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June 20th, 2008
FinePrint: Buffalo Jurisprudence

Ranjeev C. Dubey on the politics of control in legal battles

Ranjeev C. Dubey

Although the timeless truth of it has been universally accepted since the dawn of Indian civilisation, the Buffalo school of jurisprudence is yet to find its way into any legal tome. Considering that astute lawyers use it as the ground norm on the basis of which all strategy is built, it is amazing that it isn't taught in law school either. This is how it goes.

There is a buffalo calf of uncertain parentage over who both you and your neighbour claim ownership. You argue about ownership, threaten each other, talk to the village panchayat and peddle influence, yet the issue remains unresolved. Eventually, your neighbour gets fed up and simply ropes the calf and takes him in. You go storming into his house only to find that he threatens you with violence. You go to the police but they launch a breach of peace proceedings against both of you thus perpetuating the status quo. Eventually, you visit your lawyer.
Your lawyer advices you to file a case for which he wants his fees in advance. You then find that the judicial system wants court fees in advance too. You have the case drafted, collect the evidence, swear your affidavits and at the end of an exhausting process, file the case. You learn that the judicial system is so horrendously overburdened that your case will be listed at some uncertain point in the future. So, you persuade your lawyer to request the court to hear you early and out of turn. However, although the court wishes to be benevolent to you, you find that the rest of the system does not because your lawyer or the opposite lawyer is busy/sick/on leave/other reasons unspecified heretofore. You could make a dozen visits to realise the timeless wisdom: when it comes down to dust, it's the stick that decides who owns the buffalo.

This is no cynical banter. People in India who file criminal cases because they have suffered a bounced cheque find that they must pay their lawyer, file their case, 'prima facie' prove that a cheque has bounced by making a statement in court and calling their banker to show his books of accounts, serve a summons on the maker of the cheque and finally haul the culprit to court only to find that (a) they are a year or two older than when the cheque bounced, (b) they are poorer not merely by the amount of the cheque but also the lawyers fee and substantial expenses incurred on getting to court and through a variety of court processes and (c) the culprit can now defend himself at leisure helped along by a tardy system designed to help the producers rather than the consumers.

 The point is not that in a criminal action, you are obviously a criminal before the accused considering how long and often you visit the court before the accused is summoned. The point is also not that the system is full of ennui which between long weekends that become longer weekends, summer, winter and midterm breaks, the variety of mundane and arcane tropical sicknesses, strikes, cricket matches, and so forth which famously in the words of Mr. P. Chidambaram is not subject to service tax because it "provides no service". The point is that in the face of all these givens, should we plan our business lives accordingly or should we retire early?

Well of course not. This is a land of opportunity, more than most others of my youth, and if a set of alternate rules are in effect than those that we may have preferred, then we must adapt our business strategies to these alternate rules. I love a good moral science lecture as good as the next man so while we wait for another paradigm to impose itself, we can either get on with our lives or lament the lack of it. The whole secret of a successful life is to understand the terrain on which we walk and to then navigate through it accordingly. Successful businessmen have an intimate knowledge of how the system works which is why in all cases of conflict, they come out ahead. And the secret of this system is the buffalo principle. Let me talk about it in relation to basic business structuring.
In an environment where you cannot quickly sue somebody to collect unpaid money, how do you write your distributor contract? In two words: control credit risk. If it's only about money, secure payment first, worry about the business opportunity later. If you must collect later, calibrate supply so that your exposure is limited. If you must supply a lot, secure collateral before you let go of possession of your goods. If you must let go of possession before you have secured payment, get a counter guarantee.

If you want to now convert the distributor arrangement into an incorporated venture, the same principles dominates your actions. You let your partner commit himself deeper into the venture at higher 'cost' than you do. You keep a handle on the critical elements of the business that you are bringing to the venture till such time as you have a substantial handle on the new venture. You let your partner contribute his distribution chain before you license your IPR or let go of the marketing initiative. You secure your nominee executives' control over the last mile before you let go of the old supply chain.
Even the structuring of the incorporated partnership reflects these realities. You insist on nominating a majority of directors to the board because 3 out of 5 directors is near total control of the company. You demand 51 per cent of equity because in India, 51 per cent of equity is practically 100 per cent of it. If you are compelled to settle for 50 per cent of equity and thereby create a stalemate, you secure control of local management or house the company within your group entities to get that critical leverage.

In any event, you try to control the company secretary and the accounting department because that is really where the entity interfaces with regulation and presents its reality to the world. If you control the public interface, you control the company. Thus viewed, in everything that you do, the rule remains the same: if you do not control the distribution chain, goods, cash, board of directors, shareholders meeting, accounting department or company statutory records, any right you may ever write into a contract is only a twenty year long litigation with no great statistical certainty that you will ever be heard.

And this is the central reality of doing business in a country where we have deliberately and systematically overburdened and neglected the judiciary till it is snowed under and unable to deliver efficiently, quickly, seamlessly. If a court does not want to hear you - and I will assume that its reasons are perfectly good - you cannot make the court hear you. It does not help that whether you are heard or not, you are going to pay. It hurts when you pay to not be heard. At the end of the day, this is the core of it: when it comes to a legal dog fight, it's all about who currently has control over the stakes and who stonewalls whom.


The author is managing partner of the Gurgaon-based corporate law firm N South  and author of the pioneering business book, Winning Legal Wars. He can be contacted at This email address is being protected from spam bots, you need Javascript enabled to view it This email address is being protected from spam bots, you need Javascript enabled to view it.

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