Executive Summary

Infrastructure and real estate companies use third-party litigation funding to pursue high-value contractual claims without diverting critical business capital into prolonged disputes. Through non-recourse funding, an external funder finances agreed legal expenses in exchange for a share of successful recoveries, generally without repayment if the claim fails, subject to contractual terms.

1. The Hidden Financial Risk Behind High-Value Contractual Disputes

A ₹10 Crore contractual claim can represent far more than a legal dispute. For an infrastructure developer, construction company, or real estate promoter, it can mean delayed project completion, constrained working capital, mounting financing costs, and reduced capacity to pursue new opportunities.

Disputes involving delayed payments, cost overruns, variations in project scope, defective performance allegations, termination of contracts, and withheld security deposits can tie up substantial sums for years.

Meanwhile, the business must continue paying contractors, suppliers, employees, lenders, and statutory obligations.

For CFOs, promoters, and managing partners, the commercial dilemma is clear: how can a company pursue money it believes it is owed without allowing litigation expenditure to weaken its financial position?

Third-party litigation funding offers a potential solution by allowing eligible businesses to explore external capital for pursuing contractual claims and enforcement proceedings.

2. Why Infrastructure and Real Estate Disputes Are Particularly Capital-Intensive

Infrastructure and real estate projects operate through interconnected contracts, substantial capital commitments, and complex payment arrangements. When one contractual relationship breaks down, the financial consequences can extend across the entire project.

Infrastructure companies: delayed payments and contractual entitlements

Infrastructure contractors and developers may face disputes involving:

• Delayed or withheld milestone payments.
• Variation orders and additional work claims.
• Cost escalation and extensions of time.
• Contract termination and damages.
• Retention money and performance security.
• Claims against project owners, concessionaires, or other contracting parties.

Even when a company has substantial contractual entitlements, recovering those amounts may require extensive documentation, expert evidence, arbitration, court proceedings, or enforcement action.

Real estate companies: project cash flow and commercial disagreements

Real estate developers, construction businesses, and commercial property companies may encounter disputes involving:

• Construction and development agreements.
• Joint development and joint venture arrangements.
• Unpaid contractor or vendor obligations.
• Termination of commercial agreements.
• Delayed handover and contractual damages.
• Disputes concerning deposits, receivables, and other contractual payments.

A prolonged dispute can restrict the capital available for construction, debt servicing, land acquisition, or the next phase of development.

The critical distinction is between having a contractual claim and converting that claim into actual cash recovery.

A company may have a credible legal position but still face a significant funding requirement before recovery becomes possible.

3. The Financial Cost of Self-Funding Litigation

Traditional litigation financing relies on the company paying its own legal and case-related expenses. For high-value disputes, that approach can create several financial pressures.

Locked-up working capital

Capital used to finance legal proceedings cannot simultaneously support inventory, construction activity, contractor payments, or expansion.

For a business operating across several projects, even a relatively small diversion of available cash can create competing funding priorities.

Potential impact on EBITDA

Legal expenditure may affect reported EBITDA when recognised as an operating expense under the applicable accounting framework. However, accounting treatment varies, and not every litigation-related payment reduces EBITDA.

Regardless of presentation, legal costs consume cash and may increase pressure on operating budgets.

Opportunity cost of internal capital

Consider a construction company pursuing a contractual claim worth ₹8 Crore. The company may need to finance counsel fees, technical experts, documentary analysis, arbitration expenses, and subsequent enforcement.

The same capital could otherwise support project mobilisation or reduce reliance on working-capital borrowing.

The relevant question is not simply whether the company can afford the legal expenses. It is whether deploying internal funds into litigation represents the best use of capital compared with available alternatives.

Uncertain duration and recovery

A favourable judgment or arbitral award does not guarantee immediate payment.

The company may still need to navigate enforcement proceedings, challenges to the award, questions concerning recoverable assets, and other procedural obstacles.

This uncertainty makes it difficult to forecast when the disputed amount will become available for operational use.

4. What Is Third-Party Litigation Funding?

Third-party litigation funding is a financing arrangement in which an independent funder provides capital for an eligible legal claim in return for an agreed financial return, typically linked to successful recovery.

In a corporate contractual dispute, the funding may support agreed expenses associated with litigation, arbitration, or enforcement, depending on the terms negotiated.

The claimant retains its legal claim, while the funding agreement defines the funder’s financial rights, the expenses covered, the conditions for disbursement, and the treatment of different outcomes.

In India, each proposed arrangement must be evaluated under the applicable legal and procedural framework, including relevant contractual, public-policy, and professional obligations.

Understanding non-recourse litigation funding

The defining feature of a non-recourse arrangement is that repayment of the funded amount is generally contingent on a successful recovery under the agreement.

If the funded claim fails, the claimant ordinarily does not have to repay the funded amount from its own assets, subject to the agreement’s conditions, exclusions, and exceptions.

If the claim succeeds, the funder receives its agreed return in accordance with the contract.

This structure can transfer specified litigation-related financial exposure away from the claimant. It does not eliminate every risk, guarantee a successful outcome, or automatically cover expenses outside the agreement.

For infrastructure and real estate companies, the potential benefit is the ability to pursue a commercially valuable claim without necessarily funding every agreed expense from existing business resources.

5. How Litigation Funding Can Support Infrastructure and Real Estate Businesses

Preserve capital for ongoing projects

Project-based businesses need liquidity to meet construction milestones, pay subcontractors, procure materials, and satisfy financing commitments.

Funding an eligible contractual dispute externally may allow the company to preserve more internal capital for these operating priorities.

Pursue claims that would otherwise strain budgets

A company may hesitate to pursue a strong claim because the anticipated cost and duration of proceedings compete with immediate business needs.

Third-party funding can provide an alternative financing route when the claim has sufficient legal merit, economic value, and a credible recovery pathway.

Finance arbitration and enforcement

Many high-value commercial contracts contain arbitration clauses. Even after obtaining an award, a successful claimant may need to pursue enforcement to realise the value of its legal entitlement.

Depending on the arrangement, funding may support agreed expenses for arbitration proceedings, court-related steps, and enforcement activities.

For domestic arbitral awards, Section 36 of the Arbitration and Conciliation Act, 1996, addresses enforcement, subject to the applicable statutory framework and procedural circumstances.

Manage specified downside exposure

Under a non-recourse arrangement, the funder generally assumes the agreed financial risk of the funded expenditure if recovery does not occur, subject to contractual terms.

This can be valuable for companies that want to avoid committing substantial internal funds to a disputed claim with an uncertain outcome.

Improve capital-allocation flexibility

External litigation capital may allow management to evaluate the dispute independently from the company’s immediate operating cash requirements.

The trade-off is that the claimant shares the successful recovery. The commercial decision should therefore compare the funding cost with the benefits of liquidity preservation and the transfer of specified risk.

6. Which Infrastructure and Real Estate Claims May Qualify?

Not every contractual disagreement is suitable for funding. The strength of the claim, documentary evidence, counterparty’s financial position, anticipated expenses, and potential net recovery all matter.

Construction and infrastructure claims

High-value disputes involving unpaid bills, certified work, variation claims, contractual damages, retention money, and other substantiated entitlements.

Real estate and development agreements

Eligible claims arising from development contracts, joint ventures, construction arrangements, and other material commercial agreements.

Commercial arbitration

Substantial contractual disputes with supporting evidence, a credible legal position, and a commercially viable route to recovery.

Arbitral award and court decree enforcement

Matters involving an existing award or decree where enforceability, the debtor’s assets, and the cost of pursuing recovery justify further assessment.

High-value commercial receivables

Substantial unpaid contractual amounts where the documentary record and available information support a credible recovery opportunity.

A claim’s face value is only one part of the assessment. A large award against a financially distressed debtor may offer a weaker recovery prospect than a well-documented claim against a solvent counterparty with identifiable assets.

Legal merits and financial recoverability must be evaluated together.

7. LegalFund’s Indicative Eligibility Threshold: ₹1 Crore+

LegalFund evaluates commercial claims and eligible arbitration award or court decree enforcement matters, with a focus on high-value recovery opportunities.

Indicative screening threshold: ₹1 Crore or more in dispute value.

This threshold is a preliminary filter, not a promise of funding or an assurance that a case will be accepted.

An initial assessment may examine the following factors:

1. Claim value: Is the disputed amount commercially significant relative to the expected cost of pursuing it?
2. Contractual documentation: Do the agreements, invoices, correspondence, project records, and related documents support the claim?
3. Legal merits: Is there a credible basis for establishing liability and quantifying the amount sought?
4. Counterparty recoverability: Are there identifiable assets or realistic sources of payment if the claim succeeds?
5. Cost-to-recovery ratio: Is the anticipated funding requirement proportionate to the potential net recovery?
6. Procedural position: What stage has the dispute reached, and are there pending challenges, stays, limitation issues, or other material obstacles?

For infrastructure claims, project records, measurement books, certification records, variation orders, payment applications, and correspondence may be especially relevant.

For real estate disputes, the review may require development agreements, payment records, contractual milestones, title-related documentation where relevant, and evidence supporting the amount claimed.

The exact documents required will depend on the facts and stage of the matter.

8. Illustrative Financial Analysis: Funding a ₹10 Crore Contractual Claim

Consider an infrastructure company pursuing a contractual claim worth ₹10 Crore. The following example illustrates how management might evaluate the potential economics of funding.

Financial consideration	Illustrative amount
Contractual claim value	₹10 Crore
Agreed funding for eligible expenses	₹60 Lakh
Assumed gross recovery	₹10 Crore
Illustrative funder’s return	₹1.50 Crore
Other recovery deductions	₹25 Lakh
Illustrative net recovery to claimant	₹8.25 Crore

Illustrative figures only. These amounts do not represent LegalFund’s actual pricing, a typical funding offer, or a forecast of recovery. Actual returns, expenses, and outcomes depend on the facts and negotiated agreement.

In this hypothetical example, the claimant retains ₹8.25 Crore after the illustrated deductions.

However, the company should not assess the funding arrangement in isolation. It should compare the potential net outcome with the economics of self-funding, including the cost of internal capital, expected duration, the probability of recovery, and the consequences of an unsuccessful claim.

The company should also confirm which expenses are funded, whether the return is calculated on a particular recovery base, and how partial settlements or staged recoveries are treated.

The decision ultimately depends on whether the proposed funding terms provide sufficient commercial value relative to the capital and risk transferred.

9. How the Funding Process Works

A structured assessment allows corporate decision-makers to understand the potential economics before entering into a funding agreement.

01

Submit the claim for initial review

Share the claim amount, a concise dispute summary, the current legal stage, and key supporting documents.

02

Legal and financial due diligence

Assess the contractual basis, evidence, potential recovery, estimated costs, counterparty’s financial position, and relevant enforcement risks.

03

Review proposed funding terms

Examine the proposed funding amount, covered expenses, recovery-sharing mechanism, disbursement milestones, and contractual obligations.

04

Execute documentation and arrange funding

If the matter meets the relevant criteria and the parties agree on the terms, execute the funding agreement and proceed with disbursement according to its conditions.

Before signing, companies should examine confidentiality, settlement authority, reporting requirements, treatment of adverse costs, termination rights, and any obligations that survive an unsuccessful claim.

The funding agreement should clearly define the allocation of responsibilities and risks.

10. Important Legal, Governance, and Accounting Considerations

Third-party litigation funding can be a strategic financing option, but it requires careful structuring.

Legal enforceability

The parties should assess the agreement under applicable Indian law, including any relevant public-policy restrictions, procedural considerations, and contractual enforceability issues.

The suitability of funding can differ depending on the type of claim, the parties involved, and the stage of proceedings.

Counsel independence and governance

The funding structure should respect the professional independence of legal counsel and the client’s appropriate decision-making authority.

Corporate boards and management teams should understand the proposed financial obligations and ensure the arrangement aligns with the company’s governance requirements.

Confidentiality and information sharing

Infrastructure and real estate claims can involve commercially sensitive project records, pricing information, contracts, and financial data.

Companies should establish suitable confidentiality protections and review any implications for legal privilege before sharing sensitive material with a prospective funder.

Accounting and financial reporting

Litigation funding does not automatically improve EBITDA or eliminate balance-sheet liabilities.

The accounting treatment of funding proceeds, legal costs, contractual obligations, and recovery-sharing arrangements depends on the transaction structure and applicable reporting standards. The company’s finance team should obtain advice from its auditors and accounting advisers.

Adverse costs and excluded expenses

Non-recourse funding does not necessarily cover every expense associated with litigation.

The company should verify whether the agreement covers appeals, enforcement costs, adverse-cost exposure, settlement-related expenditure, and any other potential liabilities.

The objective is to define precisely which risks transfer to the funder and which remain with the company.

11. Why Infrastructure and Real Estate Companies Should Evaluate LegalFund

LegalFund is a technology-enabled litigation funding business in India focused on assessing eligible commercial disputes and recovery opportunities.

For infrastructure and real estate companies, a funding review can help determine whether an existing or prospective contractual claim has a viable combination of legal merit, recoverable value, and commercially acceptable funding requirements.

LegalFund evaluates relevant opportunities involving:

• High-value commercial and contractual disputes.
• Infrastructure and construction-related claims.
• Real estate and development agreement disputes.
• Arbitration proceedings and award enforcement.
• Court decree execution and commercial recovery.

Every case is subject to individual legal and financial assessment. Funding depends on the merits, evidence, recovery prospects, proposed terms, and other relevant considerations.

For a CFO, promoter, or managing partner, the key question is whether the claim can be pursued on terms that support the company’s wider financial objectives.

A contractual entitlement should be evaluated not only for its potential legal value, but also for the practical route to recovery and the cost of achieving it.

Frequently Asked Questions

1. What is third-party funding for contractual claims?

It is an arrangement in which an independent funder finances agreed expenses associated with an eligible commercial claim in return for an agreed financial return, generally linked to successful recovery.

2. Can infrastructure companies obtain funding for arbitration claims?

Potentially. High-value construction and infrastructure arbitration matters may be considered if the evidence, contractual basis, counterparty’s financial position, expected costs, and recovery prospects support a viable funding opportunity.

3. Can real estate developers obtain funding for unpaid contractual dues?

Potentially. Eligible claims arising from development agreements, construction contracts, unpaid receivables, and other commercial arrangements may be considered, subject to legal and financial due diligence.

4. What happens if a funded claim fails?

Under a non-recourse arrangement, the claimant generally does not repay the funded amount if the claim fails, subject to the agreement’s terms and exceptions. The claimant may remain liable for expenses or obligations that the agreement does not cover.

5. Does litigation funding eliminate all legal costs?

No. The funding agreement defines which expenses are covered. Companies should carefully examine exclusions, adverse-cost exposure, enforcement expenses, and other liabilities before proceeding.

6. What is LegalFund’s minimum dispute value?

LegalFund’s indicative screening threshold for the relevant commercial claims and enforcement matters discussed here is ₹1 Crore or more. Meeting this threshold does not guarantee acceptance or funding.

7. Does funding guarantee recovery?

No. Litigation funding does not guarantee a favourable judgment, arbitral award, settlement, or successful enforcement. The outcome depends on the legal merits, evidence, proceedings, counterparty’s ability to pay, and other circumstances.

Protect Your Cash Flow. Pursue Your Contractual Claim.

Is your infrastructure or real estate business pursuing a high-value contractual claim, arbitration award, or court decree? Explore whether third-party litigation funding could help preserve internal capital while supporting a commercially viable recovery strategy.

Submit Your Case Details for a Confidential Underwriting Evaluation.

Indicative screening threshold: ₹1 Crore+ in dispute value. All matters are subject to legal and financial diligence, eligibility criteria, and mutually agreed terms. Submit Your Case to LegalFund

Email: info@legalfund.in · Phone: +91 8448330076