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Lawyers Vs Chartered Accountants!

Published on Fri, Jul 17,2015 | 23:34, Updated at Mon, Jul 20 at 18:10Source : CNBC-TV18 |   Watch Video :

Get ready for a mega battle between lawyers and chartered accountants! The Society Of Indian Law firms is going after the Big 4 accounting firms for the unauthorised practice of law! Aayush Ailawadi gets in the middle of it…

The Society of Indian Law Firms (SILF), a representative body of more than a 100 Indian law firms has accused the Big 4 accounting firms – EY, KPMG, PWC and Deloiite of the ‘surrogate practice of law’. According to their complaint, among other things, the Big 4 are currently offering legal services such as drafting, reviewing, litigation & advisory in the field of corporate laws, taxation, IPR and the regulatory space.

Lalit Bhasin
President, SILF
“You see this issue has been coming up for the last 15-20 years and we have tried to speak to the CA institute and taken up the matter before the Ministry of Corporate Affairs that these accountancy firms are engaging in the practise of law. They are not just confining their activities to accounting and auditing which they are supposed to do under the legislation that governs them. They have set up large practices having number of lawyers working for them and you know, under some façade they might have some subsidiary company. They’re all incorporated bodies!”

Ailawadi: But, your complaint to the Bar Council of Delhi is specifically directed at the big 4 accountancy firms…?

Lalit Bhasin
President, SILF
“No, we are targeting all the accountancy firms which have engaged in the practice of law and Big 4 are just to start with, but possibly in the course of next week or so, we will be filing appeals against others also!”

Ailawadi: In the specific case of EY, “Whereas 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. Whereas E & Y have inducted PDS Legal as a member / affiliate firm of E&Y Global Limited. 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.”- By just consulting PDS Legal and collaborating with them, is it compelling enough evidence to attract these charges?

Lalit Bhasin
President, SILF
“These are all similar complaints against the Big 4. This is a surrogate practice going on and they are openly and brazenly doing what they are not supposed to do. You can’t do even indirectly what you can’t do directly. That is a principle of law. We have got documentary proof to show that they are not only doing the work but they are also publicizing that they have under one roof all services to offer including legal services.”

Pankaj Jain is a chartered accountant, auditor and the Chairman of ICAI’s Ethics Standards Board. He’s also represented cases at the income tax tribunal. He disagrees with Mr. Bhasin’s allegations

Pankaj Jain
Managing Partner, Khandelwal Jain & Co
“PDS Legal as you have said is a part of EY Global, then obviously it’s a foreign firm or member of foreign firm, whether it is owned by the foreign entity or not, that is the issue that has to be looked into and it depends on the ownership. If the ownership is not Indian, then obviously it’s a foreign firm which is not allowed to practice the legal services in India. But obviously, if EY India is consulting PDS, then it gives altogether a different twist to this entire issue and again, I’d say that it is only the facts of the ownership deciding exactly whether it is permitted by PDS to provide the services of law in India. As regards, the statement whether CAs are in surrogate practice of the law, I completely disagree with that, I think, as CAs we are entitled to practise many laws in India and appear before many authorities right up to the tribunal under various acts and I think we are doing a very good job about that!”

Senior tax lawyer and a chartered accountant himself, H P Ranina also disagrees with the SILF accusation…

HP Ranina
Senior Advocate, Supreme Court
“It only shows that EY is aware that it has limitations on legal appearance and therefore it has taken on board a legal firm in an informal way which will give specialised legal service and the fact that the two firms may be working in tandem or working together, that does not mean that one firm is doing legal work and the other is doing accounting work!”

Ailawadi: “Whereas in Tribunals and before authorities, Deloitte appear on behalf of clients. They also work alongside experienced business professionals in tax, consulting, accounting, and financial advisory practices.”- Mr. Bhasin, but in many tribunals such as the ITAT, SAT or COMPAT, CA’s are statutorily allowed to represent their clients… What is your objection here?

Lalit Bhasin
President, SILF
“You see these are all general statutes, but so far as the Advocates Act is concerned it is a specific piece of legislation which has been interpreted by the SC to mean that CAs can do their accountancy and auditing work, nothing more, nothing less. On questions of fact, they can advise the clients but not on the legal issues that arise…”

Pankaj Jain
Managing Partner, Khandelwal Jain & Co
“Under section 288 of IT act, they have defined who are the authorised representatives to appear before the income tax authorities as well as the appellate tribunal. In this case the ITAT. And in this case, it clearly mentions that the term CA means a chartered accountant under the CA Act which would obviously include any of those working in Deloitte or any of the Big 4 entities that if they come under the definition of ‘accountant’, then they can definitely be authorised representatives!”

HP Ranina
Senior Advocate, Supreme Court
“As I said, at the tribunal level one of the most important points is that in most tribunals they have what is called a legal member and accounting member. So, you have an accounting member who deals with the accounting aspect of the case and you have the legal member, so the tribunal itself is constituted of somebody representing the legal profession and one member representing the accounting profession and it is because of this reason that accountants and lawyers are permitted to appear before tribunals. But in the High Court and Supreme Court, that’s where the Bar Council rules apply and that’s where only lawyers can appear and accountants and people from any other profession cannot appear.”
 
Ailawadi: What really amounts to legal advice? If a CA were to advise a client on a tax dispute, is that barred under the Advocates Act?

Lalit Bhasin
President, SILF
“Legal opinions are exclusively in the domain of the lawyers! You see, even the Supreme Court is quite clear that on facts, you see, they can advise the clients, they can even advise the lawyers who are appearing for the clients, giving the factual position. But, giving legal opinions, that is not at all permissible and they have gone, you see much beyond legal opinions! They are doing actual drafting of agreements and advising clients on intricate and complex issues which arise in global transactions these days. That is strictly not permissible!”

Pankaj Jain
Managing Partner, Khandelwal Jain & Co
“According to me, obviously a CA is well versed in various laws. In their examination, they are asked questions under various laws and we require expert knowledge not only working knowledge to answer those questions. In the course of our articleship, we actually have practical training, are exposed to those so many laws and after qualifying, many of us practice those laws. So, we believe that CAs are highly qualified to give legal advice under various laws, which they regularly encounter in their practice. Therefore, the issue of whether it amounts to legal advice or not, that I think is very technical in nature, I think that the assesse or the client will obviously want to go to a person who they believe would give them more practical advice based on their daily exposure to the particular law.”

HP Ranina
Senior Advocate, Supreme Court
“Well, it would amount to legal advice but as I said, if a client feels that a CA is more qualified to give this type of advice then it is for the client to decide. After all the client is free to go to a law firm as well and if the client decides to go to an accounting firm because they feel that they will get better advice from that firm rather than a law firm, then you leave it to the client to decide. Now, the question is, can they give legal advice, can they interpret the law? The answer is they are eminently qualified as CAs to interpret the law if he has studied the law as part of his examination curriculum, then surely he is competent to give advice on that!”

This is the first round in the turf war between lawyers and chartered accountants. The next round will be when SILF goes after other accounting firms. Meanwhile, the Bar Council of Delhi has issued notices to the ‘Big 4’ seeking replies before the 7th of August and their representatives have been directed to be present before the council on the 7th of August, else ex-parte orders will be passed and since the complaint names the top brass of the Big 4, if found guilty, they could be liable to up to 6 months of imprisonment.

In Mumbai, Aayush Ailawadi

 
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