Bar Council of Delhi directs Deloitte, EY, KPMG and PwC not to offer legal services

In a double-whammy of sorts for the Big Four audit-cum-consultancy firms – Deloitte, EY, KPMG and PwC – the Bar Council of Delhi on Friday directed the four firms to refrain from providing legal services to clients till further notice.

The move comes after a complaint was filed by the Society of Indian Law Firms (SILF), representing around 100 Indian law firms. SILF said in its complaint that the Big Four were actually accounting firms, but are engaged in "doing law practice". SILF had filed a similar complaint to the Bar Council in 2015 alleging that the Big Four were resorting to "unauthorised practice of law" in violation of the Advocates Act.

The Bar Council order asked the four firms to provide a list of advocates on their rolls. The order copy said that while Deloitte and KPMG had filed their response to the complaint, PwC and EY had asked for more time to submit their response. The Council has deferred the matter for further hearing to July 12. It has asked the four firms to refrain from the practice until further orders.

The development comes at a time when the Big Four firms are under the scanner for audit-related practices. The recent meltdown at ILFS group has put the spotlight on statutory auditors.

Many in the chartered accountant fraternity were of the view that there were grey areas over jurisdiction of non-litigation related legal services. In their earlier response in 2015, one of the Big Four firms had said that they were not "engaged in the practice of law". A source in one of the Big Four firms reiterated the same stand that they do not represent any legal firm. "We do not practice in any area that only advocates are supposed to practice," he added.

There has been growing angst in the legal fraternity that multinational audit-cum-consultancy firms have over the years hired lawyers in large numbers to offer legal advice to clients. “It is a turf battle between lawyers and chartered accountants,” noted a senior advocate and chartered accountant. There are many lawyers – registered with the Bar Council – who offer tax advice to clients.

Meanwhile, the Institute of Chartered Accountants refused to get drawn into this fight and did not offer any official comment to Bar Council’s order.



Source: https://www.business-standard.com/article/companies/bar-council-of-delhi-directs-big-four-not-to-offer-legal-services-119050301212_1.htm

Amrapali Group Committed First Degree Crime by Cheating Home Buyers: Supreme Court

Amrapali Group has committed a "first-degree crime" by cheating thousands of home buyers and no matter how powerful the people behind this mess they will be booked and prosecuted, the Supreme Court said Tuesday.

"Fate is written on the wall" for the group and its directors, the top court said while declining to hear their claims of no wrongdoing.

The embattled real estate firm "cheated everybody including home buyers, banks and authorities and indulged in cartelization to prevent the Debt Recovery Tribunal from auctioning its unencumbered properties", it said. "The limit of your fraud touched the sky."

A bench of Justices Arun Mishra and U U Lalit said it cannot believe the justification given by Amrapali for alleged diversion of funds of over Rs 3,500 crore, looking at its dubious conduct.

"You have committed a first-degree crime by cheating thousands of home buyers. We should have cancelled the licences of statutory auditors of Amrapali for indulging in fraudulent practise long back and sent them to jail.

"We are saying in open court that there are powerful people behind this mess but no matter how powerful they are, we will book them and prosecute them. We are not going to spare anybody," the bench said.

The hard-hitting remarks of the bench came after advocates appearing for the group, said there was no wrongdoing done on their part and there was no diversion of Rs 3,500 crore as claimed by the court-appointed forensic auditors.

Luthra said forensic auditors have erred on various aspects in their report like they had claimed that not a single penny was invested by directors of Amrapali but in reality, Rs 60 to Rs 70 crore was put in by them.

"We have to believe the forensic auditors and their report looking at your dubious conduct. We believe them. You (Amrapali) have yourself admitted in your earlier affidavit that Rs 2,990 crore of home buyers money was diverted and now you are claiming that there was no diversion. You have made a peon as your director and he purchases shares worth crores of rupees for Amrapali. Is this not correct," the bench said.

Luthra said the group acted in a bona fide manner and in the interest of home buyers but the problems started after the company ran into litigation.

Amrapali Group claimed that they had received Rs 11,057 crore from the home buyers and they have constructed five projects in Indirapuram of Delhi-NCR and gave their possession to home buyers.

"Your (Amrapali Group and its directors) fate is written on the wall. We are not inclined to hear your bona fide claims looking at your dubious conduct," the bench said.

At the outset, the bench also pulled up Bank of Baroda and other lenders, who have given hefty loans to Amrapali Group for failing to monitor and control the diversion and usage of funds by the realty firms.

The day-long hearing remained inconclusive and would continue tomorrow.

Two forensic auditors -- Pawan Agrawal and Ravi Bhatia -- in their fresh report said yesterday that Amrapali has diverted over Rs 3,500 crore of home buyers money to different projects.

The top court had allowed the I-T department and the EOW to access the report of forensic auditors in their probe but restrained them from summoning them.

Forensic auditors in their fresh supplementary report pointed out that promoters of Amrapali did not invest a single penny in real estate firm and home buyers money was used for the construction of high rise buildings.

Supreme Court sets aside Centre's decision to merge FTIL and NSEL

The Supreme Court on Tuesday set aside the Centre's decision to merge National Spot Exchange Ltd (NSEL) with Financial Technologies India Ltd (FTIL), which is now known as 63 Moon Technologies Ltd.

A bench comprising justices R F Nariman and Vineet Saran delivered the judgement on a batch of petitions filed by 63 Moon Technologies Ltd challenging the Bombay High Court's December 2017 verdict upholding the Centre's decision to merge NSEL with FTIL.

In February 2016, the Centre had passed a final amalgamation order in terms of the provision of the Companies Act merging FTIL and NSEL. As per the order, all the assets and liabilities of NSEL would become assets and liabilities of FTIL.

The government's order was challenged in the high court which dismissed the petition in December 2017.

In its judgement, the apex court held that the Centre's February 2016 order was "ultra vires" to section 396 of the Companies Act and was also violative of Article 14 (equality before law) of the Constitution.

"In conclusion, though other wide-ranging arguments were made with respect to the validity of the Central Government amalgamation order, we have not addressed the same as we have held that the order dated February 12, 2016, is ultra vires Section 396 of the Companies Act, and violative of Article 14 of the Constitution of India for the reasons stated by us hereinabove," the bench said.

"The appeals are accordingly allowed, and the impugned judgment of the Bombay High Court is set aside," the apex court said.

The bench held that the merger of NSEL and FTIL did not satisfy the criteria of "public interest".

"Thus, it is clear that no reasonable body of persons properly instructed in law could possibly hold, on the facts of this case, that compulsory amalgamation between FTIL and NSEL would be in public interest," the bench noted.

After the apex court's verdict, Jignesh Shah, chairman emeritus and mentor of 63 Moons Technologies Ltd, said in a press statement, "We have always had full faith in the Indian judiciary and our courts. Finally, truth has prevailed."

NSEL had shut down in 2013 after a major payment default and it was ordered not to enter into any fresh contracts by Forward Markets Commission (FMC), which has since been integrated into the Securities and Exchange Board of India (SEBI).

On July 31, 2013, NSEL, then 99.99 per cent subsidiary of FTIL, had defaulted in nearly Rs 5,600 crore payments to its around 13,000 investors.

After the crisis, the Ministry of Corporate Affairs (MCA) had decided to issue a final order for the merger of NSEL with FTIL under section 396 of the Companies Act, 1956.

In February 2016, the MCA had passed a final order directing the merger of scam-hit NSEL with FTIL.

https://www.businesstoday.in/top-story/supreme-court-sets-aside-centre-decision-to-merge-ftil-and-nsel/story/342130.htm

WHETHER ARBITRATION AWARD DIRECTING TRANSMISSION OF SHARES CAN BE ENFORCED THROUGH NCLT?

Cheran Properties Ltd. vs Kasturi and Sons Ltd. & Ors. 
Civil Appeal 10025/2017 decided on 24.04.2018 

The court held that since the award postulates a transmission of share to the Claimant, the directions contained in the award can be enforced only by moving the tribunal for rectification in the manner contemplated by law.

WHETHER FLAT BUYERS CAN INITIATE INSOLVENCY PROCEEDINGS AGAINST BUILDERS UNDER THE IBC?

Nikhi l Mehta & Sons (HUF) & Ors. v. M/s AMR Infrastructures Ltd. (NCLT Delhi), 
C.P NO. (ISB)-03(PB)/2017, decided on 23.01.2017

In this case the NCLAT has ruled that a purchaser of real estate, under an 'Assured-return' plan, would be considered as a 'Financial Creditor' for the purposes of IBC and is, therefore, entitled to initiate corporate insolvency process against the builder, in case of non-payment of such 'Assured/Committed return' and non-delivery of unit. NCLAT further went on to rule that the 'debt' in this case was disbursed against the consideration for the 'time value of money' which is the primary ingredient that is required to be satisfied in order for an arrangement to qualify as 'Financial Debt' and for the lender to qualify as a 'Financial Creditor', under the scheme of IBC.

WHETHER THE IBC CAN BE INVOKED IN RESPECT OF AN OPERATIONAL DEBT WHERE AN ARBITRAL AWARD HAS BEEN PASSED AGAINST THE OPERATIONAL DEBTOR, WHICH HAS NOT YET BEEN FINALLY ADJUDICATED UPON?

K. Kishan vs. M/s Vijay Nirman Company Pvt. Ltd, Civil Appeal No. 21824 of 2017 decided on 14.08.2018

The court held that the filing of a Section 34 petition against an Arbitral Award shows that a pre-existing dispute which culminates at the first stage of the proceedings in an Award, continues even after the Award, at least till the final adjudicatory process under Sections 34 & 37 has taken place. However, court clarified that there may be cases where a Section 34 petition challenging an Arbitral Award may clearly and unequivocally be barred by limitation, in that it can be demonstrated to the Court that the period of 90 days plus the discretionary period of 30 days has clearly expired, after which either no petition under Section 34 has been filed or a belated petition under Section 34 has been filed. It is only in such clear cases that the insolvency process may then be put into operation.

Supreme Court Dismisses Plea To Review Decision On Kohinoor Diamond

The Supreme Court has given the legal burial to a case which had sought judicial intervention to reclaim the 108-carat Kohinoor diamond from the United Kingdom.

A five-judge bench headed by Chief Justice Ranjan Gogoi dismissed a curative petition seeking to re-examine its 2017 verdict in which it had said that it cannot pass order for reclaiming Kohinoor diamond from the UK or to stop it from being auctioned.

Kohinoor, which means Mountain of Light, is a large, colourless diamond that was found in Southern India in early 14th century.

The 108-carat Kohinoor gem, which fell into British hands during the colonial era, is the subject of a historic ownership dispute and claimed by at least four countries including India.

"We have gone through the curative petition and the connected papers. In our opinion, no case is made out within the parameters indicated in the decision of this court in the case of Rupa Ashok Hurra vs. Ashok Hurra & another....Hence, the curative petition is dismissed," said the bench, also comprising Justices SA Bobde, NV Ramana, DY Chandrachud and SK Kaul, in its recent order.

Curative petition is heard in the chamber of judges in the absence of lawyers.

The top court had in April 2017 disposed of pleas filed by an NGO and others seeking directions to bring back the treasured diamond to India saying it cannot ask a foreign government not to auction a property.

The court had made it clear it could not pass an order with regard to a property which was in another country.

In its order, the court had referred to an affidavit filed by the Centre and said that "the Government of India continues to explore ways and means with the UK government on the issue".

The Centre had earlier told the apex court that Kohinoor was neither "forcibly taken", nor "stolen" by British rulers but given to the East India Company by the rulers of Punjab.

The pleas had sought directions to the Indian High Commissioner in the UK for the return of the diamond, besides several other treasures.

After the April 2017 order, a plea seeking review of the verdict was filed in the top court.

COMMENT

The review plea was dismissed by the court in November 2017.

Supreme Court orders mediation to settle Ayodhya land dispute, appoints 3-member panel

The Supreme Court's Constitution Bench on Friday referred the Ram Janmabhoomi-Babri Masjid land dispute case for a court-appointed and monitored mediation to find a 'permanent solution'.

Justice Khalifullah (Retd) will be heading the mediation proceedings while the other two members will be - Sri Sri Ravi Shankar and senior advocate Shriram Panchu.

The top court also said that the mediation proceedings should be held on-camera. "Court monitored mediation proceedings will be confidential," Chief Justice Ranjan Gogoi said.

It will begin within a week and is meant to be completed in eight weeks. The first status report on mediation is supposed to be given within four weeks.

 In its order, the Supreme Court said, ''Mediators can co-opt more on the panel if necessary. Uttar Pradesh government will provide mediators all the facilities in Faizabad. Mediators can seek further legal assistance as and when required.''

Reacting to SC order, Swami Chakrapani, president of All Hindu Mahasabha, said, "We accept the Supreme Court order. We are happy with it. We are glad that Sri Sri Ravishankar is part of the mediation panel. I am sure that everything will go well."

Varun Kumar Sinha, advocate for Hindu Mahasabha, said, "Our past experience with mediation has not been good. I hope the apex court has taken this into consideration."

A five-judge Constitution Bench headed by CJI Gogoi had on Wednesday reserved the order after hearing various contesting parties.

Hindu bodies except Nirmohi Akhara have opposed the suggestion of the Supreme Court to refer the issue for mediation, while Muslim bodies have supported it.

The Constitution Bench, also comprising Justices SA Bobde, DY Chandrachud, Ashok Bhushan and SA Nazeer, concluded the hearing by asking stakeholders to give the names of possible mediators. 

Hindu bodies like Nirmohi Akhara suggested the names of Justices (retd) Kurian Joseph, AK Patnaik and GS Singhvi as mediators, while the Hindu Mahasabha faction of Swami Chakrapani proposed the names of former CJIs Justices JS Khehar and Dipak Misra, and Justice (retd) AK Patnaik to the bench.

Supreme Court also restrained media from reporting proceedings of mediation in Ayodhya case. It has directed in-camera proceedings of mediation in Ayodhya case. 

Fourteen appeals have been filed in the apex court against the 2010 Allahabad High Court judgment, delivered in four civil suits, that the 2.77-acre land in Ayodhya be partitioned equally among the three parties - the Sunni Waqf Board, the Nirmohi Akhara and Ram Lalla. 

https://zeenews.india.com/india/sc-orders-court-monitored-mediation-to-resolve-ram-janmabhoomi-babri-masjid-land-dispute-case-2186007.html

Aadhar status: Post 2 months of Supreme Court 5 Judges bench Judgment

It has been around two months since a five-judge bench of the Supreme Court determined the fate of the Aadhaar project. The majority judgement did not receive much enthusiasm as it only limited Aadhaar’s use, rather than strike it down entirely. The two aspects that emerged from the judgement were that first, Aadhaar can be made mandatory only for subsidies, benefits or services, and Aadhaar authentication cannot be carried out by private entities.

Aadhaar’s Continued Existence

One of the biggest criticisms of the Aadhaar judgement is that not much notice was taken of the negative consequences of upholding section 7 of the Aadhaar Act. This provision allows Aadhaar to be used for availing subsidies, benefits and services, which citizens are entitled to. The reasoning provided is that it will cut-out ghost beneficiaries and fraud which will result in savings.

However, the petitioners had repeatedly argued against this provision since the technology is not free from issues and hence false negatives can result in exclusion from entitlements. In September 2017, 11-year-old Santoshi Kumari died of hunger in Jharkhand. The reason was due to her family not linking their ration card with Aadhaar, they did not receive the foodgrains they were entitled to. On November 11, 2018, Kaleshwar Soren died of starvation. Once again, the culprit was non-possession of Aadhaar card. He had managed to survive on his neighbours’ charity after his ration card was cancelled in 2016.

The Economic Times reported today that Aadhaar enrolments, as well as authentications, had fallen drastically. However, this does not reveal much information about Aadhaar’s continued use. First, the drop in enrolment could be explained as many people in the country have already been coerced into getting an Aadhaar card before the Supreme Court decided on the matter. On the other side, the drop in authentication requests can also be one explanation as the use of Aadhaar for authentication has been made optional, hence rather than having to play with biometrics, people may prefer to submit or use other documents.

Following the Supreme Court’s judgement, the Unique Identification Authority of India (UIDAI) has issued two press releases in connection to it. The first press release welcomed the Supreme Court’s decision to uphold Aadhaar’s constitutional validity, the other concerned the electronic-Know Your Customer (e-KYC) norms. In the second press release, the UIDAI along with the Department of Telecommunications (DoT) stated that SIM cards linked with Aadhaar would not be deleted, as some rumours suggested. The release also mentioned that one could de-link one’s Aadhaar card by submitting a request for de-linking accompanied by an alternative identity document for fulfilling the e-KYC requirements.

However, Aadhaar continues to be of value to banks and telecommunications operators since no opt-out procedure has been devised till date. In a letter to the National Payments Corporation of India (NPCI) on November 19, the State Bank of India (SBI), in the light of the Aadhaar judgement, had decided to suspend the Aadhaar enabled Payment System (AePS). However, the UIDAI – the agency overseeing Aadhaar and its implementation – on November 30, informed the banks through a circular to the Reserve Bank of India (RBI), that since it is not possible to distinguish between authentication requests for the purposes listed under section 7, suspending the AePS would have an adverse impact. This circular would certainly be music to the ears of those operating the AePS, Bhim App as well as Aadhaar Pay, not to mention the numerous other corporate beneficiaries of Aadhaar.

Protecting the Financial Technology Companies

Barely a day after the Supreme Court had delivered its decision, the Union Finance Minister, Arun Jaitley, and the Union Minister for Electronics and Information Technology as well as Law and Justice, Ravishankar Prasad, said that the Supreme Court’s reading down of section 57 related only to contracts. In this regard, the Ministers are correct. But this is the letter, not the spirit of the Supreme Court’s decision.

Section 57 states that: “Nothing contained in this Act shall prevent the use of Aadhaar number for establishing the identity of an individual for any purpose, whether by the State or any body corporate or person, pursuant to any law, for the time being in force, or any contract to this effect:

Provided that the use of Aadhaar number under this section shall be subject to the procedure and obligations under section 8 and Chapter VI.”

Due to the blank cheque nature of this provision wherein Aadhaar can be used for ‘any purpose’ and by ‘the State or any body corporate or person’, the Supreme Court held:

“We read down this provision to mean that such a purpose has to be backed by law. Further, whenever any such “law” is made, it would be subject to judicial scrutiny. (b) Such purpose is not limited pursuant to any law alone but can be done pursuant to ‘any contract to this effect’ as well. This is clearly impermissible as a contractual provision is not backed by a law and, therefore, first requirement of proportionality test is not met. (c) Apart from authorising the State, even ‘any body corporate or person’ is authorised to avail authentication services which can be on the basis of purported agreement between an individual and such body corporate or person. Even if we presume that legislature did not intend so, the impact of the aforesaid features would be to enable commercial exploitation of an individual biometric and demographic information by the private entities. Thus, this part of the provision which enables body corporate and individuals also to seek authentication, that too on the basis of a contract between the individual and such body corporate or person, would impinge upon the right to privacy of such individuals. This part of the section, thus, is declared unconstitutional.”

However, there appears to be a loophole in this part of the Supreme Court’s decision, i.e. that the use of Aadhar has to be backed by a law. Under clause 3 of Article 13 of the Constitution, law is defined as including; “any Ordinance, order, bye law, rule, regulation, notification, custom or usages having in the territory of India the force of law”. Therefore, a departmental notification requiring the use of Aadhaar for any purpose would still not fall foul of the Supreme Court’s decision on section 57. The only saving grace is that the law is subject to judicial review, hence any formal iteration making Aadhaar mandatory can be challenged before the Courts. However, this depends on whether the general public is vigilant enough.

The actions of the UIDAI, as well as statements from the government regarding section 57, appear to be geared towards ensuring the continued existence of fintech companies. While the ongoing Assembly elections along with the rhetoric around the Ram Mandir and the Citizenship Bill grab people’s attention, the Monsoon Session of Parliament could see the passage of a Bill to enable Aadhaar’s use for digital payments. It is not necessary to state who the true beneficiaries of such a law would be.

departmental as well as criminal proceedings against government servants to be conducted simultaneously

The departmental and criminal proceedings against the erring Government servants will now be conducted simultaneously and necessary instructions in this regard have been passed to all the Administrative Secretaries for prompt and strict compliance.
The Supreme Court in its judgement in case titled “State of Rajasthan Versus BK Meena and Others” dated September 27, 1996 had made it clear that the approach and the objective in the criminal proceedings and the disciplinary proceedings are altogether distinct and different.
Moreover, the Apex Court in its judgment delivered in a case titled “State Bank of India and Others Versus Neelam Nag” on September 16, 2016 had mentioned that there is no legal bar to the holding of the disciplinary proceedings and the criminal trial simultaneously.
However, despite these explicit judgments of the highest court of the country, there was lack of clarity in Jammu and Kashmir regarding initiation of departmental proceedings in cases where criminal proceedings have either been sanctioned or the proceedings in the criminal case have been stayed by a higher forum. Due to this, the authorities were preferring to await conclusion of the criminal proceedings before initiating departmental proceedings.
Recently, on the directions of the Chief Secretary BVR Subrahmanyam, the plethora of judgments of the Apex Court were minutely examined by a group of senior officers in consultation with the Department of Law, Justice and Parliamentary Affairs and finally the issue regarding conduct of departmental enquiry in general cases and in particular where prosecution stands sanctioned has been settled.
“The matter has been commented upon by the Apex Court in plethora of judicial pronouncements and the Apex Court has held that there is no legal bar in simultaneous conduct of departmental proceedings along with the criminal proceedings”, the Commissioner Secretary to Government, General Administration Department Hilal Ahmad said in a circular issued today.
“It is a settled legal position that the criminal proceedings and the departmental proceedings can be held simultaneously except in the cases where the court has specifically restrained the Government from undertaking departmental proceedings”, the circular said.
Accordingly, the General Administration Department has directed all the departments to initiate departmental proceedings in all such criminal cases where the criminal proceedings have been initiated and the alleged criminal act amounts to misconduct and attracts the provisions of Jammu and Kashmir Civil Services (Classification, Control and Appeal) Rules, 1956.
“The departments should accordingly take recourse and strictly adhere to the Rules of 1956 wherever departmental enquiry in such cases has to be initiated”, the circular said.
It is pertinent to mention here that in its judgment in the case titled “State of Rajasthan Versus BK Meena and Others”, the Apex Court had held: “In the disciplinary proceedings, the question is whether the respondent is guilty of such conduct as would merit his removal from service or a lesser punishment whereas in the criminal proceedings the question is whether offences registered against him under the Prevention of Corruption Act are established and if established what sentence should be imposed upon him”.
“The standard of proof, the mode of enquiry and the rules governing the enquiry and trial in both the cases are entirely distinct and different. Staying of disciplinary proceedings pending criminal proceedings should not be matter of course but a considered decision. Even if stayed at one stage, the decision may require reconsideration with the criminal case gets unduly delayed”, the judgment further reads.
Similarly, the Supreme Court judgment in the case titled “State Bank of India and Others Versus Neelam Nag” read: “Suffice it to say that while there is no legal bar to the holding of the disciplinary proceedings and the criminal trial simultaneously, stay of the disciplinary proceedings may be advisable course in cases where the criminal charge against the employee is grave and continuance of the disciplinary proceedings is likely to prejudice their defence before the criminal court”.
“Gravity of the charge is, however, not by itself enough to determine the question unless the charge involves complicated question of the law. The court examining the question must also keep in mind that criminal trials get prolonged indefinitely especially where the number of accused arraigned for trial is large. The court, therefore, has to draw a balance between the need for a fair trial to the accused on the one hand and the competing demand for an expeditious conclusion of the ongoing disciplinary proceedings on the other. Moreover, an early conclusion of the disciplinary proceeding has itself been seen to be in the interest of the employees”.