the person who is obliged to fulfill the condition.

In the first example, the right to waive the fulfillment of the condition in relation to obtaining consents from distributors must be with A and not the investee company. The investee company can never have the right to waive fulfillment of a condition that it is obliged to fulfill. Similarly, in the second example, the right to waive the condition in relation to withdrawal from the Mumbai-based IT company is on the investee company and not B, the investor.

Since these are all contractual rights, it is up to the parties to decide whether they would like to waive the conditions in part or in full. As a lawyer, your duty is to ask these questions from your client before you start drafting so that you can use the words that are appropriate to your client’s interests.

When should the conditions precedent be met?

Finally, always insert a date by which all the conditions precedent must be met. This is typically called the ‘long stop date’ and is important to ensure that there is no undue delay in the performance of the contract or the fulfillment of the conditions. Parties know that they must fulfill the conditions precedent by a specific date. While drafting this clause however, always include the following or similar words:

“The Conditions Precedent must be satisfied by April 20, 2015 or any date as may be mutually agreed between the Parties.”

The words in plain text above give the parties to a contract the right to mutually agree and extend the time for the fulfillment of the conditions. If, for example, regulatory approval — a condition precedent for a particular deal — takes longer than anticipated, the parties should have the right to extend the long stop date if they feel the need to do so. This is also important because if conditions precedent are not satisfied, the transaction is terminated, and parties must have the flexibility to prevent this.

As you start drafting conditions precedent, you will realise that there are many nuances to the manner in which you draft these conditions. For instance, you may use the words ‘use all reasonable efforts’ to dilute the obligation on a party. In such cases, that party only has to show that it has used all reasonable efforts to fulfill the condition and that will be enough (even if the condition has not been fulfilled).

Keep drafting and with practice, you will get better at drafting conditions precedent clauses.

(Deepa Mookerjee is part of the faculty on myLaw.net.)