It was in December 2015 that in response to a Parliament question, the then Minister for Corporate Affairs Arun Jaitley had shared that “the modalities of setting up Multi-Disciplinary Partnership (MDPs) of their members are under discussion amongst the Institute of Chartered Accountants of India (ICAI), The Institute of Company Secretaries of India (ICSI) and The Institute of Cost Accountants of India (ICAoI).”
“The councils of the three Professional Institutes are yet to take a final decision in the matter,” he had further said adding “MDPs are, in principle, not limited to the three aforesaid Institutes.”
And it is today that the ICAI has come out with Guidelines for MDPs, ICAoI has rolled out a draft, and ICSI Guidelines are in the making. While this in itself is an indicator of time taken for these professional institutions to firm up their views on the issue, it also raises a question, what was it that stopped them from doing so?
All professionals acknowledge that the complexity of business has increased manifold and reliance on technology has resulted in a greater demand for specialists. Besides, there has been a massive increase in cross-border movement of goods and services. The complex supply chains, ownership structures and transactions have added more layers of complexity for business entities. The financial reports have also become far more complex.
Let us look at it this way: Under the General Agreement on Trade in Services (GATS), services can be traded internationally in four different ways — known as the four modes. The Mode 4 refers to the presence of persons of one WTO member in the territory of another for the purpose of providing a service. It does not concern persons seeking access to the employment market in the host member, nor does it affect measures regarding citizenship, residence or employment on a permanent basis. It covers natural persons who are either service suppliers (such as independent professionals) or who work for a service supplier and who are present in another WTO member to supply a service.
For a client, a MDP will be a one stop shop where it can get a bouquet of professional help.
Were not MDPs then order of the day? Foreign firms are already doing it in a surrogate way. So, shouldn’t the Indian professionals take advantage too, as it also helps expand business globally? And why is the legal fraternity not openly adopting it and dismissing the entire concept of MDP?
Two arguments
The arguments are twofold. According to those in the business reasons for delay could be regulatory as well as a case of protecting their turfs. Although the roles of these professionals are well defined, but each has been fighting for their space in the services which they can provide to the corporate world. The MDPs can have professionals from across services including engineers, architects and actuaries. While these professionals are trying to protect their own turfs, there are legal firms who also offer a bouquet of all services.
The CA Institutes has allowed its members to partner with any other professional service provider, but have restricted them from partnering with advocates. The reason is simple because the Bar Council of India established under the Advocates Act, 1961, does not reciprocate.
Mukesh Butani, Managing Partner at BMR Legal, points out: “MDP in general is a good concept — it helps pulling professionals bringing diverse skills. The experience with MDPs across the globe is contingent upon local regulations. In India, the statutory framework under the Advocates Act and enabling subordinate regulations by the Bar Council has strayed from MDPs. What’s most crucial in MDPs is addressing potential situations of conflict that such arrangements could create.”
According to Lalit Bhasin, Managing Partner of Bhasin & Company, and President of the Society of Indian Law Firms, “There should not be any MDP as each profession has its own sanctity from the ancient times — where there used to be an accountant in the domestic business looking after the finances, there used to be a munshi looking after legal problems. These professions have to remain different and distinct. You cannot have any merger of this…”
“What is happening in the UK and Australia and some other jurisdiction is that law firms are even getting listed at stock exchanges… so you are converting a profession into a business,” he added.
Carrying the argument further, Ved Jain, former President ICAI, said “To make an Indian firm globally competitive it is important that a professional firm is in a position to provide all professional services under one umbrella. Keeping this in mind only these three Acts — CA, CS & Cost Accountants — were amended way back in 2006 allowing MDP. There is no reason for any of these professional bodies to put any restrictions when the respective Act permits MDP.”
“The Bar Council is also resisting this MDP and has not amended its Regulations allowing Advocates joining/ forming MDP. The apparent reason for this as I understand probably is the apprehension amongst such professional body is dominance of other profession over their professional members. This apprehension, I think, is unfounded,” he argued.
“…In fact, it demonstrates the lack of confidence by such professional body in its own professional members which it has educated and trained. On the contrary, it is time proven that competition brings the best out of a person. Thus, allowing MDP will give an opportunity to its members to show their skill and expertise. Also, when two or more professionals from different fields join together, their combined strength will be much more than the strength of such professionals from same field joining together,” he added.
According to Nesar Ahmad, Past President ICSI, “In the liberalised economic environment MDPs are a necessity to tap domestic as well as international professional services market. Therefore, the government must initiate a serious dialogue amongst all stakeholders (professional bodies) including Bar Council of India to come together and allow their respective members to enter into partnership and/or limited liability partnership so as to render professional services effectively, both at domestic as well as international market under Mode 4 of WTO.”
It is the education and training by each professional body which makes its members experts and competent professionals and hence to think that members of other professions will dominate if MDPs are allowed seems more a case of insecurity.
Also MDPs are crucial for competing globally. Till all come on board MDPs from India may remain at a disadvantage vis-à-vis big firms.