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LegalPay, India, and the Promise of Litigation Finance in Emerging Markets

May 11, 2022

LegalPay, India, and the Promise of Litigation Finance in Emerging Markets

LegalPay is a Litigation Finance startup founded in India, an emerging market for third-party legal funding. Until recently, investing in legal cases was reserved for high-end investors. The advent of LegalPay allows retail investors—those of average means–to take advantage of the potentially large uncorrelated returns that have attracted savvy investors for years. According to founder Kundan Shahi, LegalPay is the only formal player that offers third-party litigation funding for late-stage cases in India. One can’t help but wonder how this will influence the development of global Litigation Finance? Does LegalPay’s success foretell the rise of litigation funding in emerging markets?  How Does LegalPay Work? According to founder Kundan Shahi, LegalPay is a tech-focused, data-driven litigation funder which leverages a 15-point checklist proprietary algorithm in its underwriting process. The use of AI in diligencing cases is nothing new, however, LegalPay differentiates itself by enabling retail investors to commit modest amounts of capital as a means of participating in this uncorrelated asset class. Interest rates are competitive and offer high returns—plus investor and creditor interests are secured by the IBC. There are other such “crowdfunding for Litigation Finance” platforms on the market, though LegalPay seems to be performing a balancing act between being a tech platform for the masses, and a large-scale commercial funder that invests in mega cap cases (at least, as far as the Indian legal market is concerned). In 2021, for example, LegalPay offered interim financing to Yashomati Hospitals, a private medical entity in insolvency. This is in addition to more than a dozen short-term secured loans to hospitals undergoing insolvency. The funds go toward operating costs and payroll to keep the hospital running from six months up to a year. Ravindra Beleyur explains that the term sheet was finalized in fewer than two weeks from initial contact. LegalPay’s platform has worked out well for insolvent firms, and perhaps even better for the company’s spate of retail investors. A case involving Brain Logistics demonstrates the difference that backing from LegalPay can make. A bevy of delays and appeals by delinquent debtor Hero MotoCorp necessitated increased funding for Brain Logistics to continue fighting. This was provided by LegalPay, and allowed Brain Logistics to proceed with its claim against Hero MotoCorp. While the case has yet not resolved, it demonstrates how legal funding can expedite proceedings and allow for a more timely application of justice. In addition to its funding platform, LegalPay aims to create specialized products in insolvency and interim business financing, as well as carve out a piece of the legal funding market in India for itself. For insolvent companies, LegalPay offers short-term lending products that are asset-backed and secured.  Why is This Especially Important in India? Though the Indian legal system has been refined in recent years, it is still lacking when compared to that of developed nations. The Supreme Court of India is the de facto head of its unified legal system. Its purpose is to interpret laws and defend the constitution, resolve disputes, and affirm basic rights for citizens. Today, certain drawbacks of the Indian legal system make justice more difficult to achieve in a timely way. For example: As far back as 2016, the Chief Justice of India’s Supreme Court implored the Prime Minister to appoint more judges. Government inaction over judicial delays has caused significant hardships in all case types. Bloomberg Businessweek has affirmed that if India’s judges closed 100 cases every hour, 24-hours a day, it would take more than 30 years to clear the current backlog of pending cases. Ironically, there are pending cases from 30 years ago that are still unresolved. Given the dearth of judges and astronomical wait times, many companies–and even wronged individuals or businesses–are reticent to sue in India’s courts. New cases must work their way up from lower courts, which means they often take years to reach completion. Given all of this, it’s clear that in India today, finding innovative solutions to the old adage “justice delayed is justice denied,” is more important than ever. Who is Partnering with LegalPay? The well-documented challenges in India’s legal market may dis-incentivize investors from getting involved in TPLF in India. At the same time, LegalPay is amassing impressive partnerships that will enable it to make offers to companies undergoing insolvency. LegalPay’s Series A funding, a special purpose vehicle, found itself oversubscribed in a short amount of time—demonstrating consumer confidence in the concept and in its implementation. This first SPV was intended to diversify capital with a portfolio of 8-12 cases, and allowed retail investors to commit as little as Rs 25,000 in a single case. A second SPV will emphasize commercial disputes. These SPVs help investors diversify by investing in a basket of commercial cases that typically generate a pre-tax IRR of over 20 per cent. Incidentally, the entire investment process is digital and seamless, including signing investor documents, KYC, tracking of the basket of claims, and portfolio monitoring and analytics. Among those partnering with LegalPay is Jumbo Finance, which provides secured interim financing. Managing director Smriti Ranka explained that there are many benefits to investing in distressed debt assets. US hedge fund Hedonova is another LegalPay partner that, according to Shahi, will enhance LegalPay’s plan to aggressively grow its Indian market. Naples Global is also onboard with LegalPay, launching a $5MM fund that’s expected to protect the interests of founders in the event of disputes among the board. With disputes between founders and investors on the rise, this development may be crucial in attracting new investors and adding a sense of security to the opportunities LegalPay provides. The current $20 billion legal expense market in India has enabled seed funding led by 9Unicorns and Accelerator VC, along with LetsVenture, and angel investor Ambarish Gupta. Much of these funds will be deployed toward late-stage litigation—currently plentiful given that delays are rampant due to COVID. Also among LegalPay’s list of partners are Amity Technology Incubator and Venture Catalysts. What’s the Next Step? How will innovators like LegalPay alter the Litigation Finance landscape?  The complexities of global litigation funding make predictions like this difficult. As noted earlier, the Indian legal market is full of challenges, as are all emerging markets (heck, even most mature legal markets can be labyrinthine at times). But those challenges keep competitors out of the fray, which means funders willing to take the plunge typically have their pick of the litter in terms of cases. Lack of competition can present itself as a blue ocean of opportunity, as early entrants into the US and UK litigation funding markets can attest. And India certainly has a lot of untapped potential. The prospect of getting in on the ground floor of a maturing legal market that is home to over 1 billion people may be too enticing for some funders to pass up.  While LegalPay’s emergence may encourage more partnerships between larger funders and retail investor platforms, it’s unlikely we will see funders dive head-first into emerging markets like India any time soon (for example, opening an office in Bangalore). That type of commitment will take time, as there are less risky jurisdictions out there where the TAM has yet to be saturated (like Japan, South Korea and Israel–where Woodsford maintains an office and Validity Finance recently opened shop).  Yet established funders in Australia, the US and UK would do well to keep an eye on Shahi’s startup, given how its numerous strategic partnerships and technological capabilities enable both large-scale case investment, and promising returns for retail investors. Any company leveraging AI to effectively source and/or diligence cases deserves a second look, and one doing that in an emerging market like India deserves extra consideration. 
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Case Developments Commercial

‘Forensic Independence’ from Funders at Forefront of Pogust Goodheads’ Brazil Claim

By John Freund |

Pogust Goodhead has emphatically denied that it is controlled by litigation funders, insisting it retains full “forensic independence” in the high‑profile claim over the 2015 Mariana dam collapse.

As LFJ recently reported, the class action firm, representing hundreds of thousands of victims in a potential £36 billion lawsuit against mining giant BHP, is under scrutiny following the recent ousting of its co‑founder and chief executive, Tom Goodhead, at the behest of its primary financier, Gramercy Funds Management.

An article in The Law Society Gazette reports that Pogust Goodhead maintains it enjoys “forensic independence” from its principal backer. Opponents—including BHP and its counsel, Slaughter and May—have raised serious concerns about governance, questioning whether Gramercy now exerts undue influence over strategic decisions—an arrangement that could run foul of English and Welsh rules reserving case control for qualified lawyers.

In response, Pogust Goodhead reiterated that it remains “fully independent, with complete control over the strategy and direction of every case” and that its renewed governance structures strengthen its capacity to act in its clients’ best interests. Gramercy, for its part, denied any ownership or management control of the firm.

Looking ahead, this unfolding governance dispute raises critical questions for the future of litigation funding: How will courts view funder-linked control over claimant law firms? Could the outcome limit or reshape access-to-justice models reliant on third-party financing? As this case nears a key ruling, the legal funding industry may be on the cusp of a regulatory watershed.

Commercial Regulatory Issues

Inside India’s Insolvency Regime

By John Freund |

A new joint study by the Insolvency Law Academy and Burford Capital sheds light on how legal finance is gaining traction as a strategic tool in the India's insolvency processes. By enabling distressed entities and professionals to monetize contingent assets without exhausting limited estate resources, legal finance has the power to enhance liquidity and improve recovery outcomes for creditors.

An article by Burford Capital unveils how legal finance-backed structures can convert contingent claims into tangible value, supporting corporate continuity and delivering stronger creditor returns. The study highlights India’s unique factors: abundant untapped recoveries from avoidance claims and disputed receivables, widespread capital shortages faced by insolvency professionals, and the need for prompt liquidity solutions. It also references real-world case studies showcasing how legal finance facilitated strategic wins for firms like Hindustan Construction Company and Patel Engineering.

On the regulatory front, judicial rulings—such as in Tomorrow Sales v. SBS Holdings (2023)—have explicitly recognized the legitimacy of legal finance in India’s litigation ecosystem. Meanwhile, updates to the IBC now permit the assignment of “not readily reali[z]able assets” during liquidation, laying groundwork for integrating legal finance into the insolvency framework. Nonetheless, the regulatory landscape—including aspects of FEMA compliance and fund repatriation—remains cautiously permissive.

Emerging operational structures include direct estate financing, SPV‑based claim ring‑fencing, and creditor assignments for immediate value. The report urges a “light‑touch” regulatory approach, alongside the development of codes of conduct and educational efforts to arm insolvency professionals and creditors with the know‑how to deploy legal finance effectively.

Looking ahead, as India’s insolvency infrastructure matures, legal finance is poised to play a central role—unlocking value in distressed assets, bridging funding gaps, and aligning with global best practices.

Commercial Deals

Burford’s Law-Firm Investment Plan Draws Fire

By John Freund |

Burford Capital’s new push to take minority stakes in U.S. law firms is already meeting resistance from tort-reform advocates and insurer-aligned groups, who argue the structure could blur loyalties inside the attorney-client relationship. The plan, described by Burford’s chief development officer Travis Lenkner as “strategic minority investments” to help firms scale, would rely on managed service organizations (MSOs) that house back-office assets while leaving legal work to a lawyer-owned entity. Supporters cast it as a lawyer-friendly alternative to private equity; skeptics see a back-door end-run around state bars’ bans on non-lawyer ownership.

An article in Insurance Journal reports that critics, including the Florida Justice Reform Institute’s William Large, warn MSO-style deals could tilt decision-making toward investors focused on “big verdicts,” threatening firm independence and client interests. Only Arizona permits direct non-lawyer ownership today, and while Utah and Washington, D.C., have loosened rules at the margins, most states still enforce bright-line prohibitions.

The debate has sharpened as disclosure and licensing regimes proliferate: at least 16 states now require some level of third-party funding transparency. The Insurance Journal piece also notes a recent Texas Bar ethics opinion that green-lights MSOs for law-firm services under narrow conditions, though it doesn’t answer the broader question of outside investors’ influence. For its part, Burford says it understands the ethical guardrails and intends to be a passive investor focused on firm growth and operational support.

For the legal finance industry, the MSO path signals a pivotal test. If bars and courts accept these structures, capital could flow directly into firm operations—potentially accelerating portfolio origination, technology spend, and fee-earner leverage. If regulators balk, expect renewed calls for explicit rulemaking on ownership, disclosure, and control—alongside creative alternatives (credit facilities, revenue shares, and hybrid portfolios) to replicate MSO-like benefits without the governance controversy.