In a decision which is bound to create a lot of inconvenience and issues amongst the foreign law firms already operating in India or planning to operate in India, the Bombay High Court has yesterday declared that foreign law firms are not allowed to operate in India even through liasion-offices and therefore the permission granted by the Reserve Bank of India (RBI) to these firms to operate liasion offices was unjustified and contrary to provisions of Advocate Act, 1961 which governs the practice of lawyers in India.The decision was rendered by a Bench of which the Chief Justice of the High Court, Justice Swatanter Kumar was a member who has now been approved for elevation to the Supreme Court.
In a writ petition filed by Lawyers Collective, a Society registered under the Societies Registration Act before the High Court almost all interest parties were made Respondents before the High Court; the Bar Council of India, Bar Council of Maharashtra, Bar Council of Delhi, Supreme Court Bar Association, Bar Association of India, Society of India Law Firms Government of India, to represent the view as regard the admissibility of such firms operating in India and three law firms to defend their actions, namely (a) White & Case (US) (b) Chadbourne & Parke (US), and (c) Ashurst Morris Crisp (UK).
The High Court noted the poser as under;
A person can be said to be practising in litigious matters when he renders legal assistance by acting, appearing and pleading on behalf of another person before any Court or authority. Similarly, a person can be said to be practising in non litigious matters, when he represents to be an expert in the field of law and renders legal assistance to another person by drafting documents, advising clients, giving opinions, etc. There is no dispute that for a person to practise in litigious matters, he has to be enrolled as an advocate under the 1961 Act. However, the dispute is, where a person wants to practise in non litigious matters, whether, he should be enrolled as an advocate under the 1961 Act?
The petition was filed by Lawyers Collective, in public interest as it claimed that "the permission granted by the Reserve Bank of India to the foreign law firms, ... to open liaison offices in India is totally illegal and in gross violation of the provisions of the 1961 Act. Since the petitioner is concerned with the practice of legal profession and particularly concerned in ensuring that the ethical practise prevail in the legal profession in India, the petitioner seeks declaration that the permission granted by RBI to the respondents (firms) is bad in law and that the respondents ... cannot be permitted to carry on their activities in India unless they are enrolled as advocates under the 1961 Act." The present dispute arose in the wake of the permission granted by the Reserve Bank of India to undertake liasion work while specifically directing them not to undertake other activities.
The Petitioners argued (relying upon a number of Indian and foreign decisions to support their perspective) that;
- to carry on the profession of law even in non-litigious matters, enrollment as advocates under the 1961 Act was mandatory. Since the foreign law firms were not enrolled as advocates under the 1961 Act, the RBI could not have granted permission to the respondent firms;
- as per the provisions of the Advocates Act, any person intending to practise the profession of law must be enrolled as an advocate on any State Bar Council established under the 1961 Act. Since the expression `topractice the profession of law’ includes both practise in litigious matters as well as non-litigious matters foreign law firms could not have carried on practise in nonlitigious matters without being enrolled as advocates under the 1961 Act;
- the right to practise the profession of law cannot be said to be confined to physical appearances in Courts / Tribunals / other authorities, but the right to practise the profession of law necessarily includes giving legal advise to a client, drafting and providing any other form of legal assistance. Therefore foreign law firms cannot be permitted to practise the profession of law even in nonlitigious matters without being enrolled as advocates under the 1961 Act;
- In view of the permission granted by RBI, the foreign law firms have an unfair advantage over the advocates practising the profession of law in India, because, Indian advocates practising in non litigious matters are subjected to the provisions of the 1961 Act and the rules framed by the Bar Council, whereas, the foreign law firms are neither subjected to the 1961 Act nor the rules framed by the Bar Council;
The Government of India submitted that "there is no proposal, as of now, to allow foreign lawyers to practice Indian law in Indian Courts ... the Government is still in the process of consulting all the stake holders and any decision on the issue will be taken after considering the views of all the stake holders ... however for drafting legal documents or giving opinion on aspects of foreign or international law, one need not be on the roll of the Bar Council." It was also argued that "the fact that the 1961 Act contains penal provisions in respect of persons illegally practicing in Courts and other authorities, and does not provide any penal provisions for the breaches committed by persons practicing in non-litigious matters clearly shows that persons practicing in non-litigious matters are not governed by the provisions of the 1961 Act."
The RBI defended its decision by stating that "RBI is not concerned with the provisions contained in the 1961 Act and in any event, the permission granted by RBI is only to establish a liaison / representative office to act as a communication channel between the overseas principal and parties in India". Further, since "the permission granted by RBI was limited to granting permissions to overseas entities for undertaking specific activities enumerated in the permission letter and the said permission was not to be construed in any way regularizing or validating any irregularities or lapses under any other law, it cannot be said that the permission granted by RBI to respondents is contrary to law."
It was argued from the side of the foreign law firms (with almost equal vindication and support of cases as done by the Petitioners) that;
- Unless a legislation is enacted to regulate the persons practising in non-litigious matters by invoking entry 26 in List III to the Seventh Schedule to the Constitution which deals with legal, medical and other profession, it cannot be said that the persons practising in non litigious matters are governed by the provisions of the 1961 Act;
- Foreign law firm had neither sought permission nor permission has been granted by RBI to practise the profession of law as legal practitioners or advocates. Permission has been granted by RBI to open a liaison office in India which is within the domain of RBI under the 1973 Act. Therefore, in the facts of the present case, reference to the 1961 Act is wholly misconceived;
- If the contention of the petitioner that the 1961 Act applies both to persons practicing in non-litigious matters as well as litigious matters practised by persons before the Supreme Courts and High Courts is accepted, then it would render the Advocates Act, 1961 ultra vires the Constitution, because the 1961 Act is enacted in exercise of powers vested in the Central Government under entry 77 and 78 in List of the Seventh Schedule to the Constitution which specifically provides for enacting law relating to persons practising in the Supreme Court and the High Courts. Therefore, the construction put forth by the petitioner which renders the 1961 Act ultra vires the construction cannot be accepted.
- Even assuming that the expression `to practice the profession of law’ in Section 29 of the 1961 Act applies to persons practising in litigious matters as well as non-litigious matters, then and in that event, the liaison activities carried on by the respondent cannot be said to fall in any of the above two categories, because the activity carried by their liaison office in India was only a liaison activity and not an activity covered under the 1961 Act and, therefore, the permission granted by RBI under Section 29 of the 1973 Act to carry on the liaison activities in India cannot be faulted.
The first question to be considered herein is, what were the liaison activities carried on by the foreign law firms in India ? In the affidavit in reply, these foreign law firms have stated that they have opened the liaison offices in India mainly to act as a coordination and communications channel between the head office / branch offices and its clients in and outside India. Since the Head Office and the branch offices of the foreign law firms are engaged in providing various legal services to their clients carrying on wide range of businesses all over the world, the liaison activity carried on in India, namely, to act as a coordination and communication channel would obviously be relating to providing legal services to the clients. The respondent No.12 has further claimed in its affidavit in reply that their liaison activity inter alia included providing “office support services for lawyers of those offices working in India on India related matters” and also included drafting documents, reviewing and providing comments on documents, conducting negotiations and advising clients on international standards and customary practice relating to the client’s transaction etc. It is contended by the respondent No.12 to 14 that they never had and has no intention to practise the profession of law in India. Thus, from the affidavit in reply, it is evident that the liaison activities were nothing but practising the profession of law in non litigious matters.
In these circumstances the High Court noted that the activity carried out by the foreign law firms were essential one of professional character and therefore the Reserve Bank of India had no power to grant permission for carrying out such activities in India. The High Court observed as under;
The question then to be considered is, whether the foreign law firms could carry on the practise in non litigious matters in India by obtaining permission from R.B.I. under section 29 of the 1973 Act ? Section 29 of the 1973 Act provides that without the permission of RBI, no person resident outside India or a person who is not a citizen of India but is resident in India or a Company which is not incorporated in India shall establish in India a branch office or other place of business, for carrying any activity of a trading, commercial or industrial nature. Foreign law firms engaged in practising the profession of law in the foreign countries cannot be said to be engaged in industrial, commercial and trading activities. The liaison activities of respondent Nos. 12 to 14 in India being activities relating to the profession of law, no permission could be granted to the foreign law firms under section 29 of the 1973 Act. The Apex Court in the case of M.P. Electricity Board V/s. Shiv Narayan reported in (2005) 7 Supreme Court Cases 283 has held that there is a fundamental distinction between the professional activity and the activity of a commercial character. The Apex Court has further held that to compare the legal profession with that of trade and business would be totally incorrect. Therefore, in the facts of the present case, the RBI could not have granted permission to carry on the practise in non litigious matters by opening liaison offices in India under Section 29 of the 1973 Act.
43. It is not the case of the foreign law firms that the activity carried on by their liaison offices in India are different from the activity carried on by them at their head office and the branch offices world over. In fact, it is the specific case of respondents No.12 to 14 that the main activity at their liaison offices in India was to act as a coordination and communication channel between the head office / branch office and its clients in and outside India. Thus, the activity carried on by the foreign law firms at their Head Office, branch offices and liaison offices in India were inextricately linked to the practise in non litigious matters. Section 29 of the 1973 Act relates to granting permission for business purposes and not for professional purposes and, therefore, the RBI could not have granted permission to these foreign law firms under Section 29 of the 1973 Act.
Thereupon the High Court noted the provisions of the Advocates Act, 1961 to hold that it was 'intended to apply not only to the persons practising before the Courts but it is also intended to apply to persons who are practising in non litigious matters outside the Court'. The High Court inter-alia observed in this regard as under;
49. Apart from the above, Section 29 of the 1961 Act specifically provides is that from the appointed day, there shall be only one class of persons entitled to practise the profession of law, namely Advocates. It is apparent that prior to the 1961 Act there were different classes of persons entitled to practise the profession of law and from the appointed day all these class of persons practising the profession of law, would form one class, namely, advocates. Thus, section 29 of the 1961 Act clearly provides that from the appointed day only advocates are entitled to practise the profession of law whether before any Court / authority or outside the Court by way of practise in non litigious matters.
50. Section 33 of the 1961 Act is a prohibitory section in the sense that it debars any person from appearing before any Court or authority unless he is enrolled as an advocate under the 1961 Act. The bar contained in section 33 of the 1961 Act has nothing to do with the persons entitled to be enrolled as advocates under section 29 of the 1961 Act. A person enrolled as an advocate under section 29 of the 1961 Act, may or may not be desirous of appearing before the Courts. He may be interested in practising only in non litigious matters. Therefore, the bar under section 33 from appearing in any Court (except when permitted by Court under Section 32 of the 1961 Act or any other Act) unless enrolled as an advocate does not bar a person from being enrolled as an advocate under section 29 of the 1961 Act for practising the profession of law in non litigious matters. The Apex Court in the case of Ex-Capt. Harish Uppal (supra) has held that the right to practise is the genus of which the right to appear and conduct cases in the Court may be a specie. Therefore, the fact that section 33 of the 1961 Act provides that advocates alone are entitled to practise before any Court / authority it cannot be inferred that the 1961 Act applies only to persons practising in litigious matters and would not apply to person practising in non litigious matters.
The very object of the 1961 Act and the Rules framed by the Bar Council of India are to ensure that the persons practising the profession of law whether in litigious matters or in non litigious matters, maintain high standards in professional conduct and etiquette and, therefore, it cannot be said that the persons practising in non litigious matters are not governed by the 1961 Act.
Strong reliance was placed by the counsel for the respondent No.12 on the decision of the Apex Court in the case of O.N. Mohindroo (supra) in support of his contention that the 1961 Act applies only to persons practising the profession of law before Courts / Tribunals / other authorities. It is true that the Apex Court in the above case has held that the 1961 Act is enacted by the Parliament in exercise of its powers under entry 77 and 78 in List I of the Seventh Schedule to the Constitution. However, the fact that entry 77 and 78 in List I refers to the persons practising before the Supreme Court and the High Courts, it cannot be said that the 1961 Act is restricted to the persons practising only before the Supreme Court and High Courts. Practising the profession of law involves a larger concept whereas, practising before the Courts is only a part of that concept. If the literal construction put forth by the respondents is accepted then, the Parliament under entry 77 & 78 in List I of the Seventh Schedule to make legislation only in respect of the advocates practising before the Supreme Court / High Courts and the Parliament cannot legislate under that entry in respect of advocates practising before the District Courts / Magistrate’s Courts / other Courts / Tribunals / authorities and consequently, the 1961 Act to the extent it applies to advocates practising in Courts other than the High Courts and Supreme Court would be ultra vires the Constitution. Such a narrow construction is unwarranted because, once the Parliament invokes its power to legislate on advocates practising the profession of law, then the entire field relating to advocates would be open to the Parliament to legislate and accordingly the 1961 Act has been enacted to cover the entire field. In any event, the question as to whether the persons practising the profession of law exclusively in non-litigious matters are covered under the 1961 Act, or not was not an issue directly or indirectly considered by the Apex Court in the case of O.N. Mohindroo (supra). Therefore, the decision of the Apex Court in the above case does not support the case of the contesting respondents.
It is not the case of the respondents that in India individuals / law firms / companies are practising the profession of law in non-litigious matters without being enrolled as advocates under the 1961 Act. It is not even the case of the respondents that in the countries in which their head office as well as their branch offices are situated, persons are allowed to practice the profession of law in non-litigious matters without being subjected to the control of any authority. In these circumstances, when the Parliament has enacted the 1961 Act to regulate the persons practising the profession of law, it would not be correct to hold that the 1961 Act is restricted to the persons practising in litigious matters and that the said Act does not apply to persons practising in non litigious matters. There is no reason to hold that in India the practise in non litigious matters is unregulated.
It is not in dispute that once a person is enrolled as an advocate, he is entitled to practise the profession of law in litigious matters as well as non-litigious matters. If the argument of the respondents that the 1961 Act is restricted to the persons practising the profession of law in litigious matters is accepted, then an advocate found guilty of misconduct in performing his duties while practising in non-litigious matters cannot be punished under the 1961 Act. Similarly, where an advocate who is debarred for professional misconduct can merrily carry on the practise in non-litigious matters on the ground that the 1961 Act is not applicable to the persons practising the profession of law in non litigious matters. Such an argument which defeats the object of the 1961 Act cannot be accepted.
Being of this view, the High Court concluded as under;
Counsel for the Union of India had argued that the Central Government is actively considering the issue relating to the foreign law firms practising the profession of law in India. Since the said issue is pending before the Central Government for more than 15 years, we direct the Central Government to take appropriate decision in the matter as expeditiously as possible. Till then, the 1961 Act as enacted would prevail, that is, the persons practising the profession of law whether in litigious matters or non litigious matters would be governed by the 1961 Act and the Bar Councils framed thereunder, apart from the powers of the Court to take appropriate action against advocates who are found guilty of professional misconduct.
60. For all the aforesaid reasons, we hold that in the facts of the present case, the RBI was not justified in granting permission to the foreign law firms to open liaison offices in India under Section 29 of the 1973 Act. We further hold that the expressions ‘ to practise the profession of law’ in section 29 of the 1961 Act is wide enough to cover the persons practising in litigious matters as well as persons practising in non litigious matters and, therefore, to practise in non litigious matters in India, the respondent Nos.12 to 14 were bound to follow the provisions contained in the 1961 Act.
Have a look at the decision. And not to forget, we acknowledge with thanks our friend Sumit Agarwal who sent us a copy of this decision.
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