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‘Liberalisation = obsolete subject’, as SILF’s Bhasin vows to go after Big 4’s best friends [read 28-page complaints]

SILF: CA target locked
SILF: CA target locked

The Society of Indian Law Firms (SILF) will complain to the Bar Council of Delhi in the coming week against PDS Legal, Advaita Legal and other Indian law firms that are best friends with accountancy firms, as a follow-up to its recent complaints in the council against the Big Four consultancies E&Y, KPMG, PwC and Deloitte for their alleged unauthorized practice of law.

SILF’s re-elected president Lalit Bhasin commented: “You can’t do indirectly what you can’t do directly.” The best friend arrangements between law firms and accountancy firms were all just modes and manners of circumventing law, he said.  “These are devices. Also the ownership of the [best friend] firms and all vests with accountancy firms. It is just a facade. Management and control and everything are done by these accountancy firms.”

“What is the actual arrangement, what is the modus operandi, that is what the bar council wants to investigate. So that there is no scope of malpractice,” added Bhasin.

PDS Legal is best friends with E&Y and Advaita Legal is best friends with KPMG.

Legally India has reached out to PDS, Advaita and the Big Four firms for comment. Advaita founding partner Sujit Ghosh declined to comment.

A Deloitte’s spokesperson commented: “We are in receipt of a letter from the Bar Council of Delhi and shall respond to it in due course. We remain committed to compliance with the applicable rules and regulations that govern us.”

Beyond the Big 4?

Bhasin told Legally India that the bar council had served notices on the four consulting firms and their affiliates and had posted the matter for hearing before the council on 7 August. He added that SILF had not filed complaints against firms, such as BMR Legal, engaged in similar allegedly unauthorised practices as the Big Four, but that it planned to do so in the coming week.

BMR Legal is the Indian law firm which is the legal services arm of domestic CA firm consultancy BMR Advisors. BMR Legal’s managing partner Mukesh Butani is the chairman and co-founder of BMR Advisors. BMR Legal was co-founded by Sujit Ghosh who later set up Advaita Legal.

Bhasin also added that SILF has not threatened legal proceedings against the alleged violators. “The question of going to court does not arise. It may arise later on but not just now.”

We have reached out to BMR spokespersons and Butani for comment.

Foreign law firms: ‘Very obsolete subject’

Bhasin was re-elected on Saturday for the third consecutive time as SILF’s president and said that the body, which until recently was the staunchest opponent of legal sector liberalization in India, will meet on 22 July to discuss its future activities and events.

“Foreign [law] firms is a very obsolete subject. Now we have already taken a position that we are in favour of a phased, sequential entry of foreign firms over the next five to seven years. Our other agenda is now to fight the Big 4 accountancy firms because they are openly and brazenly engaging in law practice which is prohibited under law.”

Under the scanner

On 18 June SILF had filed four complaints – one against each of the Big Four firms – for “the unauthorised practice of law by Multinational Audit and Accounting Firms in violation of the provisions of the Advocates Act 1961”.

The complaints cite AK Balaji V Union of India – the Madras high court writ against more than 30 foreign law firms - to state that “the oversight of the Bar Council on non-litigation activities of such Law Firms was virtually nil till now, 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.

SILF further noted in its complaint that it was unfair for accounting firms to encroach on law firms’ specialised domain of work because “advocates cannot engage in multi-disciplinary practices and are not engaged in practice of auditing and accounting. […] Advocates cannot engage in any other business or trade or profession as the profession requires complete devotion by an advocate to the profession.”

The bar council has served notice on the four consulting firms to appear before it on 7 August, said Bhasin.

Unauthorised practices

The complaints cite the Supreme Court’s judgment in the case of Madras Bar Association V Union of India to state: “Chartered Accountants and Company Secretaries would at best be specialists in understanding and explaining issues pertaining to accounts. 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.”

Each of the complaints attach 10-12 annexures as alleged evidence of dozens of categories of legal work listed in the complaint as unauthorised.

According to the complaint the Big Four are currently doing unauthorized work in corporate and commercial laws, disputes, taxation and the regulatory and policy space.

The listed categories included:

Corporate and commercial work such as advising clients on FDI policy, exchange control regulations and industry sectoral regulations, corporate and capital markets transactions, investments and business models, review and documentation, the companies act, regulatory approvals, compliance and legal due diligence, drafting and review of contracts and agreements and M&A legal advice.

Acquisitions, divestures and joint ventures, legal purchaser and vendor due diligence, corporate reorganizations, national and cross-border mergers, shareholder agreements, family protocols, post merger integration activities and legal entity reduction, corporate compliance, private equity and venture capital, legal and contractual framework for supply chain management and distribution networks, restructuring business functions and outsourcing       

Tax advisory, drafting, reviewing, and litigation work.       

Making representations to the government on policy related to various laws and obtaining regulatory approvals.       

Representing clients before various courts and tribunals and even drafting writs, appeals, plaints and applications for them to be filed in these courts and tribunals.

Additionally, it highlighted that PwC and KPMG were dealing extensively with legal advice and assistance related to the Foreign Exchange Management Act, Deloitte with real estate laws and intellectual property laws and E&Y in the taxation space.

Best friends PDS and Advaita

SILF’s 28-page complaint against E&Y highlighted its alleged relationship with PDS Legal and noted in paragraphs 21, 22 and 23:

E & Y have also got into arrangements with Advocates and Law firms in India to provide legal advice and represent clients before courts, tribunals and other authorities. (Please see annexure 6). Whereas E & Y have inducted PDS Legal as a member / affiliate firm of E&Y Global Limited. (Please see Annexure 7) PDS Legal is a law firm and is composed of advocates. Therefore, E & Y have in a surrogate manner engaged in the practice of law.

Whereas advocates are recruited as part of the E&Y Network are in fact interviewed by Chartered Accountants / other professionals. Whereas the advocates of PDS Legal attend the Partners meeting of E&Y network of firms and take part in the discussions with the members of the E&Y Network.

Whereas the advocates of PDS Legal and other members of the E&Y network are involved in determining the business strategy to meet clients and cross-refer work to each other. Whereas there is a modus operandi between PDS Legal and E&Y to share remuneration etc. Whereas the logo of E&Y is being used by PDS Legal. Therefore, E&Y has unauthorised practiced the profession of law.

Whereas litigation work is being referred to PDS Legal by members of E&Y. The infrastructure, resources etc of E&Y is being used by PDS Legal. Whereas PDS Legal and E&Y share office space, address etc. Whereas this would also result in issues pertaining to confidentiality of clients which is only available to advocates. This abundantly brings to light the fact that the E&Y in addition to practising the profession of law as mentioned above is also involved in the unauthorised practice of law through its alliance with PDS Legal.

SILF’s 26-page complaint against KPMG highlighted its alleged relationship with Advaita Legal and noted in paragraph 27:

KPMG has entered into an arrangement with a law firm Advaita Legal to practise the profession of law in a surrogate manner. Whereas the professionals of Advaita Legal are in addition to being partners of Advaita Legal are also shown as being associated with KPMG. (Please see Annexure 10).

Whereas KPMG and Advaita Legal have an arrangement to practise the profession of law. Whereas Advaita Legal and KPMG are sharing the infrastructure, resources etc and are working together to practise the profession of law. Whereas the Partners of Advaita Legal and professionals of KPMG are working together and are providing legal advice to clients.

Whereas the strategy for meeting with clients etc and referral of work is taking place between Advaita Legal and KPMG. Whereas the address and office location is also being shared between Advaita Legal and KPMG. Whereas it is also public knowledge that there is an alliance / relationship between Advaita Legal and KPMG (Please see Annexure 11 and 12).

Advaita founder Ghosh declined to comment when contacted.

SILF Complaints vs Big 4 CAs (PDF)
SILF Complaints vs Big 4 CAs (Text)

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