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.
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Will foreign law firms understand this noble culture of 5000 years ? In our culture junior lawyers address seniors as "Sir" and show respect by standing in the presence of the senior and not leaving office without permission of the senior. In their culture people address seniors by first names and think that they are colleagues, not shishyas.
its high time the government looked at amending the provisions of advocates act to amend the law to make the law in line with today's realities.. also add in the certificate of practice rules created by BCI.... for ex: how will a lawyer registered with a bar association of state A, working for the past many years as a lawyer in a corporate firm in state B, satisfy the certificate of practice rules related requirements of BCI??? Kian, why dont you take views of the leading GCs in India and the heads of leading law firms on these fine points of the BCI COP Rules and publish them as well?
Why isn't the SILF raising these issues since these also relate to their major stakeholders????
BCI needs to wake up to the reality of legal education before it takes any action on these accountancy firms. There are clients who are taking such advisory services from them, and those must be people who make a difference, otherwise SILF wouldn't bother complaining. And the fact that the big 4 has such clients is ample evidence of the fact of their competence.
And why is providing legal opinion and advise monopolized by advocates anyway? Company Secretaries study company law way more than the average Advocate, what really makes an Advocate the 'go to' for consultation?
Anyone who is competent to provide legal advise should be allowed to.
The AA was made in a time when CA and CS professions were hardly prominent. Times have changed, BCI hardly has.
I am all for MDPs myself, but till they are formally allowed and truly contain no entry barriers, it is not fair for a powerful and deep-pocketeted bunch of accounting firms to be allowed to get away with eating the law firms' lunch through surrogate law practices, while their own turf enjoys regulatory protection against a similar attack by non-CAs. How is the law firms' objection to this unfair or unreasonable?
The response is unfair because the underlying premise is that such restrictive regulation is a public good (not a law firm good alone). Get off that high horse and say that all we are doing is protecting our bacon using all available legal means, and the client/customer be damned, then at least you're being honest. But of course, doing that would likely mean that the claim loses its legitimacy.
And this whole, "the big 4 enjoy similar CA protection" is merely tu quoque (a logical fallacy) and, therefore, shouldn't be considered when determining the issue on the merits.
Why is it that you want only law firms to "get off their high horse" and think about "public good" and not the CAs? No one has succeeded in protecting their franchise more than the CAs have. You've dismissively called that simple and well-known piece of pure fact a "logical fallacy" without explaining why it is! You'd be naive to think there is any element of "public good" in CA firms either wanting to eat the law firms' lunch or in their protecting their turf so jealously even now :-)
Like I said in my previous post, I really am all for MDPs - I think everyone could potentially benefit from MDPs - but till MDPs are legally allowed, there's no fairness in allowing a bunch of deep-pocketed CA firms to get away with brazenly breaking the law while not allowing law firms to do the same thing on the CA firms' businesses.
You cannot say that a particular argument/conduct is correct on the basis that the person opposing you is doing the same thing. To put it even more simply, two wrongs don't make a right. You have no argument as soon as I say that the accounting firms should not be protecting the CA profession any more than the law firms should be protecting their turf. The fact that it is "pure fact" doesn't make it right either. If your only argument is that it serves them right because they're a bunch of s****, then the law firms should admit that they're only doing this because they want a piece of the CA business if they have to compete with the CAs for legal business
And there is public good in the CA firms wanting the law firs lunch (business) because that means there's more competition for their business. More competition means better service and better prices. More competition stops law firms from charging the earth and the moon for commodity work, which is why they're scared of this competition.
Of course its wrong that people break the law usually, but this law is just plain wrong. The laws governing the legal profession are protectionist in the extreme, and they need to change ASAP. If it's going to take some CA lobbying for that to happen, I'm perfectly happy with that. If the CA's fail to change simultaneously, some change is better than no change.
As for "this law is plain wrong", may be it is. As I have said (twice already, but seemingly you are ignoring it or haven't noticed it), I am all for MDPs as long as they provide free market access to everyone. Thats a win-win. What's NOT a win-win is MDP not being permitted, but a bunch of deep-pocketed CA firms breaking the law brazenly using workarounds. I can't see how that behaviour can be justified merely by saying this is how it OUGHT to be.......if this is how it ought to be, then the attempt should be use those deep pockets to create true free market access. The fact that these firms have chosen the workaround route over lobbying to change the law shows that they choose to thrive in the unfair advantage this workaround gives them in comparison to those who are following the law. Thats why they need to be stopped.
And maybe if law firms (who also have fairly deep pockets btw) made genuine attempts at creating truly free market access, instead of promoting this rent seeking behaviour by proxy, then we'd all be able to give SILF the benefit of the doubt like you do.
And law firms are as allowed to practice accountancy as CA firms are to practice law (i.e., not at all). In status quo both practice boths sets of professions. Maybe the deep pocketed CA firms are more successful in their practice of law than vice versa, which surely isn't a reason to shut them down.
Again, at the end of the day, if the "workaround" is legal, I don't see why there's an obligation on CA firms to fix the market for competitors instead of just working within the legal framework and using the law to their advantage (that's not the prerogative of law firms either, you know :-) ). If the workaround is actually illegal under the current laws, then obviously its within SILF's right to challenge this in court. But irrespective of whether or not they win, my problem from comment one onwards was that they aren't the good guys. As I said in my first comment, "Get off that high horse and say that all we are doing is protecting our bacon using all available legal means, and the client/customer be damned, then at least you're being honest. But of course, doing that would likely mean that the claim loses its legitimacy." The restriction is NOT a public good.
Wherein I am not against the idea of SILF protecting law firms, but I would have appreciated if SILF would have approached this issue in a more holistic way and represented the interest of all lawyers though may be in law firms or be in corporate counsel or be practising as counsels or in tribunals.
SILF has to move the courts to amend the law relating to advocates and include practising advocates,in house lawyers, law firm non advisory services and other upcoming areas such as various tribunals in definition of advocates.
It should suggest amendment of the Advocates Act to ensure that any kind of legal work be it litigation, legal advisory or non litigation transactional work in courts, tribunals or in house are done by lawyers who are enrolled with bar council and not by Practising CA or CS. This will help the legal profession and the clients.
Nothing to do with senior lawyers particularly. All licensed professionals protect their own turf. Will Medical Council of India permit a lawyer who is good at identifying ailments to open a clinic and practice medicine? Will ICAI tolerate a lawyer who has vast experience in accounting providing accounting advice? It can be argued that this is a wrong approach and thats a debatable issue. But till the law is changed CA firms certainly cannot be allowed to get away with this fraud.
So, the complaint should mean and be reflective of lawyers incompetence to compete with CAs.
And, what's wrong in having a one-stop solution for tax issues. So long as the BIG4 do compliance, advisory, tax optimization and litigation-of course, upto the tribunals- it should not be a problem, given that they are better equipped. The ground should be thrown open for competition when it comes to litigation work. The matters, when they reach, the higher levels of judiciary, are better handled by lawyers, though the reality proves it to be otherwise.
Not sure what evidence they are citing - maybe from client tenders or the like?
And
www.llca.net/index9ba3.html?page=home
You realize that most people practicing law at the big 4 are licensed lawyers. Its just that the entrepreneurial profits are not going to lawyers. Hence it is SILF that has a problem with this. Most lawyers working at law firms don't care.
Are you living under a rock ?
Law graduates working at Big 4 are NOT licensed lawyers, their CoP must be suspended. Not my opinion, thats the law. They cannot dispense legal advice (just as doctors salaried and working at a Big 4 cannot legally give medical advice). In any event how do you know the advise comes from a law graduate. It could be a CA who writes up the memos for all you know.
The flip side is that non law firms / non lawyers are not answerable to the BCI in exchange for not providing legal advisory services. It is only when they want tge best of both worlds, i.e. give legal services but dont comply with BCI norms that it is a problem.
Like I said I dont particularly like Lalit Bhasin, but on this issue he is dead right. Surprised it has been allowed to continue for so long.
And I really don't think anyone should feel safer knowing that there lawyers are answerable to the BCI.
The lawyers in question are working at law firms associated with the Big 4. They're not employees of the big 4.
This in no way impacts the answerability of the lawyer to the BCI (possibly why the BCI isn't complaining).
The issue is not about salary versus retainer. Salaried positions are a blanker bar. A retainer not connected with law = business income = requirement to suspend sanad because BCI rules say that an advocate "shall not personally engage in any business".
What these CA firms are doing is patently unlawful. If they want to provide legal services let them apply to BCI for recognition. Clearly they anticipate they will not be recognised else they would not undertake such a charade.
This is a common fraud perpetuated by the CA firms in which they try to corner the market for legal services by getting their "in-house" lawyers to give opinions, draft documents etc. with disclaimers that those do not constitute legal advice. Clients suffer as there is no accountability when things go wrong and licensed lawyers suffer as they lose out potential clients.
No honest lawyer has ever had an issue with these aspects of the BCI rules. Restrictions on professional practice apply to various categories of professions such as architects, doctors, CAs, CS, CWA, advocates, etc. I can only surmise that you must be one of those KPMG / PWC associates practicing law in the garb of being an "associate" or whatever designation is in vogue nowadays.
If they're giving legal opinions which state that these do not constitute legal advice then why do clients take them? Why do people take that risk? Could it be because law firms charge the earth and the moon for standard docs/agreements and the client doesn't want to pay that much?
Several honest lawyers have a problem with the BCI's protectionist attitude. Restrictions ought to be reasonable, and not framed towards creating a self-perpetuating cabal. CAs are the worst example of this, and lawyers aren't far behind. Also, note how it is the SILF, not the BCI, challenging this conduct. To me, that suggests that it is clear that the losers in status quo are not client, and not individual lawyers, or even law firm associates (that's what they're called at law firms when they have a law degree, the rest are consultants at law firms), just the law firm profit sharers.
Lastly, why is it a retainer not connected with law?
Example, if Reliance pays you a retainer to give them legal advice, you don't have to suspend Sanad.
So if KPMG pays you a retainer to give them (and their clients) legal advice, you don't have to suspend Sanad.
Other than the fact that the Advocates Act actually prohibits it (and it should not, any other objections are just anachronistic territory protection - no different to what is being done for foreign law firms. MDPs haven't worked particularly well so far because internationally clients actually seem to prefer their lawyers to be independent of their other advisers.
no competition is bad .. why they fear competition .. ? Mr. Bhasin has been made mouth piece of other law firms..
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