Emerging Litigation Funding Startups Enhance Prospects for Speedier Dispute Resolution

New Delhi, Jul 22 (KNN) In a significant development reshaping India's legal and financial sectors, a new breed of startups is making waves by offering third-party litigation funding services.

These companies are addressing a crucial gap in the market, providing financial support for costly legal disputes and insolvency proceedings.

Key players in this burgeoning field include LegalPay, LitiCap, LegalFund, and FightRight. These startups are focusing on sectors such as infrastructure, real estate, logistics, media entertainment, and manufacturing – areas often plagued by complex and expensive legal battles.

Kundan Shahi, CEO of LegalPay, told our correspondent, "We are funding largely the plaintiff side, who want to recover their money, but now we have also started to fund defendants in certain cases." Shahi projects an average internal rate of return (IRR) of 22-27 per cent on their investments, with an average return of 12-15 per cent.

LegalPay, based in Gurgaon, has set an ambitious target to disburse Rs 200 crore in 2024 through its own non-banking finance company (NBFC), Padmalaya Finserve, and other partner NBFCs.

The company has already made significant inroads, funding corporate insolvency resolution processes (CIRP) for notable entities like Lavasa Corporation and Bengaluru-based Yashomati Hospitals.

However, experts argue that the success of this emerging industry hinges on regulatory support. Anuroop Omkar, founding partner of AK & Partners, emphasised the need for amendments to the Arbitration and Conciliation Act, 1996, to create a more conducive environment for third-party funders.

The potential for growth in this sector is substantial, given the enormous backlog in India's legal system. According to the National Judicial Data Grid, over 45 million cases are pending across various courts in the country, including about six million in high courts and 83,800 in the Supreme Court.

While arbitration cases are currently the primary focus for these startups due to their shorter timelines and higher settlement probability, some are exploring other avenues. Harish Parmar, founder of SingleDebt, shared that his company assists clients through negotiation and mediation with creditors, aiming to prevent litigation or insolvency proceedings where possible.

As this innovative industry continues to evolve, it promises to not only provide financial relief to litigants but also potentially expedite the resolution of legal disputes in India. The coming years will likely see increased attention from both investors and policymakers on this transformative sector.

(KNN Bureau)