A group of Indian lawyers are being investigated and could have their licences revoked by the Calcutta Bar Council for allegedly advertising their expertise in helping clients declare bankruptcy.
Four major banks filed petitions to the Calcutta high court claiming that the lawyers were helping people declare bankruptcy to evade repaying debts owed to them.
“Under the insolvency laws here, once a person is declared insolvent, no civil proceedings can be brought against him for recovering the amount, and they also have the right to apply to suspend any criminal proceedings against them,” said lawyer Paritosh Sinha, who is representing the banks. “These people would borrow and accumulate a huge amount of money – often from more than one bank – and then go to a lawyer who would guarantee an order of adjudication, for a fixed fee. This was so rampant that it was being advertised in local papers where the lawyers would charge around 3-5% of the loan amount, something around 25,000 rupees (US$500).”
The court heard that there was around an 80% increase in the number of insolvencies filed in Calcutta between 2008-2009, a trend which “gives credence to the … apprehension that there was a veritable industry behind these insolvency matters,” the court heard. “The matter calls for a thorough investigation.”
Sinha said that there was a noticeable correlation between the rise in insolvency declarations and the “unusually” quick turnaround granted for approvals. “Some of those insolvency orders were granted in two or three days which is extremely unlikely because the procedure laid down in the statute takes much longer than that,” he said.
The courts are investigating whether the lawyers had been working with officials, who approve the insolvencies. “It’s a police matter and they’re looking into the role of the officials who’ve been asked to file affidavits explaining their conduct,” he said. “The police are investigating whether there were middlemen basically arranging work for these lawyers.”
The state Bar Council has been asked to investigate whether the lawyers breached the restrictions on advertising.