reviving sare gurugram


LegalPay announced its successful exit from a litigation finance case — one of India’s few reported cases of litigation funding. When writing our book on Third-Party Funding1, we were hopeful for the future of litigation funding in India, given the business and litigation demography already existing in the country. Now, the time is already here when an Indian third-party funder is changing the course of funding disputes in India. We provide an analysis of the case study with key takeaways.

Sare Gurugram, formerly known as Ramprastha Sare Realty (P) Ltd. and a unit of Sare Homes, faced financial difficulties in constructing a township on the outskirts of Delhi. Despite starting the project in 2009, the construction failed to meet the stipulated timeline, causing frustration among homebuyers who had invested in the flats since 2012. Sare Gurugram owned two land plots of size 66.03 acres each and divided the lands for two projects, namely, “Crescent Parc” and “Sports Parc”, located in Sector 92, Gurugram, Haryana. As per the initial plans, Crescent Parc was designed to have 1699 flats built across seven phases of construction, while Sports Parc had 942 flats to be built in three phases of construction along with 166 EWS (economically weaker section) housing units.

In 2021 (at the end of the COVID Pandemic), four years after the construction began, the process stopped due to a lack of funds. As a result of the construction halt, almost 200 to 250 buyers who had already paid almost 95% of the property cost staged a protest against the developer, complaining about the denial to have the rightful possession of their flats.

Sare Gurugram went into the corporate insolvency resolution process (CIRP) on 9-3-20212 following a petition filed by Asset Care and Reconstruction Enterprises Limited (ACRE).3 A consortium was formed with KGK Realty (India) Private Limited and Dhoot Infrastructure Projects Limited, with 74% and 26% shares, to revive the debt-ridden projects in Sector 92.

Debt resolution & LegalPay’s entry

In August 2022, when LegalPay, an Indian litigation funder, committed interim finance4 to Sare Gurugram to complete the projects, it struck our minds that in a market like India, how does one decide on the kind of finance to be provided to a claimant? Or how does a claimant decide on which funder to approach to for litigation funding. In our book, as we discussed, there are various kinds of business models and structuring of third-party funding. Should the funder opt for recourse-based finance or non-recourse-based finance?

The Committee of Creditors (CoC) approved the debt resolution plan on 24-4-2023 to benefit the 1300 Crescent Parc buyers and Sports Parc buyers.5 In April 2023, the National Company Law Tribunal (NCLT) approved a debt resolution plan of INR 990 crores to revive Sare Gurugram Private Limited.

NCLT’s action for project revival

The NCLT Principal Bench, led by President Shri Ramalingam Sudhakar and technical member Shri Avinash K. Srivastava, required the consortium to complete the Phase 3 construction of Crescent Park within six months, Phase 5 in eighteen months, Phase6 in thirty-six months and Phase 7 in six months.

Further, the clubhouse of the residential property was to be completed in twenty-four months as per the NCLT order.6 The Sports Parc project was to be completed within forty-eight months, with this deadline starting a year after the resolution plan’s approval as approved by a 100% vote.

LegalPay’s funding revived the Sare construction projects again. To ensure the plan is carried out in terms of the schedule, the NCLT Bench further ordered the formation of a monitoring committee consisting of representatives from the buyers, the consortium, the CoC and a resolution specialist. It was decided that in case of any legal repercussions, for instance, non-compliance with NCLT’s order7 or withdrawal of the resolution plan within the allotted period, the CoC shall forfeit the performance bank guarantee (PBG)8 by the successful resolution applicant (SRA).9

Funding structure adopted

The actual terms of funding are not available in the public domain. Generally, in the case of interim finance, the company in default is provided with working capital to get through the CIRP governance procedure. The capital (funds) provided are usually generated from a group of investors or raised from large family offices or high net-worth individuals (HNIs) in the country. The investors, in return, can expect a minimum of 30% internal rate of returns (IRRs) across stages and types of cases, implying that the cases undergo a detailed risk and underwriting process.

A dispute funder providing non-recourse litigation finance will generally expect to make a multiple return on the capital invested. In our book, we have briefly discussed the return structures under third-party funding agreements.

The investment is non-recourse; the investors gain nothing if the case is unsuccessful in its claims. The success rate is 90% globally in such litigation financing cases, with LegalPay maintaining a 50% success rate.10

To guarantee that the amount or decided percentage is repaid, the investor funds only those companies that either have substantial assets for liquidation or stand a chance to get acquired or be restructured. In this case, the loan tenure was 12-18 months, and investors can earn 18-25% (pre-tax) interest on their investment. After the funding process was completed and the revival of the said company was done, LegalPay announced its exit in the interim finance segment within 11 months of investment, claiming a gain of 23% IRR. However, the amount financed remains undisclosed.

Interestingly, when we were writing our book on Third-Party Funding, one of the key issues that emerged was the confidentiality of such third-party funding agreements and the role of the Doctrine of Legal Privilege. We believe that by the time a funding agreement is signed, in most cases, the funder and the claimant have already entered into some form of confidentiality agreement.

Given the present case, when the amount financed by LegalPay remains undisclosed, it should not be a matter of great surprise.

† Founding Partner at AK & Partners. Author can be reached at

†† Founding Partner at AK & Partners.

1. Kritika Krishnamurthy and Anuroop Omkar, Third Party Funding of Dispute Resolution (1st Edn., Eastern Book Company 2002).

2. Corporate insolvency resolution process is the process of resolving the corporate insolvency of a corporate debtor in accordance with the provisions of the Insolvency & Bankruptcy Code, 2016.

3. Asset Care and Reconstruction Enterprises Ltd. v. Sare Gurugram (P) Ltd., Company Petition (IB) No. 300(PB) 2020.

4. Interim finance is short-term lending granted to debt-ridden companies undergoing corporate insolvency resolution process.

5. Asset Care and Reconstruction Enterprises Ltd. v. Sare Gurugram (P) Ltd., 2023 SCC OnLine NCLT 423.

6. Asset Care and Reconstruction Enterprises Ltd. v. Sare Gurugram (P) Ltd., 2023 SCC OnLine NCLT 423.

7. Asset Care and Reconstruction Enterprises Ltd. v. Sare Gurugram (P) Ltd., 2023 SCC OnLine NCLT 423.

8. A performance bank guarantee (PBG) is a type of surety bond that is used in construction contracts. It is a guarantee from a bank or a financial institution that the contractor will complete the project according to the contract terms. If the contractor fails to complete the project, the surety will pay the owner the amount of the bond.

9. Successful resolution applicant means the selected resolution applicant whose compliant resolution plan is approved by the CoC under S. 30(4) of the Code and submitted to the adjudicating authority under S. 30(6) of the Code read with Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, Regn. 39, in accordance with the Process Note.

10. Shipra Singh, “How Litigation Financing Works as an Alternate Investment”, “We spread the capital across several cases to diversify risk. Globally the success rate is around 90% and we have kept a modest expectation of a 50% success rate.” — Kundan Shahi, Founder and CEO, LegalPay (Livemint, 13-9-2022).

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