By M. L. Bhakta, Advocate and Solicitor
Article
I have stopped accepting invitations to give lecturers or
write papers. At the age of 76 and after a reasonably successful career, I can
possibly afford such a luxury. However, when Gautam Nayak, the Editor of the BCA
Journal asked me to write an article for the special issue of the Journal on the
occasion of the Diamond Jubilee of the Bombay Chartered Accountants’ Society, I
was tempted to accept the invitation, firstly being a fond reader of the
Journal, but really because of the subject on which I was asked to write.
During my long professional career spanning over five
decades, the nature of specialised work done by me has always brought me in
close contact with the accountancy profession, so much so that today I can claim
to have more personal friends in the accountancy profession as compared to the
legal profession. Possibly, this well-known fact has earned me the privilege of
being invited by the Society to write this article on the complementary nature
of relationship between the two professions in the past and in the future, as I
see it.
As G. P. Kapadia, who is acknowledged to be the father of the
CA profession in India, fondly put it, the legal profession and the CA
profession are sister professions which complement each other. I firmly believe
that neither can survive, exist or successfully practise without the active
help, support and co-operation of the other. Moreover, it is noticed that a
practising lawyer with accountancy qualifications or a practising chartered
accountant with legal qualifications has always been more successful as compared
to the others in the profession. The reasons are obvious.
Present scenario :
Presently, the sphere of work of CA firms has extended far
beyond the normal accounts, audit and taxation functions, and needs constant
legal inputs. Similarly, the work of law firms has increased as a result of
increasing mergers, acquisitions, trans-border transactions and complicated
financial structuring, needing constant support from CA firms. Consequently,
during the recent years CA firms and law firms have been working in closer
coordination with each other than ever before.
Both law and accountancy are venerable professions with old
and ingrained traditions. There are many similarities between the practice of
law and the practice of accountancy, particularly with respect to business and
corporate lawyers. Both accountants and lawyers play an integral role in the
smooth operation of trade, commerce and industry. Both are crucial to the
development and execution of the transactions that fuel industry and business
and thrive on reputation built after years of practice and expertise. On the
lighter side, both also have a relatively equal capacity to wreck havoc on the
financial sector in case they turn a blind eye to the fraudulent activities of a
client.
Dynamic changes in laws and the manner in which transactions
are entered into also play a vital role. Cross-border transactions have
necessitated the importance of international taxation and interpretation of
double taxation avoidance agreements/treaties. For such interpretation, lawyers
and accountants both have to advise their clients on the best way to solve any
problem, which may evolve during such transactions or better still, for carrying
out the most effective tax planning.
These days one sees at least three different trends in
working of a CA firm. Most of the CA firms have what is popularly known as ‘best
friend relationship’ with one or more law firms and all legal issues are dealt
with in consultation with lawyers. One also comes across CA firms who have
qualified legal personnel on their rolls or law firms who have qualified CAs
working for them. Though this is possible only at a junior level, it helps the
concerned firm to offer to its client services covering the other field. The
third trend which one notices these days (and which may in some cases prove
risky) is that even without qualified legal persons on its roll, some CA firms
offer extended services to the clients like purchase or sale of ownership
premises or drafting of documents like wills or trusts.
The scope of work of CA firms is no longer restricted to
accountancy, audit and taxation. Presently, CA firms render diverse other
services, which to some extent encroach legal field. No one can object to a CA
firm venturing to do legal work. However, it could lead to serious consequences
if CAs were to undertake drafting of complicated legal documents like wills or
trusts, which needs not just deep knowledge of law, but also expertise in
drafting, and which cannot be done merely by following precedents. The same
holds true also for lawyers who advise clients on complex taxation provisions
while drafting these complicated legal documents.
Recently, I came across a will containing some complicated
provisions, which was drafted by a senior Chartered Accountant. On the first
reading of the will, it was clear that the draftsman had followed some good
English precedent and used the normal legal terminology. However, on further
consideration I found some major flaws in drafting, which could have created
misunderstanding amongst the beneficiaries and possibly led to long-drawn
litigation. Luckily, the will was brought to me by the testator for
interpretation of some provisions and was suitably revised.
Future possibility :
In view of the current complementary nature in relationship
between two professions, future can only bring convergence.
Given the similarity and the interdependence between the two
professions, the need is for establishment of multidisciplinary firms so long as
separate firms are constituted for non-exclusive areas. In the context of
globalisation of services, establishment of firms formed by tie-up between
lawyers and chartered accountants would provide professionals from both the
professions a level playing field and strengthen the scope of services that can
be provided by them.
A major obstacle in the way of establishing such a multi-disciplinary firm is clause 2 of Chapter III Part IV of Bar Council of India Rules, 1975 which provides that, an advocate shall not enter into a partnership or any other arrangement for sharing remuneration with any person or legal practitioner who is not an advocate. The Chartered Accountants Act, 1949 provided similar regulation, which was later amended by the Chartered Accountants (Amendment) Act, 2006. The amended Act now makes an enabling provision permitting partnership with any person whose qualifications are recognised by the Central Government or the Council for purpose of permitting such partnership. Another hurdle to such establishment is S. 11 of the Companies Act, 1956, which restricts the maximum number of partners to twenty, which is to be done away with soon.
The future – as I see it – shows a distinct possibility of multidiscipline partnerships, with the necessary changes in the Chartered Accountants Act and the Advocates Act and blessings of the Institute of Chartered Accountants of India and the Bar Council of India. One can visualise a partnership or LLP with top lawyers like Soli Dastur being in partnership with Y. H. Malegam or Bansi Mehta.
While some of the big international CA firms had tried to set up in-house legal cells, the experiment does not seem to have worked well so far. I do not see a day far when even multinational muitidiscipline partnerships (or LLPs) will enter the field. Imagine Deloittes or E&Ys of the world joining hands with AZBs or Amarchands of India to form a multidiscipline organisation. Whatever is said and done, one thing is certain that the two professions will always continue to have very close relationship, complementing and supplementing each other.
