HC rules: You’re not an advocate if working anywhere full-time (including probably at law firms on retainer loophole)

Source:- legallyindia.com

A lawyer consulting full time with a public sector undertaking (PSU), who had been unsuccessfully trying to get enrolled with the Gujarat bar council (BCG) since 2012, is not allowed to do so and therefore practically not an advocate, ruled the Gujarat high court according to the Times of India.

The long-running saga of Jalpa Desai, who said that she works as a legal expert consultant with the Gujarat Industrial Development Corporation (GIDC), had seen a report by a committee led by retired judge Justice RC Mankad recommending enrolment that had been ignored by the bar council.

A single-judge bench then ordered the Gujarat bar council to allot Desai a temporary enrolment number, which was stayed by a larger division bench of the high court in November 2016, after the council argued that “only those law degree holders who are engaged in teaching profession and whose working hours do not conflict with court hours are eligible to be enrolled as lawyers”.

The case appears to have now concluded for the time being with a potentially far-reaching judgment.

The full judgment is not yet available (and the Gujarat high court’s judgment system being offline at the time of publication), so the full impact of the decision is not yet certain, but according to the Times report:

Before the high court, Desai argued that she was never treated as an employee and she was paying tax at source for professional services. What was paid to her was not a salary. BCG maintained that Desai’s contract with GIDC, by which she was getting a monthly payment of Rs25,000 required her to be present in office during office hours and that made her a full-time employee according to the Advocates Act and Rule 49 of the Bar Council of India.

While summing up, Justice N V Anjaria ruled that BCG cannot give Desai a certificate to practice law as an advocate. “Considering the nature of service contract of the petitioner with the Corporation, there is no gainsaying that she incurs debility in terms of Rule 49 as her employment could be characterized as a full-time salaried employment,” the HC said, and concluded that refusal by BCG to grant her enrolment, and the certificate to practice law, is “eminently proper and legal”.

Update 14:58: The Gujarat high court website is again available and we have uploaded the judgment below. Relevant excerpts:

Looking at Rule 49 of the Bar Council Rules, it provides that an advocate shall not be a full-time salaried employee. The conditions attached to the contract of service of the petitioner with the Corporation are reflective of the nature of the employment. The employment envisages that services are required to be rendered during the standard hours of service as per condition No.2. Condition Nos.9 and 7 show that service as legal assistant rendered by the petitioner is a full-time job and attaches with it monthly payable amount of Rs.25,000/-.

The petitioner joined the Corporation in the year 2012 and the contract has continued having been renewed on year-to-year basis till date. Apart the continuation of the petitioner as legal expert for such period, considering the aforesaid conditions, nature of employment and the kind of contract entered into between the petitioner and the Corporation requiring the petitioner to work as legal assistant or legal expert, make it evident that the same could well be comprehended within the phrase in Rule 49 “a full-time salaried employee”. It is the condition of the contract, the nature thereof and other attendant features of service which would determine whether the petitioner could be comprehended as full-time salaried employee with the Corporation or not. The mode of payment of TDS cannot determine the nature of employment for the purpose of Rule 29 of the Rules.

[…]

From the totality of operation of the facts and considering the nature of the service contract of the petitioner with the Corporation, there is no gainsaying that the petitioner incurs debility in terms of Rule 49 as her employment could be characterised as a full-time salaried employment. As a result, refusal by the respondents to grant the petitioner enrolment and the certificate to practice law could be said to be eminently proper and legal.

In-house lawyers or others in employment have long technically not been allowed to be enrolled with bar councils as advocates under the professional conduct and etiquette regulations of the Bar Council of India Rules made under the Advocates Act (see excerpts below).

Pursuant to that, lawyers in full-time employment have been required to surrender their licence and enrolment cards when they join a company in-house in full-time employment (though many don’t bother and the bar councils have had no way to really follow up on that, so many in-house lawyers we know have simply conveniently “forgot” to notify the bar council).

This judgment seems to underscore that.

The law firm loophole

However, more worryingly for law firm lawyers, it could also end up catching nearly all lawyers working in law firms (subject to the small print of the judgment).

Technically lawyers work at most Indian law firms (except at a few such as Nishith Desai Associates) not on employment contracts but on retainership agreements, where they are paid professional fees that they declare and tax themselves.

It is a fine distinction and loophole, mostly on paper, which means that the lawyers are instructed by the law firm and remain independent advocates (there are also tax saving advantages for the law firm and the lawyer in structuring the arrangement as a retainer).

But if this judgment has been correctly reported and will be more widely followed, any lawyer working if their “employment could be characterized as a full-time salaried employment” (whether on retainership or under employment contracts, even for a law firm, and even possibly in litigation departments of law firms if much of their job is office-based) may not be allowed to enrol with a bar council and call themselves an advocate.

Until now most law firm lawyers have managed to skirt around any issues relating to that with the retainership loophole, and it’s not like the bar councils have actually been paying serious attention to the issue.

The potential blowback

But if they do, it opens up a major can of worms. For one, if law firm lawyers were stripped of the status as advocates, it could also rob them and their clients of the privilege (i.e. confidentiality) that a client-lawyer relationship legally has.

Second, it would place law firm lawyers in the same category as foreign law firms and accountancy firms: i.e., legally not being permitted to practise law (which under the Advocates Act is restricted fully to advocates). That either means that corporate law is not law under the Act, which makes a mockery of the restriction on foreign lawyers operating here, or Indian law firm lawyers are practising law illegally.

Third, as ever, it proves that the Advocates Act and BCI Rules are simply not fit to govern modern day market realities anymore (despite alternatives being available).

Of course, the government’s plans to reform the Advocates Act have been harpooned temporarily by the BCI and bar council strikes.

And, on the other hand, notwithstanding its drive to weed out ‘fake lawyers’, bar councils have not shown much inclination or ability to police their rolls.

Nor, considering the BCI’s now-chummy relationship with Society of Indian Law Firms (Silf), is the BCI likely to make significant efforts to kill law firms’ practices.

So it goes.

Bar Council of India Rules 47-51, restricting employment

47. An advocate shall not personally engage in any business; but he may be a sleeping partner in a firm doing business provided that in the opinion of the appropriate State Bar Council, the nature of the business is not inconsistent with the dignity of the profession.

48. An advocate may be Director or Chairman of the Board of Directors of a Company with or without any ordinarily sitting fee, provided none of his duties are of an executive character. An advocate shall not be a Managing Director or a Secretary of any Company.

49. An advocate shall not be a full-time salaried employee of any person, government, firm, corporation or concern, so long as he continues to practise, and shall, on taking up any such employment, intimate the fact to the Bar Council on whose roll his name appears and shall thereupon cease to practise as an advocate so long as he continues in such employment.

“That as Supreme Court has struck down the appearance by Law Officers in Court even on behalf of their employers the Judgement will operate in the case of all Law Officers. Even if they were allowed to appear on behalf of their employers all such Law Officers who are till now appearing on behalf of their employers shall not be allowed to appear as advocates. The State Bar Council should also ensure that those Law Officers who have been allowed to practice on behalf of their employers will cease to practice. It is made clear that those Law Officers who after joining services obtained enrolment by reason of the enabling provision cannot practice even on behalf their employers.”

“That the Bar Council of India is of the view that if the said officer is a whole time employee drawing regular salary, he will not be entitled to be enrolled as an advocate. If the terms of employment show that he is not in full time employment he can be enrolled.”

50. An advocate who has inherited, or succeeded by survivorship to a family business may continue it, but may not personally participate in the management thereof. He may continue to hold a share with others in any business which has decended to him by survivorship or inheritance or by will, provided he does not personally participate in the management thereof.

51. An advocate may review Parliamentary Bills for a remuneration, edit legal text books at a salary, do press-vetting for newspapers, coach pupils for legal examination, set and examine question papers; and subject to the rules against advertising and full-time employment, engage in broadcasting, journalism, lecturing and teaching subjects, both legal and non-legal.

52. Nothing in these rules shall prevent an advocate from accepting after obtaining the consent of the State Bar Council, part-time employment provided that in the opinion of the State Bar Council, the nature of the employment does not conflict with his professional work and is not inconsistent with the dignity of the profession. This rule shall be subject to such directives if any as may be issued by the Bar Council India from time to time.