Friday 18 May 2018


Implementation of System for Monitoring of Foreign Investment in Listed Company

The Foreign Investment in India is regulated in terms of clause (b) of sub-section 3 of section 6 and section 47 of the Foreign Exchange Management Act, 1999 (FEMA) read with Foreign Exchange Management (Transfer or Issue of a Security by a Person resident Outside India) Regulations, 2017 issued vide Notification No. FEMA 20(R)/2017-RB dated November 7, 2017.

FEMA prescribes the various foreign investment limits in listed Indian companies for Foreign Portfolio Investors, Non-Resident Indians and sectoral gaps & compliance thereof.

Brief Introduction of measures by SEBI and RBI

As a purposive drive of Indian Government for keeping the track over the foreign Investment in India and related compliances thereto, the Securities Exchange Board of India (SEBI) in consultation with Reserve Bank of India (RBI) has introduced a new system for Monitoring of Foreign Investment limits in listed companies and prescribed guidelines w.r.t. the necessary infrastructure, data to be provided by listed Indian companies and other related matters.
In nutshell, the SEBI on 5th April, 2018 had issued circular directing market regulators to put in place a new system for depositories to monitor the foreign investment limits in listed Indian companies and such Indian company to submit the required information for FDI received till date within the specified date.
The circular provided that the last date for submission of data as 30th April, 2018, however, the stated day has been extended as for submission of information by companies by 15th May, 2018 and operationalizing the monitoring mechanism by depositories to 18th May, 2018.

Why monitoring system to be implemented

  • The objective is to enable listed Indian companies to ensure compliance with the various foreign investment limits;
  • To maintain the data of investment received within the allowed limit of FDI by the foreign investors in India;

 Compliance under the Circulars

For depositories

  • The National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL) shall put in place the necessary infrastructure and IT systems for operationalizing the monitoring mechanism described in Annexure A of SEBI’s circular IMD/FPIC/CIR/P/2018/61 dated 5th April, 2018.
  • Depositories shall provide an interface where the company shall submit the requisite information including company identification number, name, date of incorporation, PAN number, Permissible Aggregate Limit for investment by FPIs and Permissible Aggregate Limit for investment by NRIs

 For Stock Exchanges

The Stock Exchanges (BSE, NSE and MSEI) shall also put in place the necessary infrastructure and IT systems for disseminating information on the available investment headroom in respect of listed Indian companies.

For Listed Companies

  • In accordance with Para 6 of Annexure A of the circular dated April 05, 2018 which provides the Architecture of the System for Monitoring Foreign Investment Limits in listed Indian companies, requires all listed Indian companies to provide the specified data/ information on foreign investment to the depositories latest by 30th May, 2018 which has been extended to 15th May, 2018.  
  • The company shall appoint any one depository to act as a Designated Depository for the purpose of monitoring the foreign investment limit.
  • In an event of any change in any of the details pertaining to the company, such as increase or decrease of the aggregate FPI or NRI limits or the sectoral cap or a change of the sector of the company, the firm needs to inform such changes along with the supporting documentation to its designated depository.
Activation of Red Flag Alert

The circular provides that the  system  shall  calculate  the  percentage  of  NRI  &  FPI  holdings and other investment in the Company
If the total foreign investment in a company is within 3% or less than 3% of the sectoral cap, then a red flag shall be activated for that company, where the same shall be displayed by depositories and stock exchanges. Such data shall be updated on day to day basis.


Breach of foreign investment limits

In case of breach of aggregate NRI/FPI investment limits or the sectoral cap for a given company, the depositories shall inform the exchanges about the breach, the exchange issue circular/notification on its website and halt further purchases by FPIs, if the aggregate FPI limit is breached, NRIs, if the aggregate NRI limit is breached or All foreign investors, if the sectoral cap is breached. The circular further provides for manner of disinvestment so as to bring the excess FDI within the limit.

Therefore, in concluding remark it is to be stated that the Circular codifies the process of monitoring foreign investment limits. In case any FPIs/ NRIs who has breached the FDI limit, shall be required to disinvest in the manner as stated in the circular, where such breach will be informed through the custodians/ AD banks respectively along with the method for disinvestment which can opt in accordance with provisions of law.

Relevant links:

Circular by NSDL no. Ref No: NSE/CML/2018/11 dated 25th April, 2018- https://www.nseindia.com/content/equities/NSE_Circular_25042018.pdf

RBI Notification no.: - RBI/2017-18/172 A.P. (DIR Series) Circular No. 27 [(1)/20(R)] dated 3rd May, 2018- https://rbi.org.in/Scripts/NotificationUser.aspx?Id=11270&Mode=0


 Compiled by Ms. Deepika Sharma
(Senior Associate at Factum Legal Advocates & Solicitors)




Friday 11 May 2018


Import of Goods and Services under FEMA

Foreign Exchange Management Act, 1999 (FEMA) came into force with effect from June 1, 2000, Preamble of the FEMA reads as under:
An Act to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India

FEMA provisions relating to import of goods and services are being reproduced below:
Section 2 (p) of FEMA defines import as under:

“import”, with its grammatical variations and cognate expressions, means bringing into India any goods or services;

Section 2(j) of FEMA defines current account transaction as under:
 “current account transaction” means a transaction other than a capital account transaction and without prejudice to the generality of the foregoing such transaction includes,—
(i) payments due in connection with foreign trade, other current business, services, and short-term banking and credit facilities in the ordinary course of business,
(ii) payments due as interest on loans and as net income from investments,
(iii) remittances for living expenses of parents, spouse and children residing abroad, and
(iv) expenses in connection with foreign travel, education and medical care of parents, spouse and children;

Section 2e) of FEMA defines capital account transaction as under:

“capital account transaction” means a transaction which alters the assets or liabilities, including contingent liabilities, outside India of persons resident in India or assets or liabilities in India of persons resident outside India, and includes transactions referred to in sub-section (3) of section 6;
From the above definitions of the FEMA, it is understood that the foreign trade including import of goods and services is a current account transaction.

To make payment against the import of goods and services, the importer is permitted in terms of provisions of Section 5 of FEMA to approach the AD bank for purchase of foreign exchange and make remittance for import to the non-resident supplier.
Section 5 of FEMA is as under:

5.  Current account transactions
Any person may sell or draw foreign exchange to or from an authorised person if such sale or drawal is a current account transaction:
Provided that the Central Government may, in public interest and in consultation with the Reserve Bank, impose such reasonable restrictions for current account transactions as may be prescribed.

In terms of Section 46 of FEMA, Central Government has the power to make rules:
46.  Power to make rules
 The Central Government may, by notification, make rules to carry out the provisions of this Act.   Without prejudice to the generality of the foregoing power, such rules may provide for,—

 (a)the imposition of reasonable restrictions on current account transactions under section 5;
(b) the manner in which the contravention may be compounded under sub-section (1) of section 15;
(c) the manner of holding an inquiry by the Adjudicating Authorities under sub-section (1) of section 16;
(d) the form of appeal and fee for filing such appeal under sections 17 and 19;
(e) the salary and allowances payable to and the other terms and conditions of service of the Chairperson and other Members of the Appellate Tribunal and the Special Director (Appeals) under section 23;
(f) the salaries and allowances and other conditions of service of the officers and employees of the Appellate Tribunal and the office of the Special Director (Appeals) under sub-section (3) of section 27;
(g) the additional matters in respect of which the Appellate Tribunal and the Special Director (Appeals) may exercise the powers of a civil court under clause (i) of sub-section (2) of section 28;
(h) the authority or person and the manner in which any document may be authenticated under clause (ii) of section 39; and
(i) any other matter which is required to be, or may be, prescribed.

In exercise of the powers conferred by Section 5 and sub-section (1) and clause (a) of sub-section (2) of Section 46 of the Foreign Exchange Management Act, 1999, and in consultation with the Reserve Bank, the Central Government has made Foreign Exchange Management (Current Account Transactions) Rules, 2000;

Import of Goods and Services into India is being allowed in terms of Section 5 of the Foreign Exchange Management Act 1999, read with Foreign Exchange Management (Current Account Transaction) Rules, 2000. 

Reserve Bank of India also issues directions to Authorised Persons under Section 11 of the FEMA. These directions lay down the modalities as to how the foreign exchange business has to be conducted by the Authorised Persons with their customers/constituents.

The directions issued on import of goods and services into India have been compiled in this Master Direction on Import of Goods and Services dated January 1, 2016 (Updated as on February 02, 2018).

Import trade is regulated by the Directorate General of Foreign Trade (DGFT) AD Category – I banks are required to ensure that the imports into India are in conformity with the Foreign Trade Policy in force and Foreign Exchange Management (Current Account Transactions) Rules, 2000 and the Directions issued by Reserve Bank under Foreign Exchange Management Act, 1999 from time to time.

AD Category I Banks can allow remittance for making payments for imports into India, after ensuring that all the requisite details are made available by the importer and the remittance is for bona fide trade transactions.

In terms of Section 10(6) of the Foreign Exchange Management Act, 1999 (FEMA), any person acquiring foreign exchange is permitted to use it either for the purpose mentioned in the declaration made by him to an Authorised Dealer Category – I bank under Section 10(5) of the Act or for any other purpose for which acquisition of foreign exchange is permissible under the said Act or Rules or Regulations framed there under.

Where foreign exchange acquired has been utilised for import of goods into India, the AD Category – I bank has to ensure that the importer furnishes evidence of import.

In terms of the extant regulations, remittances against imports should be completed not later than six months from the date of shipment, except in cases where amounts are withheld towards guarantee of performance, etc.

AD Category – I banks can consider granting extension of time for settlement of import dues up to a period of six months at a time (maximum up to the period of three years) irrespective of the invoice value for delays on account of disputes about quantity or quality or non-fulfilment of terms of contract; financial difficulties and cases where importer has filed suit against the seller. In cases where sector specific guidelines have been issued by Reserve Bank of India for extension of time (i.e. rough, cut and polished diamonds), the same will be applicable.

While granting extension of time, AD Category –I banks are required to ensure that:
  • The import transactions covered by the invoices are not under investigation by Directorate of Enforcement / Central Bureau of Investigation or other investigating agencies;
  • While considering extension beyond one year from the date of remittance , the total outstanding of the importer does not exceed USD one million or 10 per cent of the average import remittances during the preceding two financial years, whichever is lower; and
  • Where extension of time has been granted by the AD Category – I banks, the date up to which extension has been granted may be indicated in the ‘Remarks’ column in IDPMS.
  • Cases not covered by the above instructions / beyond the above limits, may be referred by the AD bank to the concerned Regional Office of Reserve Bank of India.
RBI has also issued Operational Guidelines to the AD banks for matters relating to advance remittances for imports, Interest on Import Bills, Remittances against Replacement Imports, Guarantee for Replacement Import, Import of Equipment by Business Process Outsourcing (BPO) Companies for their overseas sites, Receipt of Import Bills/Documents by the Importer Directly from Overseas Suppliers, Evidence of Import, Import Data Processing and Monitoring System(IDPMS), Follow up for Import Evidence, Import of Gold, Import of Other Precious Metals, Import Factoring, Merchanting Trade, Import Payments through Online Payment Gateway Service Providers and Settlement of Import transactions in currencies not having a direct exchange rate.

Wherever the AD bank feels necessary; it may make a reference to the Reserve Bank seeking instructions in the case.



Compiled by Mr. G. D. Chugh
(Associate Partner in Factum Legal Advocates & Solicitors)


Monday 30 April 2018

Current and Capital Account Transactions under FEMA

The Foreign Exchange Management Act, 1999 (FEMA) came into force with effect from June 1, 2000, and as per the Preamble of FEMA, the Act was made  with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India.
Under the FEMA, foreign exchange transactions are divided into two broad categories:
  • Current Account Transactions, and
  • Capital Account Transactions. 
As per FEMA, transactions that alter the assets or liabilities, including contingent liabilities outside India, of persons resident in India or assets or liabilities in India of persons resident outside India are classified as capital account transactions, whereas, all other transactions are current account transactions.

As part of the obligations assumed under Article VIII of the charter of its membership of International Monetary Fund, India accepted the move towards full current account convertibility in August 1994. Most of the quantitative and sectoral restrictions were, therefore, removed for the current account transactions. As such most of current account transactions do not require prior approval of the Reserve Bank.

The Government of India has notified the Foreign Exchange Management (Current Account Transactions) Rules, 2000, governing the current account transaction.
These Rules list the current account remittances under three categories.
  • First, the transactions, the remittances for which are prohibited;
  • Second, the transactions, remittances for which is made after obtaining the approval of Government of India; and
  • Third, the transactions, remittances for which may be made by the Authorised Dealer, up to the limits given in the Rules. Prior approval of RBI is required, where the amount to be remitted exceeds the stipulated limit. 
Under these Current Account Transactions Rules, powers have been delegated to the Authorised Persons (APs) to allow permitted remittances which are of current account in nature, in a hassle-free manner.
While FEMA formalised the current account convertibility with the Common Law principle “all that is not forbidden is permitted”, it did the reverse with respect to capital account transactions: “all that is not permitted is forbidden”.

Presently India is not fully convertible on the capital account. Reserve Bank has been progressively relaxing and simplifying the procedures for capital account transactions. Accordingly, certain capital account transactions involving foreign direct investment, external commercial borrowings and the overseas direct investment have been permitted to be undertaken under automatic route/general permission. In respect of transactions which are not covered under general permission, the entities are required to approach the Reserve Bank through their authorized dealers for necessary approvals.

The Reserve Bank, in consultation with the Government of India, has notified comprehensive, simple and transparent regulations under the FEMA, 1999 for capital account transactions. The regulations distinctly indicate the types of permissible capital account transactions and simplified procedures for undertaking transactions. The regulations grant substantial powers to the Authorised Dealer Category – I banks to undertake capital account transactions on behalf of their clients.

Compiled by Mr. G. D. Chugh
(Associate Partner in Factum Legal Advocates & Solicitors)





Friday 30 March 2018

Entry of Foreign Lawyers and Law Firms in India

Introduction

The Supreme Court of India clarified the debatable issue as to whether International Lawyers/ International Firms can practice law and whether they can advice the clients in India.  The Supreme Court vide its judgment dated 13th March, 2018 titled as BAR COUNCIL OF INDIA v. A.K. BALAJI AND ORS (CIVIL APPEAL NOS.7875-7879 OF 2015) held that foreign firms, companies and law firms are allowed to practice foreign laws on casual visit and can advice Indian clients on ‘fly in and fly out’ mode on foreign law or on their own system of law and on diverse international legal issues.

The said matter had already been addressed before the Hon’ble Madras High Court and the Hon’ble  Bombay High Court .The Bar Council of India (“BCI”) had filed an appeal against the Madras High Court decision, while Global Indian lawyers challenged the Bombay High Court decision before the Hon’ble Supreme Court of India.

Issue Involved:-

  • Whether International Lawyers/International Firm can practice Law in India.
  • Whether International Lawyers/International Firms can open an office in India.
  • Whether Foreign Advocates shall be allowed to fly-in-fly-out in India to provide legal advice to its Clients.
  • Clarified that meaning of “practice the profession of law”.

DECISION OF THE MADRAS HIGH COURT


A writ petition was filed before the Hon’ble Madras High Court to seek direction to Union of India, RBI and BCI to take action against 32 foreign law firms which had been allegedly practicing in India.

The main issue which had been addressed in the said matter was the principle of reciprocity and to whether Foreign Advocates shall be allowed to fly-in-fly-out in India to provide legal advice to its Clients.  

Hon’ble Madras Court held that:

  • The Court had restrained foreign law firms and lawyers from practicing as an Advocate in India. However, it stated that foreign lawyers could visit India for a temporary period on a ‘fly in and fly out’ basis to render legal advice regarding foreign law or their own system of law and on diverse international legal issues as there is no specific provision in the Advocates Act to prohibit a foreign lawyer from visiting India for a temporary period to advice his or her clients on foreign law.
  •  Foreign Lawyers were allowed to conduct arbitration proceedings in respect of disputes arising out of a contract relating to international commercial arbitration.
  • Business Processing Outsourcing (BPO) providing wide range of customized and integrated services and functions to its customers were not included within the purview of the Act or the Rules. However, in the event of any complaint made against these B.P.O. Companies violating the provisions of the Act, the Bar Council could take appropriate action against such erring companies.

Supreme Court's verdict

The Supreme Court of India heard over 30 law firms hailing from the United Kingdom’s, United States of America, France and Australia on the aforesaid issues. The Supreme court of India modified Madras High Court order wherein, the Hon’ble High Court though had restrained foreign law firms and lawyers from practicing as an Advocate in India but however had allowed foreign lawyers to visit India for a temporary period to render legal advice. The court had adopted the concept of flying in and flying out (FIFO).

Vide this order The Supreme Court of India held that:-

Foreign Lawyers were allowed to fly-in-fly-out on casual basis

The concept of Flying in Flying Out had been clarified that foreign lawyers have been allowed fly in and fly out of India on casual basis for rendering legal services on offshore laws and diverse international legal issues. It shall include drafting instruments and being part of discussions on the issue. Hon’ble Supreme Court of India observed that ‘fly in and fly out’ may amount to practice of law if, done on a regular basis, and concluded that whether a particular visit qualifies to be a frequent visit, or a casual visit has to be determined on a case to case basis, and Bar Council or Union of India have been directed to frame appropriate rules in this regard.

Allowed to practice Law with prior permission

 Had clarified in respect of the law on the interpretation of words ‘practice the profession of law’ whereby allowing foreign lawyers to practice foreign law in India only with prior permission of the court or tribunal, authority or person before whom proceedings are pending. It had held that “practice the profession of law’ includes both litigation as well as non-litigation practice such as giving of opinion, drafting of instruments, participation in conferences involving legal discussion as well.  

Allowed to conduct Arbitration Proceedings

Foreign lawyers have not been completely barred from coming to India for conducting arbitration proceedings in disputes involving international commercial arbitration, but they would be subject to the code of conduct applicable to the legal profession in India. Rules of institutional arbitration will apply to them.

Non- Applicability of The Advocates Act, 1961 on Business Processing Outsourcing (BPO)

   
     The Supreme Court of India also modified the Madras High Court ruling stating that the BPOs, providing customised and integrated services, do not come within the purview of the laws regulating the legal profession provided their activities do not amount to practice of law. The Hon’ble Madras High Court had ruled that services such as word processing, secretarial support, transcription services, proof reading services, travel desk support services, etc., do not come amount to legal practice and did not come within the purview of the Advocates Act, 1961.

Conclusion

The Supreme Court of India vide this judgment had allowed foreign lawyers
  • To fly in and fly out of India and give advice on international legal issues which would be casual in nature.
  •  To conduct arbitration proceedings in respect of matters regarding international commercial arbitration, but they shall be required to adhere to the code of conduct applicable to the legal profession in India.

The Ruling of Supreme Court of India had a shown path towards opening up the Indian legal market to the foreign contemporaries for which Bar Council of India has been directed to frame Rules governing the practice of law in India by foreign lawyers and law firms.

The presence of foreign law firms will increase competition in the legal sector by making  young lawyers of India being exposed to diverse international legal laws and will provide more employment opportunities for young lawyers. While Supreme Court has not expressly restricted foreign lawyers but has however acknowledged Bar Council’s right to regulate legal profession.

Presently the Government of India is trying to make India a Global Arbitration Hub in order to adopt more liberalization, the presence of global law firms will, in fact, reassure foreign investors to India.

Monday 12 February 2018

Regulatory and Judicial Review of Entry of Foreign lawyers and Law firms in India


Introduction
There has been an ongoing debate in India regarding whether International Lawyers/ International Firms can practice law and whether they can advice the clients in India.  Under Advocates Act, 1961, the Bar Council of India recognizes law degree on reciprocal basis and legal academics can teach and engage in legal research without any bar. However, foreign national are prohibited from practicing in India as per the said Act.  In accordance with section 24 of the said act certain conditions have been mentioned for persons who may be admitted on the State roll of advocates.
QUALIFICATIONS FOR PRACTICE OF LAW IN INDIA
Section 29 of the Act clearly specifies that only 'advocates' as defined under the Act are entitled to practice the profession of law in India. An advocate is defined as a person who enters into the rolls of a State Bar Council under the provisions of the Act. Persons may enroll with a State Bar Council if:
(a) He/she is a citizen of India
(b) He/she has completed 21 years of age.
(c) He/she has obtained a degree in law from any University in India recognized for the purposes of the Act by the BCI or has obtained such other foreign qualification in law as is recognized by the BCI for the purpose of admission as an advocate.


However, Section 24(1)(c)(iv) lays down an exception that subject to other provisions of the Act, a national of any other country may be admitted as an advocate on the rolls of the State Bar Council, if Indian citizens who are duly qualified are permitted to practice law in that other country. Further, provisions pertaining to reciprocity as provided under Section 47 of the Act stipulate that where any country prevents Indian citizens from practicing the profession of law or subjects them to unfair discrimination in that country, then no subject of that country shall be entitled to practice law in India.
CASE LAWS
There have been various cases which have been filed in the court of law in India dealing with the same subject matter.
1.       Lawyers' Collective v. Bar Council of India & Ors
In 2009, the Bombay High Court (State of Maharashtra, India) pronounced a judgment on the matter,where RBI had granted permission to White & Case, a foreign law firmu/s 29 of Foreign Exchange Regulation Act (FERA) to open a liaison office in India.
Facts of the case:-
Foreign Law Firms (namely White & Case, Chadbourne & Parke and Ashurt Morris Crisp) had sought permission from RBI under S. 29 of Foreign Exchanges Regulation Act, 1971 (“FERA”), since repealed, to set up a liaison office in India to conduct the activities of, amongst other, “coordination, communication between its head office, clients, various governments; establish business contacts, explore foreign investment opportunities in India and other administrative functions”. The RBI granted permission under FERA, with certain restrictions, such as, the liaison office shall not enter into contracts on its own name; its expenses shall be met by its head office.
Subsequently, A Public interest Litigation (PIL) was filed before Bombay High Courtcontending that such permission was in contravention to section 29 of the Advocates Act.  
Issues Raised:-
(a) Whether RBI had the authority to grant permission to foreign law firms.
(b) Whether such permission will be in violation of section 29 of the AdvocatesAct, 1961 wherein, it has been clearly specified that Advocates to be the only recognized class of persons entitled to practice law.
(c) Whether the above-mentioned Act will apply on persons practicing in non- litigious matters.
Held:-
Hon’ble Bombay High Court had stated that the expression ‘to practise the profession of law’ as specified under Section 29 of Advocates Act, 1961 is wide enough to cover the persons practising in litigious matters as well as non- litigious matters and, therefore, to practise in non-litigious matters in India, the respondents (foreign law firms) were bound to follow the provisions contained in the 1961 Act.
In the case, the Hon’ble High Court was of the view that as the foreign law firms were not enrolled under the Advocate Act, 1961 they could not open liaison offices in India.  It was further held that the RBI was not justified in granting permission to the foreign law firms to open liaison offices in India u/s 29 of FERA . It had been clearly stated that u/s 29 of FERA, RBI has power to grant permission for carrying on “activities of a trading, commercial or industrial nature”. There is a fundamental distinction between professional activity and the activity of a commercial character. As the liaison activities of the foreign law firms related to the profession of law, no permission could be granted to the foreign law firms under section 29 of FERA.
The Bombay High Court had held that such permission could not have been granted as it was contrary to the Advocates Act and the BCI Rule.
2.       A.K Balaji v  Bar Council of India and Ors
Pursuant to this case some other issues were raised before the Madras High Court (State of Tamilnadu, India) in the year 2012.
Facts of the Case:-
A PIL had been filed to seek direction to Union of India, RBI and BCI to take action against 32 foreign law firms which had been allegedly practicing in India.
The main issue which had been addressed in the said matterwas the principle of reciprocity and to whether Foreign Advocates shall be allowed to fly-in-fly-out in India to provide legal advice to its Clients.
Held:-
The Court had restrained foreign law firms and lawyers from practicing as an Advocate in India. However, it stated that foreign lawyers could visit India for a temporary period to render legal advice.
The court had adopted the concept of flying in and flying out (FIFO) wherein, the foreign legal experts shall visit India, to offer advice to their clients on their laws as there is no specific provision in the Advocates Act to prohibit a foreign lawyer from visiting India for a temporary period to advice his or her clients on foreign law.

Appeal to Supreme Court

Bar Council of India and Ors v. A.K Balaji (SLP(C) -17150-17154/2012)
Bar Council of India in this case has appealed against the said judgment of Madras High Court and prayed that foreign lawyers and law firms shall not be allowed to render legal advice in seminars or conferences or even participate in arbitration proceedings.

Global Indian Lawyers (GIL) v. Bar Council of India( SLP (C)-11263/2015)
Another appeal had been filed before the Supreme Court by the Global Indian Lawyers (GIL) group of interveners who have challenged this view of Bombay High Court.
On September 14, 2015 the petitioner before the Bombay High Court, the NGO Lawyers Collective, argued before the Supreme Court that the petition filed by Global Indian Lawyers (GIL) should be dismissed as the same is not maintainable. They contended that they should not be allowed to challenge the Bombay High Court verdict after a gap of six years to which they were not even a party therefore, the bench should decide the maintainability of its appeal, at the threshold stage.
Supreme Court on 14 September, 2015 decided to grant leave in two appeals against the Madras High Court judgment and the Bombay High Court judgment against foreign law firms.
Current Judicial Scenario
An application had been in July 2017 by the Ministry of Law and Justice, India for urgent hearing by Hon’ble Supreme Court on the issue of entry of foreign lawyers and law firms in India. The aforesaid matter had been listed for hearing the contentious issue of entry foreign law firms and lawyers in India in the month of January, 2018
On 1stFebruary, 2018, Supreme Court heard the parties and reserved the its Judgment. In the case now taken up by the Supreme Court, the Petitioners have argued on the following points:
(a) That the Advocate Act, 1961 applies to individual lawyers and not law firms
(b) That the Advocate Act, 1961 does not prevent an Indian lawyer from becoming dual qualified.
(c) That the expression practices the profession of law under the Advocate Act, 1961 implies only Indian Law.

 In view of the contentions forwarded by the petitioner, the two-Judge Bench of the Supreme Court raised an intriguing concern while remarking- “If we bar the foreign law firms and lawyers would that not stop India from becoming the hub of activities? Even the Madras High Court has taken exception to the Bombay High Court judgment in respect of international commercial arbitration services on a fly-in and fly-out basis?”
Indian Government View
With a view to pushing the liberalization of the Indian legal market, the Union of India had only moved an application in the Supreme Court in the matter BCI vs. AK Bajaj & Ors for an early hearing of the matter. 

The application states that the Bar Council of India (BCI) has already drafted the Rules for the entry of foreign lawyers, but is waiting for the outcome of the case. It had further specified that the matter being utmost importance in the present time, it is necessary to be decided at the earliest possible.
The government has also recommended a phased entry for foreign lawyers spread over a period of five to seven years. This process will be enabled by:
(a) Domestic reforms. These include the removal of restrictions on marketing and advertising of legal services, entering into fee-sharing agreements and using corporate entities like LLPs to practice law which shall enable competition amongst Indian and Foreign Lawyers.
(b) Opening international arbitration and mediation services to foreign lawyers.  Recognition to the right of foreign lawyers to temporarily enter India on a “fly-in and fly-out” basis to conduct arbitrations and advise their clients on foreign and international law. However, there exists a need to amend the said Act to address some of the loopholes in the Act (for example, the issues of “reciprocity” and the regulation of the “practice of foreign law).
(c) Allowing foreign lawyers to provide non-litigious and advisory services on issues of foreign and international law.Recent reports have suggested that India is likely to follow Singapore’s model of liberalisation by giving access to a limited number of foreign law firms in select areas of law through licenses and joint ventures (with local firms).

Although the nuances of the proposal are still being worked out, BCI have expressly stated that they will not support foreign direct investment in the legal sector or allow multi disciplinary practices to provide legal services in India.
In order to embark liberalization in the legal market,the Governmenthas revoked a ban on the practice of law from special economic zones (SEZs), by issuing a notification in the Gazette of India amending the Special Economic Rules governing Special Economic Zones on 3 January 2017.
Vide the amendmentthe Special Economic Zone Rules could make Legal and accountancy services from foreign entities possible in the Special Economic Zones.Under Rule 76 of the SEZ Rules, “services” has been defined which includes various services including Professional Services. Although Legal services and accounting is a Professional Service, the earlier Rules had explicitly exempted it from the ambit of ‘Services’. That means, according to the earlier Rules, legal and accountancy services are excluded from ‘services’ which can be outsourced from overseas entities in the Special Economic Zones.  However, vide this amendment, the said amendment has been undone.
However, Bar Council of India (BCI) have been in opposition to their entry as if the same has been allowed it would be a risky proposition for Indian legal market since the SEZ rule amendment does not explicitly mention foreign law firms at all.
BCI’s View
The Bar Council of India (BCI) have already drafted rules that may allow foreign lawyers to practice in India, if ratified. The rules are yet to be discussed before the law ministry. Following are the key highlights of the rules:-
(a) Foreign lawyers and law firms shall be allowed to set up offices in India after registering with the BCI and paying the required registration fees.
(b) Foreign lawyers would be allowed to do all non-Indian legal transactional work and hire Indian lawyers or go into partnership with Indian lawyers — activities that are all currently forbidden under the Advocates Act 1961 that only allows persons who are Indian nationals to practice law in India.
CONCLUSION

Bar Council of India: BCI have agreed ‘in- principle’ with the government’s proposal to gradually open Indian Legal Market to Foreign Lawyers but however, the same should be done on reciprocal basis.
Government of India; The governmenthas amended SEZ rules related to restriction on hiring of foreign lawyers and accountants for the smooth functioning of International Financial Services Centres and further is willing to amend the BCI Rules in order to clear the stand of Foreign Laws Firms. The Government of India every now and then has been taking efforts to liberalise the legal market, alongside the law ministry.
Supreme Court of India: Further, the hearing in the aforesaid matters has ended on 2ndFebruary, 2018 with the Supreme Court reserving its verdict on the issue, which will be landmark judgment about entry of foreign lawyers/ law firms in India.