by Samyak Pati
A turf war is brewing as the Bar Council of India – the regulator for the legal profession in India- has slapped notices on KPMG, PricewaterhouseCoopers (PwC), Delloite and Ernst & Young (EY) for surrogate practice of Law. This comes after the President of Society of Indian Law Firms (SILF), which represents over 100 law firms in India, filed a complaint against the Big 4 accountancy and consultancy firms.
The complaint has been filed under Section 35, Sections 6 (1) (a), (b), (c), (d), (h), (i) of the Advocates Act, 1961. The main ground of the complaint is that these firms are engaged in “unauthorized practice of law” (providing legal services) in violation of various provisions of the Advocates Act, 1961. In a 30 page complaint coupled with a few dozen annexure, SILF has alleged that these firms were employing law graduates and providing legal advice besides drafting Joint Ventures and other agreements for clients, without registering themselves with the Bar Council of India.
The firms in question have been said to violate Section 17, Section 22, Section 24, Section 29 and Section 49 (1) (ah) of the Advocates Act, 1961 read with Bar Council of India rules.
The main problem in India is that there is no explicit statutory support for multi-disciplinary practices in a firm, something which is allowed internationally. There is a great lacuna in legislative framework over what constitutes ‘legal advice’.
SILF has, in its four complaints against the Big 4 firms, has repeatedly stressed for ‘unauthorized practice of law’. In its petition, SILF has cited various provisions of the Advocates Act as well as Bar Council of India rules.
The complaint mentions a myriad of provisions that are being violated and while the main focus of the complaint is on Section 29 which states that Advocates are the only class of persons entitled to practice Law, much emphasis has also been laid on the allied rules.
Rule 2 Chapter II of part VI of the rules states that:
“An Advocate shall not enter into a partnership or any other arrangement for sharing remuneration with any person or legal practitioner who is not an advocate.”
Rule 37 states that “An Advocate shall not permit his professional services or his name to be used in aid, or to make possible, the unauthorized practice of law by any agency.”
Rule 49 provides that
“An Advocate shall not be a full-time salaried employee of any person, government, firm, corporation or concern, so long as he continues to practice, and shall, on taking up any employment, intimate the fact to the Bar Council on whose roll his name appears, and shall thereupon cease to practice as an advocate so long as he continues in such employment.”
If proved wrong, the Big 4 firms will be liable under Section 45 of the Act which reads:
“Any person, who practices in any court or before any authority or person, in or before whom he is not entitled to practice under the provisions of this Act, shall be punishable with imprisonment for a term which may extend to six months.”
Apart from statutory provisions, the complaint also provides for judicial precedents to supplement their claim. The complaint cites A K Balaji v Union of India of the Madras High Court where, based on a writ petition, the court highlighted the loopholes in the Advocates Act and stated that “…and exploiting this loop hole, many accountancy and management firms are employing law graduates, who are rendering legal services, which is contrary to the Advocates Act”.
The complaints also cite the Lawyers Collective case and the Supreme Court case of Ex-Capt Harish Uppal to reason that the Advocates Act 1961 applies to both litigious and non-litigious matters. One of the landmark judgments of the apex court in this regard is the case of Madras Bar Association v. Union of India in which the Hon’ble Supreme Court struck down the provision allowing Company Secretaries and Chartered Accountants to appear on behalf of a party before National Tax Tribunal.
PDS Legal and Advaita Legal: Best Friends?
Since the inception of the Chartered Accountants Act in 1949, accountancy and consulting firms have been involved in various legal aspects of Company formation. And this alliance has only become better. SILF in its complaint has alleged a nexus between Accountancy & Consultancy firms and Law firms to further what is termed as ‘multi-disciplinary practice’. PDS Legal is listed as one of the affiliates of Ernst & Young Global and while never explicitly mentioned, Advaita Legal and KPMG are known to have close affairs. It comes as no surprise when both the founding members of Advaita Legal have, in between them, work experience in three out of the Big 4 firms.
In India, the legal fraternity has taken an aggressive stance against multi-disciplinary practice. The core principle in such a business model is monetary cooperation i.e. lawyers and accountants agreeing to share profits and earnings. But this form cooperating is not a new trend but an existing one in various markets like the United Kingdom and Australia. The United States and India are the only two key markets yet to open up
The Economist, in a recent article on the subject, noted: “…they (global audit and accounting firms) are seeking to build broader practices in under-lawyered emerging markets where the international law firms do not have a presence but the accountants do.” Many feel that this complaint is a diversion tactic to prevent Foreign Law Firms from practicing in India. Earlier in June, the government had announced that talks have begun about bringing Foreign Law firms on to Indian soil for transactional based legal services and India based international arbitration. However, they will not be allowed into the area of litigation. It’s a known fact that many law firms have hired chartered accountants and offer transactional and non legal services to their corporate clients. However, such a hypocritical stand by SILF remains open to interpretation.
Integrating the two professional services is the next evolutionary step of the two professions. The services offered by Legal and Consultancy often overlap in areas such as corporate forensic services, anti-bribery, anti-trust, anti-dumping, cross border mergers, international trade and taxation to name a few. However, the fate of the Big 4 in India remains a mystery as the jury is still out on whether India should allow multi-disciplinary practice.
Samyak Pati is a fourth year student at HNLU