Education

Commission-based lawyers' fee

S. Murlidharan | Updated on December 26, 2011 Published on October 30, 2011


The word ‘commission' invites instinctive, knee-jerk revulsion to the average Indian psyche. It is a dirty word to an average mind. It envisions images of its recipient being an accomplice to a crime. It smacks of something done on the stealth by both its recipient and its giver. It also envisions images of one earning his sinecure for favours done.

But howsoever detestable the word may be to many, smacking as it does of a pejorative, commission rules the roost in many walks of life. Working directors of profitable companies pine for a commission. Distributors and retailers earn their commission. Brokers earn commission. An architect typically takes two per cent of the project cost. And why even civil courts take a percentage of the suit amount as court fees which practically amount to commission.

The exchequer collects income-tax as a percentage of one's income. But the legal profession in India is barred from taking remuneration which is based on the results of the case taken up. It boils down to this: a civil court trying a property suit can take say one per cent of the suit amount as court fee but the lawyer arguing for the petitioner cannot take the same percentage or more or less as his fee for his labours, skills or sophistry lawyers are justly famed for.

In the US, there is no bar on lawyers' taking their remuneration in the form of fees. In the famous McDonald case, a lady got a whopping $3.5 million as compensation from the company when hot coffee scalded her thighs to bones requiring extensive medical treatment at considerable expenses besides causing tremendous mental agony. This arguably might not have been possible but for the perseverance and hard work of the lawyer representing her in addition of course to her own doggedness.

MERITS

The merits of the system cannot be lost on anyone - no financial burden on the person engaging the services of brilliant lawyers and positively speaking the lawyer smelling a major windfall would bring his entire competence to bear on the case and not work in a hand washing spirit which would be the case if he were to be compensated say per hour or per case as in India. S/he would allow the case to proceed apace smoothly without adopting delaying tactics like adjournment. There is of course a downside as well. There may not be takers for a weak case where defeat is staring at one's face. In that case, s/he would demand an hour or a day or a case fee irrespective of its outcome like a dour worker. In fact, insistence on an alternative form of remuneration other than commission would be a sure indicator to the litigant that he is pursuing a hopeless case and might in the wake of such dawning wisdom either sue for peace by asking for a compromise or beat a total retreat both of which would be conducive to reduction of litigation.

DOWNSIDE

One wonders why the law in India frowns on result-based remuneration for professionals. To be sure, a chartered accountant doing the audit of a company should not be compensated on the basis of the profit earned by the company because he would be in that case playing ball with the management in window dressing the accounts to show greater profits than warranted by the applicable GAAP even though the same is considered kosher in the context of directors' remuneration despite the same danger staring at one's face. Again when a CA is contesting a tax case or initiating one, he cannot take his remuneration based on the outcome just as a lawyer cannot. It seems there is no rationale explanation for the prohibition from taking outcome related recompense by lawyers and CAs except in the case of audit of accounts. If a lawyer is comfortable with commission rather than with a fixed recompense, so be it so long as the client too is comfortable with the percentage.

The main advantage as pointed out earlier is the calibre of professional services offered would be of the highest order with the lawyer stretching himself in terms of time, efforts and resources. At the macro level, the commission-based regime could well have the effect of reducing the bulge of court dockets but its downside could be a fresh impetus to judicial corruption which is no longer a taboo in media discourse and discussions. A clever judge might cozy upto an advocate in a spirit of accommodation secure in the knowledge that at the end of the day both are going to win. In other words, there is a distinct possibility of the spoils being shared with a judge with a supple conscience. This is too real a possibility to be shrugged off. Imagine a tax case: the department would go for high-pitched assessment as always and the lawyer representing the taxpayer would press for a high-pitched refund.

Whose side would a corrupt judge take? The answer is obvious.

The 1991 amendment says even if tax was collected in excess for any reason, the refund would not go to the taxpayer, because having passed the tax burden down the line, the refund does not belong to him as it would amount to his undue enrichment, but to the amorphous customers, to Consumer Welfare Fund maintained by the Ministry of Consumer Protection.

Companies have realized the futility and stupidity of fighting a case for an altruistic cause. The short point is it is the promise of monetary gains that encourages litigation both on the part of the litigant and his lawyer who eggs him on.

(The author is a Delhi-based chartered accountant)

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Published on October 30, 2011
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