Bringing a claim - initial considerations

Key issues to consider

What key issues should a party consider before bringing a claim?

Although the issues to be considered depend on the specific facts and circumstances of the case, the party intending to bring a claim should broadly consider:

  • jurisdiction of the court of law;
  • the nature of relief; and
  • the limitation period with respect to the claim.
Establishing jurisdiction

How is jurisdiction established?

Jurisdiction is established based on the value of the subject matter (ie, pecuniary jurisdiction) and the location of the defendant or cause of action (ie, territorial jurisdiction). If a suit can be filed at multiple courts and the parties confer exclusive jurisdiction on one of such courts, only the court having conferred jurisdiction as per the agreement between the parties will have jurisdiction. If an Indian party approaches courts in two separate jurisdictions, there are specific provisions under the law that bar the Indian party from initiating parallel proceedings on the same subject matter.

In the event that any order is passed by an Indian court against a foreign party, the same would have to be enforced against the foreign party in its local jurisdiction (based on the law of such jurisdiction). If the foreign party has assets in India, money decrees against such party may be executed by attachment and sale of assets of the foreign party in India.

There is no prohibition under the law preventing a party from approaching a foreign court while the proceedings are pending in a court on the same subject matter. Typically, a court would stay the proceedings only if there is a likelihood of contradictory judgments on the same subject matter.

Preclusion

Res judicata: is preclusion applicable, and if so how?

Courts are barred from trying any suit or issue that has been finally decided by a competent court in a former suit between the same parties or between parties under whom they or any of them claim.

Applicability of foreign laws

In what circumstances will the courts apply foreign laws to determine issues being litigated before them?

Indian courts would apply foreign law only if parties have agreed to be governed by foreign law under a contract. The relevant foreign law must be proved by the parties as a matter of fact.

Initial steps

What initial steps should a claimant consider to ensure that any eventual judgment is satisfied? Can a defendant take steps to make themselves ‘judgment proof’?

The steps that a claimant can take to ensure that an eventual judgment is satisfied revolve around preventing the defendant from fraudulently disposing off or creating third-party rights over its assets (by seeking interim relief to this effect).

Freezing assets

When is it appropriate for a claimant to consider obtaining an order freezing a defendant’s assets? What are the preconditions and other considerations?

If there is an apprehension that a defendant may dispose its assets and frustrate the claim, the claimant can approach a competent court and seek interim relief. Indian courts typically grant a freezing order (known as temporary injunction) only if the claimant establishes:

  • a prima facie case;
  • a possibility of irreparable harm; and
  • the balance of convenience.
Pre-action conduct requirements

Are there requirements for pre-action conduct and what are the consequences of non-compliance?

Based on the facts and circumstances of the case, there may be statutory requirements that are required to be met prior to initiation of legal proceedings. These statutory requirements include the sending of notice to the defendants, paying of court fees, etc. Non-compliance in relation to such statutory obligations could vitiate the legal proceedings.

Further, a claimant is required to ensure that all the relevant documents pertaining to the claim are disclosed with the court filings. Indian courts have the power to dismiss the claim on the ground that a claimant has not approached the court with clean hands.

Other interim relief

What other forms of interim relief can be sought?

Interim relief can also be claimed, inter alia, in the following forms:

  • attachment of property;
  • interim sale;
  • detention of property, which is the subject matter of a suit;
  • deposit of the claim amount with the court;
  • appointment of receivers for the property;
  • deposit of security in the form of immovable property; or
  • a bank guarantee equivalent to the claim amount.
Alternative dispute resolution

Does the court require or expect parties to engage in ADR at the pre-action stage or later in the case? What are the consequences of failing to engage in ADR at these stages?

If the agreement between the parties requires them to engage in alternative dispute resolution (ADR) before initiating any legal proceedings, Indian courts will direct the parties to engage in ADR.

If it appears to a court during proceedings that elements of a settlement exist between the parties, the court may refer the dispute to, inter alia, mediation or judicial settlement, or adjourn the proceedings.

Claims against natural persons versus corporations

Are there different considerations for claims against natural persons as opposed to corporations?

An individual who owns and runs a business concern has unlimited liability in relation to his business. This implies that if a claim against the business concern cannot be satisfied from its assets, the claimant can attach the personal assets of such an individual for claims against the business concern.

On the other hand, the liability of a corporation is typically limited by its share capital. Therefore, if a claim is made against a corporation that it is not able to satisfy from its assets, the claimant cannot attach the personal assets of the shareholders of the corporation.

Class actions

Are any of the considerations different for class actions, multi-party or group litigations?

Under the Code of Civil Procedure 1908, a class action suit (known as representative suit) can be filed if the persons filing the suit have the same interest (ie, commonality of interest) and obtain permission from the court. Such permission is only granted by the court after service of notice to all interested parties.

A public interest litigation may also be filed in the High Courts and the Supreme Court against the state or public authorities by public spirited individuals who represent a class of individuals for violation of their rights.

Third-party funding

What restrictions are there on third parties funding the costs of the litigation or agreeing to pay adverse costs?

Third-party funding is prohibited for litigations in India.