Chapter B4

Rule 4: The Leadership

You may recall that 2004 was the nearest thing in development economics to an all-night beach rave you will ever get from a society as traditional as ours. The economy seemed to be ticking over at 8% growth, Government seemed to be doing its job and everyone agreed that India was the next superpower. You could practically see our aircraft carriers just over the event horizon majestically patrolling the oceans as the world abandoned MacDonald’s in favor of Haldiram Gujia and Chicken Pakora! By the end of 2012, the acid trip had turned into a surreal nightmare. The economy had slowed to 4%, scams sprang eternal like daffodils in spring, the political discourse had turned abusive. Now, confrontational regional leaders, faces contorted grotesquely, engaged in stomach churning slander night after night. How did we get here in 8 short years?

In our sober moments, we know that we live in a complex world where many factors come together to synthesize ‘reality’. Who would you blame for what happened to India circa 2012 and thereafter? Whatever your political predilections, you would blame our fate? Would you blame it on the perfidy of opposition leaders who made it impossible for parliament to function for a decade? Would you blame it on immature political leadership of successive ruling parties? Either ways, you will likely blame somebody, not something. In our hearts, all of us know that most things that come to pass, or don’t, do so, or don’t, because of some one. That someone is generally the leader who holds it all together.

You can do this exercise on any historic event and you will get the same result. Did India achieve independent in 1947 because Gandhi’s morally righteous tactics so frustrated the British that they left? Was it because US President Roosevelt argued that England can’t have American support to fight fascism in Europe in defense of freedom and yet have colonies where it enslaved others? Was it because Hitler bled England leaving it with no will to fight its own colony after the war had ended? At one level, we don’t need to answer this question at all because whatever answer you choose, your finger will point at one or more guys who you hold responsible. It’s always about the leaders.

You can run the exercise in the negative and still have the same result. Would India have become a license-permit-quota-socialist paradise allied to Russia if Nehru had been a market obsessed capitalist as opposed to a Fabian socialist? Would Reliance have existed without Dirubhai Ambani? Would any Indian politician of the time but Indira Gandhi have declared a state of internal emergency and suspended our democracy because she lost a court case? Would a significant part of Delhi been half razed to the ground in 2007 if Y.K.Sabbharwal was not Chief Justice of India? Could the Delhi Metro have been built without Shreedharan? The truth is that other railways have been built without Shreedharhan and democracies have been subverted without Indira Gandhi. Credible counter-factual historical analysis is always an elusive beast!

This brings up the crack to this code though. It is true that one person can’t make things happen if historical conditions don’t exist to make it happen. On the other hand, if historic conditions do come along but you don’t have the person to make it happen, it won’t happening. If you want a hundred persons to get together and do something, you are going to need someone to keep them together and pull in the same direction. Leaders give direction and purpose to teams. If you don’t have good leaders, your team is going to mill about like bleating sheep and cancel out each other’s effort. This is true above all in the courts. How many ventures have failed because the leadership isn’t up to it?

The thing to remember is that litigation is a long-term low intensity war of attrition fought under huge pressure. It’s not a nimbu paani to be made: it’s a complex infrastructure project to be built using sophisticated project management skills. No one man wins a complex litigation by himself. It takes a three-way partnership of Client, Law Firm and Senior Counsel to win any high stakes war. All three have to act in harmony and maximize their talent and effort. It is every manager’s job to ensure that these three resources tick over smoothly and work together seamlessly.

Let us a stop a moment to get under the skin of this one. If you have a difficult legal problem, you need to find yourself a Law Firm. I say so for the same reason that you go to hospital when you have something more than a cold. You don’t deliver your fate to the friendly neighborhood MBBS doing his thing in his scooter garage ‘clinic’. Unless he is James Bond, there are only a finite number of things one person can do well. There are some great individual lawyers out there, but they don’t know everything. In today’s complex world, a problem can only be cracked by groups of people hammering away at it.

That’s not the whole problem though. If you go to a solo performing individual depending on his skill, you are fatally exposed in areas where he has little skill. Worse, he is not likely to tell you what he does not know. You rely on a generic reputation based on stuff he does know only to find, sometimes too late, that you needed a guy who knew stuff this guy doesn’t know. If instead, you go to a system integrator who says “I am no Mary Kom at anything but I can put together a great team of experts for you”, you may find that you do end up with best-in-class advice for the incremental price of the system integrator. All over the world, groups of legal experts come together under one roof because it’s efficient and it works for everyone. You’d think the world was on to something!

What attributes do you need in a Law Firm? First, you need a group of hotshots with a fair understanding of a range of laws, or at least everything that is of any relevance to your problem. If you are going to fight over a high-stake contract, your Law Firm better have written some high stakes contracts in their time so that they know where to find both the snakes and the ladders. If you are going to fight the Government over a road you failed to build, your Law Firm better know something about project finance and environmental laws too.

Second, these guys should know all the specialists you may need to solve your problem. If you need specialist expert witnesses in forensics, accounts, damages calculations, bridge building or whatever, your Law Firm better know where to find them. If you need to go to Sikkim to get a stay order, your Law Firm better know the movers and shakers in Gangtok’s small legal fraternity. Your Law Firm also needs to know which lawyer has the most success in which court room. Now that the topic has come up, I can add that they also need to know whether you should go to Gangtok or whether you can get the same result in Delhi or better still…Calcutta!

Third, your Law Firm needs to have tactical depth. What do I mean by tactical depth? Frankly, I would rather hold off on this point because I have a whole section coming up – some 20% of this book – which talks about nothing but tactics. For the moment, let me explain the context. It is critically important to understand that litigation in India is a war of attrition like the trenches of France in World War I: it is not a lightening quick Operation Desert Storm in Kuwait in 1991 … well, most of the time, anyway. To win a war, you need a Law Firm that can foresee events three or four chess moves down the road, who has worked through the risk of doing this or that, who has contingency plans in place, and who has the vision, ability and resources to bounce back from a disaster. That is tactical depth in a Law Firm.

Finally, your Law Firm needs to have logistical depth. This should be a simple one to follow. Litigation is won by a war machine, not some mad cap scientist sitting in a lab amidst his pipettes and beakers stirring some devastating magic brew he will unleash on your enemies. If you will allow a very bad cliché, litigation is 10% inspiration and 90% perspiration. It’s a method act of plodding on in a desultory desert of sweat, toil, grime and tears, filing papers and moving applications, and preparing arguments and briefing witnesses and finding case laws. To win it, you need young lawyers, libraries, data bases, court clerks, office equipment, communication tools and all the human or machine support that you may need. Inevitably, when it comes to high stakes or complex tasks, the biggest bottleneck is enthusiastic slaves who run the legal machine! If you don’t have the right Law Firm for the job, you just tied your tail to a millstone and the race is that much harder to win.

Now, that is just one of three pieces of the puzzle. You need two others: and the second is the Senior Counsel, the lawyer who argues the case in court.

Why do you need this man? No matter how mature the members of your Law Firm, some of the advice you need is about what the judge is going to do in your case. It takes a man who sits in that court all day, day after day, for 20 years, who understands stuff like this. He is the arguing lawyer who spends all his time arguing cases. In India, we inherited our Senior Counsel system from our colonial masters. This system is expensive, but it works. Senior Counsels are generally very smart and they are great orators. They also have great credibility with the judges. Senior Counsels often stay away from clients. They do this because they haven’t the time to engage with laymen. They need readymade case files and they want to be briefed ‘from the record’ and without emotion. They don’t want to waste time battling facts that are not before the court. They certainly don’t want to engage in anger management workshops with teary eyed clients who think they are tragic Bollywood heroes. It’s quite an art to brief a Senior Counsel effectively and the good Law Firms win because they are masters of the art. Mainly though, you need the right Senior Counsel in the right place at the right time saying the right things to get the right orders at the right time.

Your personal operating structure is the third limb of this troika. To win a legal war, the Law Firm requires almost continual support from its Client. It needs to be updated on the facts with documents and records, it needs management approval to put the agreed strategy into effect and it needs logistic support in signing petitions, supporting hearings, etc. It also needs some high-quality intelligence on what the enemy is doing. A Law Firm can’t get very far if the Client is not decisive, effective and able to get everyone to do what is agreed to be done. If you want to win your legal war, you need to have the internal machine to make it happen.

So every legal battle is three guys – Client, Law Firm and Senior Counsel – acting in concert. The war machine works well when everyone acts in unison. If the leadership can’t bring together this diverse army, or if the leaders start bickering, the machine breaks down and brings on its own disaster. It’s easy to underestimate the importance of this issue. Wars are won not merely because the warrior has the weapons, but also because the army has great leaders who know how to use them. You may have the hottest company in town, but if you hire crap lawyers, you will end up in the dung heap. You may have the smartest lawyers in town, but they can’t hold their logistic together in a long dog fight, you’re toast.  Companies don’t win cases because they have the people, the money and the lawyers. They win them because they have the leaders who know how to optimize these tools to win.

Since we have been on the Weizmann case a lot, let me use that example to further illustrate the point.

The Weizmann Case

Recall that the Weizmann case exploded because a foreign automotive multinational company acquired the majority shareholding of a Indian sick Company. To do this, Weizmann and the promoter group went to the Board of Industrial and Financial Reconstruction (‘BIFR’) and had a new “rehabilitation scheme” approved. BIFR also approved the Joint Venture Agreement between Weizmann and Gupta’s group.  

Let us now return to the Weizmann case and look at the leadership on both sides. Weizmann India was led by an expat foreigner experienced in running companies in the third world generally. He had no special understanding of India or its legal system. He did carry the white man’s burden in the sense that he believed he was the child of a greater God.  Factory personnel hated him within days of his taking up his duties in India. Soon enough, Weizmann’s Indian Law Firm hated him with the same dangerously incendiary passion. How could the company litigate effectively when everyone hated its team leader? Weizmann took the CEO out of the litigation equation: they asked him to confine himself to business and keep away from the lawyers. Instead, they put the topmost Indian manager in charge of the litigation. He turned out to be pretty good. Looking back, he deserves a great deal of credit for keeping everything quiet as the fight went on.

Leadership doesn’t end with the client of course. Lawyer teams need leadership too. As is often the case, this case required two leaders – a Law Firm boss and a Senior Counsel. How were these guys picked?

The Law Firm boss had to be a corporate legal guy of course. Such battles are fought in the Board room as much as they are fought in courts. The Law Firm boss has to understand company law, he has to understand commercial realities and he has to be able to handle himself inside a Board meeting. India has an exclusive spread of such lawyers in Delhi and Bombay. Weizmann appointed one such and left him to put together his own support team.

That left the business of picking the Senior Counsel. This is generally a hotly debated matter because everyone pushes the person they personally like. The trick is to find one that fits the job description. Since this litigation could be fought in several towns at once, Weizmann needed a metro based Senior Counsel who would travel at short notice. By definition, they could not hire any of India’s top twenty celebrity lawyers. Weizmann chose to go with a relative youngster from a family of eminent lawyers.

That said, you still can’t transport a lawyer from one town to another faster than a court can pass a quick stay order with far reaching consequences! Weizmann needed a local lawyer in the four cities in which cases could be filed. Long before they needed to, Weizmann appointed a lawyer in each of these four court, and briefed them in advance on what the issues were.

Let us now look at the reality from Gupta’s side. It may well have been the money, but Gupta was seriously under-supported in legal terms. He chose to go with only two young independent lawyers in two courts and no Law Firm. Both were bad choices. The younger of the two didn’t have the experience and the older was a state level lawyer on the edge of becoming a high court judge. Neither understood the high stakes litigation game.

Let’s now see how the plot developed after Weizmann stripped Gupta of his executive powers. Gupta’s first challenge was to restore the power equation between shareholders. He went to BIFR, but Weizmann produced his confession letter.  Charges and counter charges flew everywhere. BIFR refused to decide the case, bailing out on a technicality. Privately, BIFR took the view that it was here to rehabilitate the Company, not settle private shareholder disputes. Gupta was stone walled.

The stalemate changed dramatically the following month. Three critical decisions required shareholder’s approval. First, the company needed an auditor. The previous auditor had resigned when he saw Gupta’s confession letter. Second, Weizmann wanted the company’s name to be changed to Weizmann India to help leverage the international brand in its local marketing pitch. Finally, it needed shareholders to approve the appointment of the new Weizmann directors. The company convened an Extraordinary General Meeting. That gave Gupta his opportunity. Gupta filed a case in the High Court.

In this case, he argued that the Joint Venture Agreement made him the Managing Director of the Company: Weizmann could not appoint their nominees to perform this job. Similarly, the Joint Venture Agreement agreed on what the company’s name would be: no one party could be allowed to change that. Finally, the auditor of the company had been intimidated into resigning and Weizmann was really looking to replace him with their own stooge. On all counts, he argued that Weizmann’s plans should be restrained. The court bought the story and stayed the shareholders meeting without calling Weizmann to court and hearing its point of view.

This was quite a shock. Court’s don’t stop shareholders meetings.  This is commonly understood law. I suppose this order proved that anything is possible in court.

Weizmann’s lawyers were thoroughly whipped for this one. Weizmann had appointed a Law Firm, a Senior Counsel, a local lawyer in every city, asked its Managing Director to shut up and stay out of it, hired a Director (Operations) to help the litigation and what did it get for its effort? There was blood on the dance floor!

Then the soul searching began. Why had this happened? Why had such a move not been anticipated or pre-empted? The answer it seems was complacence. Two months had passed since Gupta was stripped of his powers. Everyone had gone to sleep. It was a perfect example of how not to fight a war.

Weizmann now needed to have this stay vacated. It moved the court almost immediately. It had the heavy fire power arguments on its side. The Joint Venture Agreement was a private agreement between two shareholders but this was a listed company with many public shareholders. These public shareholders were not part of any agreement: why had their rights been suspended? How could a court force a company to use the services of any servant (read Gupta as Managing Director)? Why was the Court forcing a public company to hire the services of a self-confessed fraudster? If Gupta had a salary claim based on his former status as Managing Director, he could be compensated, but a stay order?

On the face of it, the stay order was not sustainable. All Gupta could do was to try and stone wall hearings. That is what he did. His lawyers used every diversionary tactics they could dream up to avoid a hearing. Why not let BIFR decide this question? Why not let an arbitrator decide it in arbitration. The judge understood that Gupta was stalling. “I am prepared to suffer the labor and the pain of hearing you both”, the judge stated, “but let it be understood at the end, I have to deliver something”. The entire court was in splits of laughter.

And hear the case, the court did, all day long. Eventually, the court stated that it will refer the dispute to whoever the parties wanted as arbitrator but the stay would not survive. Gupta’s counsel conceded the point and the day was lost.

Gupta’s loss was a case of poor leadership. His lawyer came to court to extract an adjournment: he was not prepared to deal with the  legal issues. His strategy was unclear, his papers were not in order and he did not have masses of case law to cite and waste endless weeks in argument.

Looking back, it is pretty clear what Gupta needed to do. Once he had his stay order, he had a week in which to unleash whatever his next strategy was. He knew that Weizmann rush to court the moment they received a copy of the court order. What would he do then? He doesn’t seem to have spent any time thinking about it. He was strategically weak. In litigation, that is fatal. He could have taken any number of steps to take the case to the next level. He could have escalated the fight on shifting battle fields. Instead, he chose to defend his stay order. He ended up getting slaughtered in court.

The moral of this story is that the right leadership is not in itself the difference between victory and defeat. You have to put together a team that will work together harmoniously. If the client, the Law Firm and the Senior Counsel don’t fit well, it doesn’t help that each of them know their jobs. Poor communication between Law Firm and Senior Counsel is a common reason for failure. Bad fits happen for all sorts of reasons. Culture is probably the most common. Young people are brash and outspoken, older people are used to deference and servitude. The result is rising mutual distrust, even conflict. Brutalizing junior lawyers was the norm in the early 1990s. The Senior Counsel who does that today is likely to get sabotaged by this briefing lawyer.

Then there is the problem of expectation. Traditionally, Senior Counsel expected complete support, including case law lists. Clients are now reviewing Law Firm’s bills more closely and, as an example, often decline to pay for research. Junior lawyers don’t want to keep awake nights doing things that bring in no billing. Senior Counsel want the case laws, the juniors don’t supply them and court case suffers.

In complex litigation, there is too the conflict on who is in the driving seat. Senior Counsel see themselves as movie stars but know 20% of the facts. The Law Firm is playing all sorts of games outside the court room which it doesn’t want to share with the Senior Counsel. The Law Firm also thinks it’s the fee-paying client and should be driving the decisions. This territorial dominance struggle brings its share of grief.

Finally, there is the very serious problem of colliding agendas. Law Firms are here to win the war. They want a happy client. The Senior Counsel is here to keep his relationship with the court, which is why he gets hired in the first place. When Senior Counsels play to the court, and ignore the client’s agenda, the Law Firm gets upset. This leads to clashes.

Here’s a case that went horribly wrong because of a mismatch between the Law Firm and the Senior Counsel.

The Orient Organic case

Orient Organic was one of those second rung Indian corporations who always had potential but lived on the edge of solvency. At some point, Orient’s owners decided they needed a professional manager. They found this forceful, innovative no-nonsense personality named Seth.

Seth did his own investigation and did not see why Orient wasn’t making money.  It was one of only five manufacturers globally of an arcane sulfuric chemical used in the tire business. They had picked up the technology from Japan. Frankly, no one understood why the Japanese had agreed to share it with Orient in the first place. India wasn’t that big a market to begin with. In any case, handing out technology for small royalty couldn’t possibly meet any commercial goal. Under the terms of the technology transfer agreement, Orient could not sell its product overseas. Seth understood this to be at the heart of Orient’s problem.

Orient had another great problem though. Orient’s promoter had implemented the project in typically license-permit-quota style: over-invoicing imports, drawing down on unjustified credit lines, and buying substandard machines. Orient ended up with a sub-optimal piece of junk, not a class facility employing modern technology. Naturally, the plant ended up producing a substandard product. It sold, but it wasn’t to global standards. The company’s fate was written before it went to commercial production.

 Orient’s promoters were of course entirely satisfied with the situation. A lot of lender’s money ended up in trunks beneath their bolster beds. But that was then and Orient needed to go forward now. How to make the plant profitable? Seth leafed through the technology transfer contract and found a loophole. The plant had been in commercial operation for a year but the commissioning tests had never been performed. The commissioning tests set out tight output standards of exceptional quality. There was no way this shoddy plant was going to meet those standards. Why not claim a breach of contract? Why not tell the Japanese that since they had not given technology which could produce A class goods, they were in breach and Orient was free to sell its goods anywhere? Orient decided to roll out this strategy.

Seth hired a lawyer. The lawyers were relieved. The technology agreement did not have detailed plant specs. It did have detailed output specs. The Japanese company had assumed that Orient would build a quality plant. In hard core legal terms, nothing in the junkyard plant was contrary to the letter of the technology transfer document. What were the options? Orient could ask the Japanese company to pay them the money they lost because the plant did not produce a quality product. Or they could ask the Japanese to let them sell the product abroad in places like Africa and South America where quality standards were a little more forgiving. The case was as good as won.

Orient rolled out the strategy. They invited the Japanese partner to commission the plant. It was a fiasco. The Japanese technician was aghast when he saw the standing junkyard. Still, he was here to do a job and he had to go through with the process. It was a seven-day long nightmare of broken machines, leaking pipes, failing air conditioning, crashing computers and spluttering gen sets. The Japanese withdrew in confusion.

Orient wrote the Japanese company claiming breach of contract and demanding arbitration. The Japanese company asked for settlement talks. Seth accepted, and took along a Japanese speaking Indian with him. As the talks progressed, it became clear that the Japanese executives were worried about their legal obligation to meet the commissioning tests. It was a crazy situation for sure. Basically, Orient built a shoddy plant, but the technology partner was guilty for failing to write detailed technical specs into the technology transfer documentation. The talks ended in a stalemate. Seth was convinced the Japanese would pay to avoid an arbitration.

This is where the Law Firm screwed up. The arbitration clause provided for reference to the Federation of Indian Chambers of Commerce and Industry, commonly called FICCI. FICCI’s arbitration cell is housed one room away from the office of the Indian Council of Arbitration. The Law Firm’s clerk filed the petition with the wrong desk.

It took the Law Firm four days to detect the error. They promptly re-filed it at the correct desk but the petition was delayed and this had legal consequences. The Japanese company moved the High Court and asked the court to stay the arbitration. It was downhill from there. Orient needed an eminent Senior Counsel to stop this move. It wasn’t that hard a job. At least 50 lawyers in the city could have delivered. Seth had an existing relationship with a giant killer Senior Counsel called Bharti. He was more than capable of winning the action. Everyone was happy to engage his services. It was a mistake.

Bharti had all the arrogance of intellectual superiority but he also wanted to replace the Law Firm with his own son, still a chamber junior. Instead of focusing on the job, he concentrated on destroying the Law Firm’s credibility. He was hostile, he was aggressive, he was offensive and he accused the Law Firm of negligence. In time, Bharti’s chamber junior started doing the Law Firm’s work. In retaliation, the Law Firm started withholding critical information from Bharti. Seth found himself in the middle, hostage to a Senior Counsel and facing a sulking Law Firm. The case suffered. Briefings were incomplete, matters were not objectively debated, the Law Firm wouldn’t talk enough, the Senior Counsel wouldn’t listen enough, and through this entire charade, lawyers for the Japanese company fell about laughing helplessly at every hearing. It couldn’t go on. The Law Firm threatened resignation, the Senior Counsel refused to attend hearings, and the client was left with a no-win.

To cut a short and demeaning story shorter, the result was that Orient lost the action. That ended Orient’s relationship with its Law Firm and it also ended its relationship with its Senior Counsel.

Orient had no choice but to appeal and appeal they did, using a different and for more modest Law Firm and a much less eminent Senior Counsel. Predictably, without any great effort, the case was won in appeal, with barely a whimper. The case went to the arbitrators. But for the clash between Law Firm and Senior Counsel, things need never have gone that far.

The smart warrior knows that winning wars is about both having the weapons and knowing how to use them well. Before starting a brawl, the wise litigant asks itself if it has the leadership for the job. Since the leadership is a bunch of people working together, it makes sure that all the key people work well together. When the answer to both questions is yes, the litigant is good to go.