His schooling involved several changes thanks to his father’s Indian Air Force career, while his undergraduate degree involved one. He started out as a chartered accountant, but seven years into running his father’s firm, Luthra realized he enjoyed law more. To study the subject, he went back to the University of Delhi, from where he had graduated in the late 1970s after switching to Sri Venkateswara College following a year at Hansraj College.
Luthra eventually started his firm, Luthra & Luthra Law Offices, in 1989 in a 1,500 sq. ft space in New Delhi’s central Connaught Place business district. The firm specializes in business law practice.
“My father’s firm had 1,600 clients which included names like Rolls Royce, British Aerospace, Bank of America, etc.," says Luthra, who built his law practice on these pre-existing relations to work with other international clients in fields as varied as power plants and equity management, post liberalization.
“See, what was litigation in India before the ’90s? There were no big-ticket fights, there were no 2G scams or coal scams. There were no investments or PPPs (public-private partnerships). There was, in fact, nothing like what we see today. The whole scene has changed," he says, sitting in his plush office in the Ashoka Estate building, where his firm now owns three floors and employs more than 300 lawyers.
The law firm also has offices in Mumbai, Hyderabad and Bengaluru.
The firm has developed specialization in commercial transactions and corporate issues including mergers and acquisitions, disinvestment, privatization and restructuring projects—avenues that emerged soon after India’s economy was liberalized.
Pre-reforms India was an unfriendly place for an international company looking to do business, not least of all because of the (now repealed) Foreign Exchange Regulation Act (Fera), considered a draconian law.
According to that law, only authorized dealers were allowed to purchase, acquire, sell or borrow foreign exchange within and outside the country. The Reserve Bank of India could grant permission to entities to become authorized dealers. Even holding foreign exchange below Rs1 lakh against the prescribed manner of the law could lead to up to three years in prison.
Luthra recalls how his trips abroad had him completely at the mercy of his clients who would pick him up from the airport and give him cash for even his hotel bills. “There weren’t even any credit cards at that point of time! Things changed slowly."
Fera was eventually replaced by the Foreign Exchange Management Act (Fema), 1999, which does not have penal sections.
Fema and India’s foreign direct investment (FDI) policy, by regulating sectoral caps, entry routes and other reporting requirements, have helped foreign investors bring capital into the country without the fear of arrest and other punishments under criminal law.
Business law was a little-known part of the legal framework in 1991, when economic reforms were introduced. Complex business transactions, private participation in infrastructure projects, greater influx of FDI and technology were challenges for not just the legal community but also the government.
Luthra, who prides himself on always being ahead of the curve, read the signs early on and went back to the classroom, this time to Harvard Law School, in order to prepare himself for the changing business environment.
Post liberalization, the Indian economy moved from being a control regime to a regulation regime. This could be seen in the new laws introduced to address the emerging challenges of a market economy and in automatic approvals in some sectors for FDI and competition matters.
“No one, not even the people who taught law here were ready for this. We had never had an IPO (initial public offering) worth more than a few crores. No one knew what M&A (merger and acquisition) was, project finance, etc., and there were all these companies making a beeline to India for investing," says Luthra.
It was, according to Luthra, (with due apologies to Dickens) the best of times and the worst of times. The situation was exciting as well as frustrating as everyone, from the companies to the bureaucracy, who were dealing with challenges as they emerged and learning from them.
“A client wanted to start an asset management firm for which the investment required was $50 million. We committed to the amount but in tranches. A day before the FIPB (Foreign Investment Promotion Board) approval, we found out that the request was being denied," recalls Luthra. He knew the additional secretary at that time and went to meet him. “One of the men in his department had turned down the request because we had said in tranches. When I asked him when did he want my client to give the money, he said, in one week’s time. But the process of depositing that amount itself took six months and the officer wasn’t aware of it. As I told the additional secretary at that point, ‘your men know nothing’."
But things have changed considerably now, says Luthra. For starters, the Registrar of Companies’ clearance now happens in a day instead of six months. “You don’t have to meet bureaucrats anymore or officials. You fill up forms, if you fulfil all the criteria, permissions are easy to obtain."
Luthra considers himself to be one of the biggest beneficiaries of the economic reforms, apart from bankers. “Who knew about lawyers or bankers before 1991? I used to joke with (former prime minister) Manmohan Singh that we all will come and touch your feet one day as you have made all this possible for us," he says.
According to him, much more needs to be done still, but we also have to be patient. “There is no point in comparing our growth rate or ease of business with China. They have at least 20 years advantage on us. When we were in our teens as an economy, their’s was already in its 40s. Things will happen here."
This is the 48th part in a series marking the 25th anniversary of India’s liberalization.
To read more ‘Days of Our Lives’ stories, click here.