Litigation funders bet on inheritance battles

In 2008, Amit Aggarwal, a Delhi-bred businessman, bought an agricultural plot for Rs 40 crore, which has now soared in value to Rs 250 crore. However, the land remains unowned as other family members claim ownership. Multiple cases have arisen, with some at the appellate stage and others still in trial courts. Aggarwal's children also want the expensive land for themselves. Despite wanting to retain ownership, his stake has grown with the property's value.

Delhi-based consultancy firm Share Samadhan is assisting Aggarwal in navigating the legal maze. Vikash Jain, co-founder of Share Samadhan, explains that the property's appreciation while locked in litigation makes it an attractive case for litigation funders. These third-party financiers cover legal costs in exchange for a share of the victory or settlement. Jain notes that the asset has appreciated sharply while stuck in litigation, and the buyer cannot comfortably fund the lengthy dispute.

Legal financing firms are increasingly involved in inheritance disputes over property worth hundreds of crores of rupees. While inheritance disputes constitute only a small portion of India's litigation funding, which mainly focuses on commercial cases, the number of queries to LegalPay, a Delhi-based firm, has increased from nearly none five years ago to about 10 per month on inheritance disputes.

Founders Kundan Shahi and Irfan Mughal, of LegalPay and Five Rivers Capital respectively, say that families are often asset-rich but cash-poor, leading them to seek financial assistance for litigation.

However, these firms are cautious in their underwriting process, considering factors like case merits, documentary evidence, stage of legal proceedings, the opposing party's financial position, and potential recovery before funding. High-value property is a tempting prospect, but determining the recoverable value of disputed wealth is challenging. Legal Pay targets cases where potential returns justify capital tied up for seven to eight years, aiming for five to ten times the capital invested in cases with a defined exit.