The DESH Bill 2022 has the Potential to Change Our “Desh”

After India enacted the Special Economic Zones (SEZ) Act in 2005 and the rules governing SEZs came into effect in 2006, about 378 SEZs were notified. However, as of March 2022, only 268 of these were operational; the government has de-notified those SEZs that were not functional. In her last budget speech, Finance Minister Nirmala Sitharaman announced the government’s intention to revise the legislative architecture relating to SEZs. She cited lack of demand as a reason and also the fact that significant changes to taxation and incentive regimes in the past decade have made the existing notion of SEZs much less attractive. Further, a couple of years ago, the WTO ruled that the tax-related incentives given to SEZs violated global agreements on subsidies.

The Context of the DESH Bill 2022

 

The biggest reason why India’s SEZ regime needs a relook is because the business environment has changed substantially in recent years. The SEZ regime was originally intended to promote exports so that we could earn valuable foreign exchange. The existing SEZ regime has undoubtedly benefited the Indian IT industry, and this has contributed hugely to building our foreign currency reserves. However, with IT/ITES company business and delivery models changing to include greater on-site delivery capabilities, the sheen has worn off. Also, the manufacturing sector has not been able to leverage SEZs to deliver as much export-based economic benefit as was expected. Change was therefore needed, and this is why the government has been planning a thorough revamp of the existing SEZ system.

 

This is the Right Time for Change

With a number of disruptive events accelerating global shifts in supply chains, investment-intensive manufacturing capabilities in new sectors are becoming critical for India. It is also important to boost trading and other services beyond IT. It has become even more important to look at new ways of attracting capital to complement our demographic strengths. Also, rather than continue to cluster economic activity in certain urban areas, what India needs is more broad-based activity across various states. Only strategies that enable all this will accelerate job creation and hence socio-economic growth and development in India.

This is the context in which the government of India plans to introduce the Development of Enterprise and Service Hubs (DESH) Bill in the ongoing monsoon session of Parliament.

 

Broad Contours of the DESH Bill 2022

The DESH Bill seeks to encourage the creation of two types of hubs: one for services and the second for other enterprises. The former will have requirements for built-up areas and allow a broad range of services-related activities (including R&D), while the latter (which can house manufacturing and/or services), will have land-based area requirements. Both types of hubs can be created by the government (Centre/States), jointly, or by any registered goods and services provider. The idea is to encourage private sector investments to serve the domestic market and not just exports. The expectation is that greenfield or brownfield projects will encourage the creation of infrastructure in non-urban areas.

The Bill proposes to simplify ease of doing business by enabling single window clearances (both central and state). The bill will also make the hubs WTO compliant (tax incentives will be delinked from exports). However, some indirect tax benefits are expected to be provided. It is also likely that businesses operating from these hubs will be allowed to utilize idle capacity to service domestic customers (unlike SEZs that could only export).

What is known about the DESH Bill 2022 so far indicates that the central government is keen to use it as an instrument to activate three key levers of economic growth:

  • Creating infrastructure of the scale needed to become a global manufacturing and services hub – especially as western countries are looking at alternatives to China and other countries (even smaller ASEAN nations and some in Latin America and Africa) are positioning themselves as viable destinations at least in niche sectors. (Some of China’s hubs are more than 250 sq km in area, while Indian SEZs are hardly ever more than 2.5 sq km. Chinese hubs are fully integrated towns with well-developed infrastructure and linkages to ports, airports etc. This explains the huge difference in scale between Chinese hubs and those anywhere else in the world – a gap that India is keen to bridge).
  • Leveraging India’s scientific/technical talent to innovate and leapfrog competition in areas that will become key not just for self-reliance (e.g., pharma, energy, electronics etc.) but also critical to our security (e.g., drones, space technology, composite materials, semiconductor chips etc.)
  • Fostering better cooperation and greater alignment between central and state governments (and inter se) so that outcomes such as employment generation and optimal resource utilization are not sacrificed on the altar of petty political differences or short-term gains.

Let’s hope the DESH Act will achieve all that it seeks to, and not become just another legislation that did not deliver to its potential.

*”Desh” is the Hindi word for “country”. It is interesting that many acronyms coined by the government are easy to remember because they mean something related in Hindi.

Image Credits: Photo by Jesper Giortz-Behrens on Unsplash

The Bill proposes to simplify ease of business by enabling single window clearances (both central and state). The Bill will also make the hubs WTO compliant (tax incentives will be delinked from exports). However, some indirect tax benefits are expected to be provided. It is also likely that businesses operating from these hubs will be allowed to utilize idle capacity to service domestic customers (unlike SEZs that could only export).

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Consumer Protection (Direct Selling) Rules, 2021 – Tightening the Noose on Pyramid and Money Circulation Schemes

Direct selling entities, multi-level marketing and pyramid schemes have existed for decades across the globe. These entities and direct sellers lure customers into these serpentine schemes by provoking an individual’s desire to become entrepreneurs with minimum investment. In addition, COVID-19 induced lockdown proved to be a fertile ground for a significant increase in the establishment of direct selling/multi-level marketing businesses. While some operated legally, others exploited the grey areas in the regulatory framework or were outright pyramid schemes.

Whilst people were and still are jumping into the direct selling bandwagon, the existing and potential stakeholders must be aware of the caution that the Government has issued[1] and the legal landscape surrounding direct selling/multi-level marketing business. The Consumer Protection (Direct Selling) Rules, 2021 (“DS Rules”), one of the primordial tools to regulate the direct selling industry, is being examined herein.


Brief History of the Regulations on Direct Selling

With the intent to curb the menace of illegal multi-level marketing and pyramid schemes that were masquerading as legitimate businesses, back in 2016, the Department of Consumer Affairs, Ministry of Consumer Affairs, Food & Public Distribution, formulated a set of guidelines titled “Direct Selling Guidelines 2016”. These guidelines were formulated as model regulations,  issued as an advisory that put the onus the State Government and Union Territories for their effective implementation. 

Taking a cue from the Central Government’s advisory, various State Governments enacted their respective direct selling guidelines – The Tamil Nadu Direct Selling Guidelines Order 2018[2], Karnataka Direct Selling Rules, 2019[3], Maharashtra’s Guidelines for regulating the business of ‘Direct Selling’ and Multi-Level Marketing (MLM)[4] enacted in 2019, West Bengal Direct Selling Guidelines, 2018[5]. While some State Governments embraced the central government advisory and implemented guidelines on the lines of the DSG 2016, not all States followed suit, resulting in a lack of uniformity and regulation across the country.

With this brief history, let us understand the recently enacted Consumer Protection (Direct Selling) Rules, 2021 under the Consumer Protection Act, 2019, which is intended to operate as a bulwark against pyramid schemes established in India or offer goods and services to customers in India.


Consumer Protection (Direct Selling) Rules, 2021

 

1. Overview 

The Consumer Protection (Direct Selling) Rules, 2021 came into force on December 28, 2021, to prohibit participation and/or promotion of pyramid schemes and money circulation schemes[6]. While the new DS Rules do not define direct selling as compared to the DS Rules, 2016; the term direct selling entity has been defined as “principal entity which sells or offers to sell goods or services through direct sellers, but does not include an entity which is engaged in a Pyramid Scheme or money circulation scheme”[7]. The exclusive definition is made to limit the application of the Act only to pyramid or money circulation schemes.

A pyramid scheme has been defined as “a multi-layered network of subscribers to a scheme formed by subscribers enrolling one or more subscribers in order to receive any benefit, directly or indirectly, as a result of enrolment or action or performance of additional subscribers to the scheme, in which the subscribers enrolling further subscribers occupy a higher position and the enrolled subscribers a lower position, resulting in a multi-layered network of subscribers with successive enrolments”[8]. And, money circulation scheme is defined as “means the schemes defined in clause (c) of section 2 of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 (43 of 1978)”[9].

The obligations under the DS Rules can be broadly categorized into:

  • obligations of direct selling entities;
  • obligations of direct sellers; and
  • duties of direct selling entity and direct seller.

Before analyzing various obligations under the DS Rules, it is pertinent to note that the DS Rules are applicable to any entity offering goods and services to consumers in India, whether or not such entity is established in India[10] and such an entity is mandated to maintain records such as charter documents, tax registration documents, income tax returns, financials, etc.[11] Further, direct selling entities must comply with the provisions of the DS Rules within ninety (90) days from the date of its publication.[12] It is pertinent to note that, the Consumer protection (e-Commerce) Rules, 2020 apply to both the direct sellers and the direct selling entities[13].


2. Obligations under the DS Rules:

Among other things, every direct selling entity shall[14]:

  • have a physical office in India.
  • Keep their website updated including details of its nodal office, grievance redressal officer and mechanism, management, products information including price and such website shall also explicitly provide name, address, contact details, complaint tracking mechanism, return, refund and warranty, payment-related information.
  • obtain all relevant registrations, including PAN and other tax registrations.
  • obtain a certificate from a company secretary for all information provided on its website.
  • Make just, fair and equitable written contracts with its direct sellers for dealing with the entity’s products and services.
  • ensure its direct sellers have verified identities and physical addresses.
  • comply with the Legal Metrology (Packaged Commodities) Rules, 2011.
  • store personal data within India.

Among other things, every direct seller shall[15]:

  • Provide full information about the direct selling entity, nature of goods and services, terms of purchase, return and refund, warranty, etc.
  • Provide an order form with various details about the direct seller and the direct selling entity.
  • Protect the sensitive personal information provided by consumers.
  • Not approach a consumer without his/her identity card and prior approval, provide literature to prospects without approval, make claims inconsistent with claims as authorized by direct selling entity.

 

3. Duties

Under Rule 7 of the DS Rules, direct seller and direct selling entity shall:

  • ensure terms of offer are clear, make true representations, not use unfair or deceptive trade practices, not indulge in fraudulent activities, not portray direct selling as market research.
  • not indulge in mis-selling products or services to customers.
  • charge any entry or subscription fee.
  • ensure orders are delivered within the proposed delivery date at the time of purchase.
  • follow provisions of the Legal Metrology Act, 2009 and rules framed thereunder.
  • Not induce customers to make purchases based on the representation that they can reduce or recover the price by referring prospective customers to the direct sellers for similar purchases.

Any contravention of the DS Rules will attract penalties and the legal procedures enumerated under the Consumer Protection Act, 2019[16]. Further, the DS Rules require the State Governments to set up a mechanism to monitor or supervise the activities of direct sellers and direct selling entities, which fortifies the effective implementation of the DS Rules.


Bringing In Uniformity 

 

The Direct Selling Guidelines 2016 were implemented during the time when FTC (Federal Trade Commission) of USA filed a complaint accusing Herbalife Nutrition Ltd. (a multi-level marketing (MLM) corporation) of deceiving consumers about how much money they could make selling its products, noting that most Herbalife distributors make no money at all[17]. The FTC also announced that Herbalife later agreed to pay $200 million to reimburse consumers who lost money on its nutrition supplements and planned a major restructuring of its sales and distribution practices[18].

The Direct Selling Guidelines 2016 which were issued as an advisory by the Central Government, were not implemented by all States resulting in a lack of uniformity, certainty and effective protection from the perniciously proliferating pyramid and money circulation schemes.

The new Rules shall now result in a uniform application of the law across the country, thereby standing in alignment with the legislative intent.  Additionally, by bringing the direct selling entities and direct sellers under the ambit of Consumer Protection Act, 2019, the Central Government has taken a step in the right direction since consumers can now approach the consumer protection forums for effective redressal of grievances.

References: 

[1] RBI cautions Public against Multi Level Marketing Activities: https://www.rbi.org.in/commonman/English/Scripts/PressReleases.aspx?Id=1514, January 01, 2015.

[2]https://upload.indiacode.nic.in/showfile?actid=AC_TN_85_1061_00003_00003_1553515101944&type=rule&filename=trekking_rules.pdf

[3] https://idsa.co.in/resources/media/guidelines/1609826052_Direct%20Selling%20Notification_0.pdf

[4] https://idsa.co.in/resources/media/guidline/1563874609_Maharashtra%20DS%20Guidelines_0.pdf

[5] https://www.idsa.co.in/resources/media/new/1596788872_West%20Bengal%20Direct%20Selling%20Guidelines%202018_0.pdf

[6] Rule 10 of the Consumer Protection (Direct Selling) Rules, 2021.

[7] Rule 1 (d) of the Consumer Protection (Direct Selling) Rules, 2021.

[8] Rule 1 (i) of the Consumer Protection (Direct Selling) Rules, 2021.

[9] Rule 1 (f) of the Consumer Protection (Direct Selling) Rules, 2021.

[10] Rule 2 (2) of the Consumer Protection (Direct Selling) Rules, 2021.

[11] Rule 4 of the Consumer Protection (Direct Selling) Rules, 2021.

[12] Proviso to Rule 2 (1) (d) of the Consumer Protection (Direct Selling) Rules, 2021.

[13] Rule 9 of the Consumer Protection (Direct Selling) Rules, 2021.

[14] Rule 5 of the Consumer Protection (Direct Selling) Rules, 2021.

[15] Rule 6 of the Consumer Protection (Direct Selling) Rules, 2021.

[16] Rule 13 of the Consumer Protection (Direct Selling) Rules, 2021.

[17] https://www.npr.org/sections/thetwo-way/2016/07/15/486174340/herbalife-agrees-to-pay-200-million-to-settle-complaints-it-deceived-consumers

[18] https://www.npr.org/sections/thetwo-way/2016/07/15/486174340/herbalife-agrees-to-pay-200-million-to-settle-complaints-it-deceived-consumers

 

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Photo by Tara Winstead from Pexels 

The new Rules shall now result in a uniform application of the law across the country, thereby standing in alignment with the legislative intent.  Additionally, by bringing the direct selling entities and direct sellers under the ambit of Consumer Protection Act, 2019, the Central Government has taken a step in the right direction the consumers can now approach the consumer protection forums for effective redressal of grievances.

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Will Air India Regain its Past Glory?

“Ladies and Gentlemen, welcome aboard this Air India Flight … We have been cleared for take-off and should be airborne soon. Thank you for choosing Air India. We should reach our destination at … Meanwhile, sit back, fasten your seat belts, and enjoy the in-flight service…”.

It’s been many years since I chose to fly Air India when other options were available, and I dare say that is true of many of you readers as well.

A new beginning for Air India in a tougher environment

 

Now that the Government has completed the sale of Air India to the Tata Group, I am hopeful that the airline will regain its glory from 25+ years ago – even in an environment that is much more competitive and vastly different, thanks to a number of reasons including the pandemic-imposed restrictions on flights/travel, the soaring cost of aviation fuel and indeed many other input costs. Also, in the intervening years, our once-venerable national airline has lost significant market share, and regaining it will not be easy.

There are some signs that after 18 harrowing months, the aviation industry may have put the worst behind it. For example, Emirates is expected to restore 70% of its pre-pandemic capacity by end of 2021. Data from FlightRadar24 suggests that average weekly departures of flights briefly crossed the comparable figure in 2019. In India, Indigo Airlines, reported a 44% increase in passengers since early 2020. 

 

The journey to regaining market share and past glory is long and arduous

 

Merely wishing for the airline (which, during the 1960s was one of the top large airlines in the world) to regain its past glory is not enough. All stakeholders need to play their roles well- the government, the new management, airport operators, ground service handling agencies and above all, passengers like you and me.

Business leaders talk about “customer experience”, and what they are doing to constantly improve it. (Remember Jan Carlson’s “Moments of Truth”?). While customer experience is largely digital for some industries, in sectors such as airlines and hospitality, there are inherently large elements of “in-person” elements of experience. In an age when every business operates in “ecosystems”, customers expect additional benefits. Indeed, frequent flyer and loyalty programs have for years been attracting customers with deals on hotels, local transportation, restaurant discounts etc.

There are many head-winds and possibly, lots of turbulence that the Tatas- and Air India- will need to overcome in the long-haul flight to becoming a leading airline brand that is once again loved, respected and preferred by customers around the world.

The new Air India needs to address every link in its customer experience chain. This includes:

  • A great digital interface (app/website/call centres) to make it easy for customers to select flights and buy tickets (and make selections around food, seating preferences, need for wheelchairs or other special needs etc.)
  • A large network of routes (the starting point is of course what it has inherited in the sale)
  • Smooth check-in and baggage handling (possibly with differentiated services for passengers traveling light)
  • A fleet of clean, well-maintained, state-of-the-art aircraft (this may mean terminating leases on old aircraft and leasing new ones)
  • Professional, well-trained crew (pilots, cabin crew) and other staff who contribute to smooth running
  • Orderly boarding
  • On-time flights
  • Smooth handling of passengers who may miss connecting flights due to flight delays
  • Good service on board (choice of food and beverages, catering to special dietary needs etc.)
  • Efficient baggage handling at destinations
  • Good frequent flyer program with multiple partners providing a range of discounted services/products
  • Mechanism to capture customer feedback and redress any grievances so that customers will want to fly Air India again and again.

Given its flying rights to almost every continent, it still remains the only Indian airline capable of providing truly global connectivity. Also, the Tatas have investments in Air Asia and Vistara- so they will surely look for ways to synergise operations. Ensuring the above will take time (not to mention significant investments), and I am sure the Tata Group has hit the ground running.

 

Each passenger choice can make a difference

 

But all the above only deals with Air India and its service capabilities. The demand side of the equation is what we can influence. Although Air India is now privately owned, it is still an airline owned by Indians. I strongly believe that as Indians, we must, to the extent possible, take pride in the rejuvenated Air India and give it the support we can by flying with them as often as we can. Just as the Japanese, Chinese, Germans and French make it a point to fly only their airlines, I believe we as Indians too should do the same.

Earlier, MPs/MLAs and government officials were required to fly Air India/Indian Airlines. That may no longer be the case- although I would urge officials of the central and state governments/PSUs and MPs/MLAs to continue to fly Air India. If you are a leader with influence over your private sector organization’s policy, I would urge you to encourage colleagues and employees to fly Air India. Of course, while this is subject to the Air India option making sense in terms of fares, flight timings, connections etc., I feel that we should be willing to make minor sacrifices.

I for one will fly Air India in the days ahead, and subject to my experience, will seriously examine the possibility of becoming a regular Air India passenger again.

PS: I hold no brief for the Tata Group or Air India; these are my views as an Indian who takes pride in the country and wants to contribute in every way possible to our country’s growth and prosperity.

Image Credits:

Photo by Daniel Eledut on Unsplash

Now that the Government has completed the sale of Air India to the Tata Group, I am hopeful that the airline will regain its glory from 25+ years ago – even in an environment that is much more competitive and vastly different, thanks to a number of reasons including the pandemic-imposed restrictions on flights/travel, the soaring cost of aviation fuel and indeed many other input costs.

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Income Tax Returns for AY 2020-21: Ready Referencer

With the extended time limit for filing of Income Tax Return (for AY 2020-21), u/s. 139(1), without late fees, for Non-Audit cases and for Non-Corporate assessees of 31st December 2020 fast approaching, given below is a quick guide for ready reference of some key changes that have been made in the respective Income tax return forms for this year.

Further, the conditions and features for eligibility of forms that are applicable for filing the correct income tax returns are also specified as follows:

Key Procedural Changes:

  • ITR 1 to ITR 4 can be filed using PAN or Aadhar by Individuals.
  • The submitted ITR forms display the ITR-V with a watermark ‘Not Verified’ until the same is verified either electronically by EVC or by sending the same via post after manual signing.
  • The unverified form ITR-V will not contain any income, deduction and tax details. The unverified form will only contain basic information, E-filing Acknowledgement Number and Verification part.
  • The unverified acknowledgement is titled as ‘INDIAN INCOME TAX RETURN VERIFICATION FORM’ & final ITR-V is titled as ‘INDIAN INCOME TAX RETURN ACKNOWLEDGEMENT’.
  • Return filed in response to notice u/s. 139(9), 142(1), 148, 153A, and 153C must have DIN.
  • There is a separate disclosure for Bank accounts in case of Non-Residents who are claiming income tax refund and not having a bank account in India.

COVID related Changes:

  • The Government had extended the time limit for claiming tax deduction u/CH VIA to 31st July 2020, and the details of the same need to be reported in Schedule DI (details of Investment).
  • The time limit for investing the proceeds or capital gains in other eligible assets, so as to claim exemptions u/s 54/ 54B/ 54F/ 54EC, had been extended to 30th September 2020.
  • Penal interest u/s. 234A @ 1% p.m., where the payments were due between 20-03-20 to 29-06-20 and such amounts were paid on or before 30-06-20, had been reduced to 75%, vide ordinance dated 31-03-20.
  • Period of forceful stay in India, beginning from quarantine date or 22-03-20 in any other case up to 31-03-20, is to be excluded, for the purpose of determining residential status in India.[1]

Consequences of Late filing of Return of Income:

  • Late Fees u/s. 234F of INR. 5,000 up to 31.12.20 and INR. 10,000 up to 31.03.21. In case of total income up to 5 Lacs, the penalty is INR. 1,000.
  • Penal Interest u/s. 234A @ 1% per month
  • Reduced to 75%. vide Ordinance dated 31.03.20, where the payments were due between 20.03.20 to 29.06.20, and such amounts were paid on or before 30.06.20.
  • Vide CBDT Notification dt 24.06.2020, no interest u/s 234A if Self-Assessment tax liability is less than 1 Lac and the same has been paid before the original due date.
  • In case of a belated return, loss under any head of Income (except unabsorbed depreciation) cannot be carried forwarded.
  • Deduction claims u/s. 10A, 10B, 80-IA, 80-IB, etc would not be allowed.

Consequences of Late filing of Return of Income:

  • Late Fees u/s. 234F of INR. 5,000 up to 31.12.20 and INR. 10,000 up to 31.03.21. In case of total income up to 5 Lacs, the penalty is INR. 1,000.
  • Penal Interest u/s. 234A @ 1% per month
  • Reduced to 75%. vide Ordinance dated 31.03.20, where the payments were due between 20.03.20 to 29.06.20, and such amounts were paid on or before 30.06.20.
  • Vide CBDT Notification dt 24.06.2020, no interest u/s 234A if Self-Assessment tax liability is less than 1 Lac and the same has been paid before the original due date.
  • In case of a belated return, loss under any head of Income (except unabsorbed depreciation) cannot be carried forwarded.
  • Deduction claims u/s. 10A, 10B, 80-IA, 80-IB, etc would not be allowed.

Vide CBDT Notification dt 24.06.2020, no interest u/s 234A if Self-Assessment tax liability is less than 1 Lac and the same has been paid before the original due date.

  1. Section 5A: Apportionment of income between spouses governed by the Portuguese Civil Code.
  2.  115BBDA: Tax on dividend from companies exceeding Rs. 10 Lakhs; 115BBE: Tax on unexplained credits, investment, money, etc. u/s. 68 or 69 or 69A or 69B or 69C or 69D.
  3. Inserted in sec 139(1) by Act No. 23 of 2019, w.e.f. 1-4-2020:

Provided also that a person referred to in clause (b), who is not required to furnish a return under this sub-section, and who during the previous year:

  • has deposited an amount or aggregate of the amounts exceeding one crore rupees in one or more current accounts maintained with a banking company or a co-operative bank; or
  • has incurred expenditure of an amount or aggregate of the amounts exceeding two lakh rupees for himself or any other person for travel to a foreign country; or
  • has incurred expenditure of an amount or aggregate of the amounts exceeding one lakh rupees towards consumption of electricity; or
  • fulfils such other conditions as may be prescribed,

Shall furnish a return of his income on or before the due date in such form and verified in such manner and setting forth such other particulars, as may be prescribed.

4. Section 57: Deduction against income chargeable under the head “Income from other sources”.

5. Schedule DI: Investment eligible for deduction against income (Ch VIA deductions) to be bifurcated between paid in F.Y.19-20 and during the period 01-04-20 to 31-07-20.

6.High-value Transaction: Annual Cash deposit exceeding Rs. 1 crore or Foreign travel expenditure exceeding Rs. 2 Lakhs, Annual electricity expenditure exceeding Rs. 1 Lakh.
7.Schedule 112A: From the sale of equity share in a company or unit of equity- oriented fund or unit of a business trust on which STT is paid under Section 112A.

8. 115AD(1)(iii) proviso: for Non-Residents – from the sale of equity share in a company or unit of equity-oriented fund or unit of a business trust on which STT is paid under Section 112A.
9. Section 40(ba): any payment of interest, salary, bonus, commission or remuneration paid to a member in case of Association of Person (AOP) or Body of Individual (BOI).

10. Section 90 & 90A: Foreign tax credit in cases where there is a bilateral agreement; Section 91: Foreign tax credit in cases of no agreement between the countries.

[1] Circular No 11 of 2020 dated 08th May 2020.

References

Image Credits: Photo by Markus Winkler from Pexels

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5 Ways Law Firms Can Ensure Client Value in the Emerging Environment

For us lawyers, the bulk of our interactions with clients and other stakeholders such as the courts, lawyers representing the other parties, the police, government officials etc. are now largely virtual as a direct result of the pandemic. In turn, this has increased our dependence on technology, reflected in terms of the quality of connectivity as well as familiarity with the digital platforms used. Naturally, all this impacts the quality of discussions and therefore, our ability to assist clients.

But the real change that has unfolded over the past few years (even before the pandemic started unfolding) has been around how clients perceive the “value” that lawyers and law firms add. To be fair, even before the pandemic hit us all, there have been rumblings about the billing models used, paying for time spent on activities not directly related to the matter, high lawyer fees and so on. All this will now come into focus even more sharply as clients become even more conscious of costs. 

The bottom line “value” that lawyers deliver to clients is the ability to obtain decisions in favour of their clients in various courts and/or quasi-judicial bodies. This in turn primarily depends on the lawyer’s knowledge and expertise- including the ability to study relevant case laws. Depending on the nature of the matter, court craft- the ability to present information and raise questions about the other side in ways that persuade the bench- also comes in. In many cases, the lawyer’s prior experience of arguing matters in front of a certain judge is also an element of value because it provides him/her with insights into the judge’s way of thinking. Just as critical is the lawyer’s ability to anticipate what the other side might do and take timely measures to mitigate the risk of such actions. In the Indian context, all this unfortunately often culminates in lawyers seeking and obtaining adjournments ad nauseam.

Taking a step back from how lawyers conventionally operate and dispassionately examining the notion of “value” to their clients, it is fair to say that law firms have plenty of room to change the manner in which they function.

Here are five aspects I believe one should consider while understanding the notion of “value” in the context of clients. 

  1. In an increasingly digital world, why should clients choose a lawyer or law firm from the same city in which the former is based? These days, courts allow documents to be uploaded in electronic format, and hearings are also conducted via digital platforms. A lot of corporate work is already done in a virtual model and this has only increased during the pandemic. In the foreseeable future, travel will only reduce, so consultations can easily be done online. Clients look for the most talented lawyer or law firm irrespective of where they are based. This means law firms should hire the best professionals out there.
  2. What lawyers primarily must do is anticipate potential problems that could arise during the execution of contracts and incorporate clauses to protect their clients. This is akin to ensuring quality at source in the manufacturing or software sectors. The tendency to use “templates” must be minimized, or at best limited to ensuring that the “standard” clauses are included. Commercial awareness and business acumen are key to ensuring that differences do not end up as legal disputes.
  3. A lot of time associated with travel, waiting at courts, etc. will now be saved; therefore, why should billing not more accurately reflect the actual time spent on the client’s case? And it can include the time lawyers and firms spend on research and planning- important activities whose value clients will fully understand.

 

  1. At least in India, many lawyers look at obtaining repeated adjournments as a strategic weapon. In some cases, it may be a legitimate avenue to help clients, but not always. Why should lawyers not change their mindset so that they focus more on obtaining a solution to their client’s problems instead of just wasting time? The lawyer’s lack of preparation or the desire to extend the case cannot and should not constitute grounds for adjournment. Remember that clients pay for time spent on hearings that simply result in the matter being deferred to another date in the future. But this change will also require a mindset change within the judiciary, which should start more actively questioning why one side is seeking frequent adjournments.
  2. Why should lawyers not develop a “solution” mindset that goes beyond litigation? Other avenues for dispute resolution, such as mediation or arbitration, must also be explored diligently. This is especially true in matters where the parties are amenable and the matter has a high probability of being resolved through alternative dispute resolution mechanisms. Think about it- a client wants a legally binding (and defensible) outcome, and not necessarily a stay, injunction, or an order issued by a court of law.

I would love to hear your views on the above, so please do leave your comments.

 

Image Credits:  Photo by Andrea Piacquadio from Pexels

Taking a step back from how lawyers conventionally operate and dispassionately examining the notion of “value” to their clients, it is fair to say that law firms have plenty of room to change the manner in which they function.

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