MUMBAI: Investors are beginning to finance commercial lawsuits in India in exchange for a share of future settlements or court awards, as litigation funding— a niche alternative asset class long established in some global markets—starts to take shape locally.
At least three entities, including alternative investment fund (AIF) Five Rivers, New Delhi-based LegalPay, a litigation funder, and Singapore-based ELF Partners, a litigation finance consultancy, are active in the space, marking early institutional entry into what is also known as third-party funding (TPF).
Five Rivers, a Mumbai-based AIF, is in talks with investors to close its first fund of $25-50 million, according to Irfan Mughal, the managing director of Five Rivers. It positions itself as the first dedicated fund of its kind in India, offering investors exposure to returns linked to outcomes in commercial disputes. AIFs in India require a minimum investment of ₹1 crore.
LegalPay and ELF Partners have been operating in the space for a few years. ELF Partners primarily act as intermediaries connecting investors to disputes for a fee and a share of potential payouts.
LegalPay undertakes litigation funding through two structures. In certain matters, the company deploys capital directly from its balance sheet, while in other matters, it also acts as a fund manager by structuring and managing capital participation from investment partners. Its investor base typically includes venture capital firms and high-net-worth individuals.
The market remains nascent, and participants say there are no reliable estimates of its size or deal flow, with firms typically bound by confidentiality agreements that prevent disclosure of case-level details.
In the US, however, TPF has evolved into a sizeable industry. As many as 346 commercial litigation funding deals worth $2.8 billion were signed in 2025 alone, according to Westfleet Advisors, a litigation funding consultancy that advises claimants and investors.
How the model works
Under the structure, a commercial dispute is referred to a TPF firm, which evaluates the case before deciding whether to fund it.
According to Pranav Mago, chief executive officer of ELF Partners, cases are typically evaluated on three parameters — legal merit, viable quantum, and asset rating.
In other words, a TPF firm assesses the likelihood of a favourable judgment, the realistic value of any potential settlement, and whether the counterparty has the financial capacity to pay if it loses in court.
If a case is funded, the firm typically covers litigation costs and may also provide upfront capital to the claimant in exchange for a share of any eventual award or settlement.
The payout for investors could typically be upwards of 200-300% over a four-to-five-year period, according to Mago. If the case is lost, investors bear the loss.
Returns on successful cases are generally expected to be around 50-70% at an internalized rate of return (IRR), but considering that some cases will be lost entirely, the fund is targeting over 30% returns on the portfolio, Mughal said.
The AIF is evaluating cases requiring investments of $1–12 million, including litigation costs and any upfront payments to claimants, he said, adding that Five Rivers is using quantitative analysis to estimate returns and make investment decisions.
“Litigation finance is a well-established industry outside India, especially in common law jurisdictions,” said Mughal, who is a New York-qualified lawyer and formerly worked with firms including Debevoise and Quinn Emanuel.
Growing interest
Litigation funding could also improve access to legal recourse for commercial claimants, according to industry participants.
TPF could also improve access to quality legal recourse for aggrieved parties in commercial disputes, said Amrita Grover, vice president, dispute finance, LegalPay. Before joining LegalPay, she practiced as a lawyer specializing in international commercial arbitration and commercial dispute resolution.
Grover said funding can help level the playing field for claimants facing better-resourced opponents. “I often observed that even in legally meritorious matters, the quality of legal representation could materially influence the outcome of a case."
“In courtroom proceedings, the experience and strategic acumen of counsel could make a substantial difference,” she added. “In such a case, access to funding enables the petitioner to engage the most competent legal teams and pursue their claims effectively without being constrained by financial limitations.”
A significant number of cases being evaluated by TPF firms today come from the engineering, procurement and construction (EPC) sector, including government contractors, according to industry executives.
Legal framework and validity
India’s legal standing on third-party litigation funding was affirmed by a 2018 Supreme Court judgment in the Bar Council of India versus AK Balaji case, which held that such arrangements are permissible so long as they are not extortionate, unconscionable or against public policy.
“TPF agreements are considered to be a valid way of funding litigants who would otherwise have to go through inordinate hurdles to procure reliefs,” law firm Nishith Desai Associates had said in a note in April 2024.
“While such agreements are subject to invalidation if they are extortionate or grossly unequal to either party, the level at which typical commercial funders operate are rarely hit by this bar," the law firm wrote.