Litigation funding is fast gaining popularity in India as an increasing number of law firms and businesses look at such financing to fund their legal matters.

Simply put, litigation financing is third-party funding for litigation matters. While litigation financing is quite new in India, it is quite popular in many of the developed economies where there are dedicated ventures that specialise in such kind of funding.

According to LegalPay, a tech-focused third-party litigation funding start-up, over 40 per cent of the cases that it funded originated from Tier I law firms with around 25 per cent of the matters coming from independent counsels as well.

Since its inception in 2019, LegalPay has underwritten over 1,500 cases of litigations and arbitrations across jurisdictions including India, Australia, Singapore, US and Europe.

The LegalPay study also showed that as much as 73 per cent of the cases originated from the unlisted space with logistics as a sector accounting for the largest chunk at 31 per cent, followed by financial institutions at 28 per cent and constructions at 22 per cent.

“Our strong underwriting process gives an insight to the claimant whether to pursue the case further or not,” says Kundan Shahi, Founder & CEO, LegalPay.

“The underwriting also takes into consideration the creditworthiness of the defendant, which helps funders and claimants to evaluate the ability to pay an award or recovery. Such insight provides a level of validation of claims to the claimant with respect to the merits of the case, the financial viability of the defendant, and other operational challenges,” adds Shahi.

Interestingly, the analysis further showed that of the 1,263 cases that LegalPay denied funding between June 2021 and May 2022, almost 90 per cent – 1,129 to be precise – of the cases were not pursued further before a court of law. And, the claimants have completely written off their claims in 812 cases.

The start-up invests in commercial legal claims for a portion of the claim amount after the successful realisation of the claim amount. The Delhi-based start-up has seen a huge demand of litigation funding from cities like Delhi, Mumbai, Bangalore, Hyderabad, Lucknow, Chennai, Jaipur and Kolkata.

More importantly, while there has been a surge in both domestic and international matters, India is leading the demand by a 30 per cent rise, followed by Singapore at 25 per cent even as Singapore is a huge arbitration centre.
Source: BusinessToday