From the claimant's side, litigation funding looks like a black box: send your case, wait two weeks, get a yes or no. From inside, it is a structured six-point underwrite that decides whether the matter mathematically makes sense to capitalize. Here is the checklist most Indian funders run before issuing a term sheet.
The six-point underwrite
Each criterion is independent. Failure on any one can sink a term sheet — including matters with strong claims, because strength of claim doesn't guarantee fundability.
The first thing any underwriter checks, because no other criterion matters if the claim is already dead. For unpaid invoices: when did the cause of action arise; has three years passed; was there any written acknowledgment under Section 18 of the Limitation Act that restarted the clock? We pass on otherwise strong matters every month because the Section 138 window quietly closed or the civil limitation expired without acknowledgment.
The most expensive lesson in litigation is winning a decree against a shell. Before funding, we run:
- MCA21 portal check — financial filings, registered charges, secured creditors
- NCLT and IBBI public records — bankruptcy or CIRP status
- Property record check in key cities for known attachable assets
- News and social signal scan for distress indicators
A decree against a thin company is paper. A decree against an entity with attachable assets — bank accounts, immovable property, listed equity — is recovery.
The underwriter reads the evidence the way the trial judge eventually will. Five checks:
- Contract — original, signed, with arbitration or jurisdiction clauses readable
- Invoices — GST-compliant and reconcilable with the counterparty's GSTR-2A and 2B
- Delivery proof — e-way bills, signed challans, GRN-acknowledged receipts
- Bank trail — payment history showing partial payments that admit the relationship
- Correspondence — emails and messages where the counterparty engaged with the debt
A claim with three out of five is usually fundable. A claim with one is usually not.
Capital flows through counsel. We require disputes-track senior counsel with reportable matters in the relevant forum, a realistic case plan (settlement window, contested timeline, escalation map), and willingness to accept staged fee disbursement against milestones rather than lump sum upfront. If the claimant insists on counsel we cannot get comfortable with, we don't fund.
Litigation funding is not a long-tail bet. It is a structured commercial product. For the matter to make sense, settlement probability within 12 to 24 months should be ≥ 50 percent. Hard contested matters — banking fraud, complex IPR, large international arbitrations — need patient capital with 36-month tolerance. We model expected recovery × settlement timeline × counsel cost × success premium. When the math doesn't work, we say no even on strong cases.
Underwriters quietly look for one signal above all others: is the claimant in this for vendetta or for recovery? 'I want my money back' is fundable. 'I want him in jail' is much harder. Claimants who say 'we'd settle at 70 percent' are easier to capitalize than those who treat full recovery as a matter of principle.
- Term sheet within 7-10 working days of complete documentation
- Non-recourse funding of agreed legal expenses
- Disbursement against counsel-certified milestones
- Settlement and strategy decisions stay with claimant and counsel — funders don't run the case
From outside, the decision looks like a fast binary. Inside, it is six independent checks any one of which can sink the deal. The cleaner the documentation, the clearer the counsel plan, the more realistic the settlement expectation — the faster the term sheet appears.