Nomad,
Thanks, I understand your point regarding the lack of clarity with respect to the statutory basis for denying foreign law firms entry into India, although I do not think the reason is ultimately related to an Advocate having to continue to be an Indian citizen after he/she has been duly enrolled (i.e. the point of our present idscussion).
The point with regard to foreign ownership of law firms is, in my view, this (and I confess I have not spent an inordinate amount of time dwelling on it as life is too short et. al!):
1. An advocate in India statutorily needs to be an individual, Section 24 makes this clear. A body corporate cannot be an advocate. Thus, advocates have always practiced as body sole proprietorships or as partnerships (in each case, no body corporate is involved) - I am not clear how the recently introduced Indian LLP entity will work in this context, i.e. does the Advocates act actually allow law firms to be constituted as LLPs;
2. Under BCI regulations, an advocate cannot enter into partnership with a non-advocate in a fim which practices Indian law. Thus, for instance, Indian advocates and Indian chartered accountants cannot be partners in an Indian firm which offers legal and accountancy advice (although each lawyer and accountant who offers the legal and accountancy advice, respectively, under the aegis of such firm would be individually qualified to do so under the Advocates Act and any similar eligibility statute for Indian accountants);
3. For a foreign law firm to 'own' an Indian law firm, it must somehow participate in partnership with the partners of the Indian law firm and have some 'majority partnership rights' in the partnership agreement governing such Indian law firm'. However, it cannot participate in such Indian law firm through a 'body corporate', since 'body corporates' cannot practice law in India and cannot be partners in Indian law firms. This would mean that the foreign law firm would need to become a partner in the Indian law firm through an entity without legal personality (such as an English limited partnership, so as to limit their liability with respect to the obligations of the Indian law firm);
4. Apart from potentially causing tremendous tax problems to the partners of the foreign law firm (because they might, indirectly, be deemed to have a 'business connection' (where they are rsident in a non-treaty jurisdiction) or a a 'permanent establishment' (where they are rsident in a treaty jurisdiction) as a result of such partnership interest in the Indian law firm, if the consequence of such structure is that persons who are not qualified as advocates in India are partners in such law firm, then this would also fall foul of Bar Council regulations and the principle identified in point 2 above;
5. If a contractual solution is pursued (i.e. foreign law firm enters into a contract with the Indian law firm whereby it is entitled to participate in X% of Indian law firm's profits and share in [Y%] of Indian law firm's costs, has veto rights on some actions by the Indian law firms etc.), this could still be construed as the foreign law firm becoming a partner in, or creating a new partnership with, the Indian law firm (since a partnership is, in essence, nothing more than a contract to do business with a view to sharing profits).
Accordingly, in my view, this is in essence what I think causes problems with respect to foreign law firms owning Indian law firms as of the present date - i.e. the rules that only individuals can be advocates in India and that advocates cannot partner with non-advocates to run a law firm. It has very little to do with the continuing Indian citizenship of an advocate who was an Indian when he/she originally enrolled.
I would note that the court cases alleging that W&C, Ashursts and Chadbourne & Park wrongfully practiced Indian law also contains additional arguments about the breach by them of certain exchange control regulations pursuant to which they were originally accorded permission to open 'liaison offices' in India. This argument is not relevant for the purposes of our present discussion.
If you read through all of gunk I just wrote, I applaud your perserverence! If you think it makes sense, I applaud your bravery! :)