A first-generation lawyer, Mr. Neeraj Malhotra, is a distinguished name in the field of litigation. His dedication towards his profession and his humility is found to be unmatched. In this candid conversation with Desi Kaanoon, Mr. Neeraj gives a background of his life as a lawyer, his major cases. He ultimately provides a few valuable insights for budding lawyers. Read on-
Q. Which were your favourite subjects at law school?
A. The most sought after subjects by me were The Indian Contract Act and The Indian Penal Code, along with The Code of Criminal Procedure. The Indian Contract Act is a holistic legal enactment encompassing all the characteristics and essentials of a contract entered into between two parties. The act is based on the principle of Common English Law. It lays down some fascinating legal concepts pertaining to making an offer, acceptance of the same, conclusion of a contract, determination of contracts, Void and Voidable contracts, contracts which are triggered on the happening of certain contingencies, novation and rescission of contracts and most importantly the consequences of a breach of contract. Additionally, the landmark judgments rendered by the Apex Court concerning the above legal aspects were very knowledgeable. All the above aspects caught my attention, and Contract Law became one of my favourite subjects.
The Indian Penal Code was my other favourite subject. At that point of time, what fascinated me in The Indian Penal Code was the substantive aspects of criminal law, the manner of segregation of the offences and the myriad nature of offences enumerated therein. Another aspect which I found very interesting was that even though the said legislation was enacted in the year 1860 by the then Imperial Legislative Council, the said Code had witnessed very few amendments till then. This implied that the draftsmen in 1860 itself could envisage all the possible offences which could be committed in the future. This was a manifestation of the brilliance of the drafters of the said legislation. The Code of Criminal Procedure, another species of the Criminal law which is the primary legislation on the procedural aspect for the administration of the substantive criminal law, also caught my attention. The constitution of criminal courts, the provisions about the arrest of persons, the registration of FIRs, the powers of the Police to investigate and the procedure of trial before a Magistrate and a Sessions’ Court interested me.
Q. It is often seen that in a bid to do every activity while in law school, students often find themselves burdened. What is your advice to them?
A. The legal profession is very challenging and equally competitive. In the past two decades, the legal profession has witnessed a substantial number of aspiring as well as practising lawyers going abroad for their Under Graduate and Post Graduate studies respectively, to hone their knowledge and skills in the legal field. Given the large number of students aspiring to be a part of the legal fraternity, the level of competition has been on the rise. Consequently, students endeavour to put in their best and maximise the opportunities available to them by multitasking, which is justified. They participate in a moot course, take up internships, organise and participate in Webinars, host websites for guiding and mentoring new students etc. These activities are very beneficial to the law students both in short and the long run. These concepts playa vital role in the overall development of a law student, and they should be encouraged to take these up. I do not consider these as burdensome, and in case the students feel burdened or overworked, they can plan and prioritise the above activities in such a manner that it adjusts with their academic calendar and schedule. I believe that if a student is passionate about his areas of interests, be it academics or otherwise and enjoys doing the same, he or she will excel in the same. There is an old saying; there are problems to solve and lessons to learn, but most of all, there are experiences to enjoy.
Q. Being a first-generation lawyer, how much do you believe in the fact that a person who ventures out into something in which he or she does not have a legacy, inevitably tends to put in an extra effort only due to the joy of doing something different than his predecessors did? At the same time, does the rest of the journey remain the same as other lawyers?
A. A lawyer who enters into the legal profession without having a legacy faces more challenges than a second or third-generation lawyer.However, as already stated by me in the preceding question, if one is passionate about his area of interest, academic or otherwise, it will lead him to his goal. He will surely put-in his best to excel in the same, and the fact that he has no legacy behind him should make him more resilient. I have witnessed a lot of law students whose immediate family members or relatives are not in the legal profession. Still, the zeal and enthusiasm in the told students to train themselves and emerge as formidable lawyers are commendable. The journey for a first-generation lawyer would be slightly different to the extent that he would have to show his academic excellence before finding the right chamber, be it of an individual, a law firm or a designated Senior Lawyer. The stream of practice and the chamber for practice would determine the trajectory of the career of the first-generation lawyer. Remember, there is no substitute for hardwork, dedication and commitment in the legal profession. While you are at work, you must either not wear a watch or if wearing one, must not look at the time. If you are focused on your work, you will succeed. Here I am reminded of an old quote; Success is a journey, not a destination.
Q. What have been the invaluable lessons you learnt by working under your senior and mentor?
A. My senior was very work-centric and a tough taskmaster. He was very meticulous in his professional work. He used to plan his entire week, culling out and identifying the matterswhich had to be dealt with within a particular week. My senior gave me the absolute freedom to draft matters, strategise them and also appear before different courts and tribunals. The most invaluable lessons, which I learned as a junior associate were; to be all ears to your clients, to read the relevant statute(s) before venturing out to draft any pleadings, to make proper notes in a case before arguing the same, to research on law and cull out the most appropriate precedents relevant to the case, be respectful towards the judges, be ethical in the profession and strive for the best.
Q. Your knowledge of commerce-enabled you to have a firm grasp over Corporate Laws. Is it true that unlike the adversarial nature of trial law, corporate law is team-oriented where corporate counsels for both sides of a transaction seek a common ground for their clients?
A. Yes. It is correct to an extent. Corporate law which primarily regulates the incorporation of a company, responsibilities of a company and its directors and dissolution of a company, is skewed mainlytowards the non-adversarial scheme of legislation when it comes to transactional issues. The provisions pertaining to debt restructuring by way of a Scheme of Settlement and Compromise under Sections 230 and 231, Mergers and Amalgamation of Companies under Sections 232-234, reduction of share capital under Section 66 and buy-back of shares under Section 68 etc., of The Companies Act, 2013 are essentially non-adversarial.
However, there are various provisions under The Companies Act, 2013,which, if invoked, would lead to adversarial litigation between parties. The provisions relating to the Winding up of a company under Chapter XX, Oppression and Mismanagement of a company under Chapter XVI, Investigation into the affairs and ownership of a company by the SFIO or otherwise under Chapter XIV, disqualification of a Director under Section 164, striking off the name of a Company by the Registrar of Companies under Section 248etc., of The Companies Act, 2013 are all adversarial. Moreover, the arrival of the Insolvency and Bankruptcy Code in 2016has seen the adversarial nature of the Corporate laws.
Q. Having represented SEBI in a number of cases since 1997, we would like to invite your kind opinion on the recent amendment to the Investment Advisers Regulations, 2013, issued on July 03, 2020, and its possible impact in these times of pandemic.
A. Let me first give you a brief gist of the above Regulations. The above Regulations while defining the terms “Investment Adviser” and “Investment Advise” primarily deal with the aspect of the grant of a certificate to a person intending to act as an Investment Adviser (IA) and the pre-conditions as well as obligations attached to the same. The Regulations protect the interests of the investors in the Capital Market by prescribing the minimum eligibility criteria for grant of a certificate of registration to an IA in terms of the qualifications required and also the capital adequacy of an IA. The said regulations also contain the general responsibilities of an IA including the risk profiling of the investments by the IA, the disclosure to be made to the clients, maintenance of records, appointment of compliance officers etc. In terms of the above Regulations, the IA has to ensure that investments advised to the client are appropriate to his risk profile. It also must ensure that the client has a reasonable understanding of the nature and risk of the products being advised by the IA.
Through the amendments notified by SEBI on July 03 2020, the Advisory and Distribution Activities at the client level have been segregated to avoid conflict of interest. Vide this amendment, a person now has the option to register as an IA OR to provide distribution services as a distributor. Furthermore, the amendment allows an IA to offer implementation services through Direct Schemes in Securities market for which an agreement would have to be executed mandatorily between the IA and the client to ensure greater transparency. The amendment also specifies how the IA will charge the fee. Moreover, the eligibility criteria for registering and acting as an IA has strengthened further.
The above amendments will enhance the investor’s confidence while dealing with Investment Advisers now. The amendments during the pandemic period would ensure that the interest of the investors is better protected, by reducing the terms of engagement into writing so that the disputes if any, get narrowed down. Additionally, the manner of charging fee would also ensure that the investor is not charged an exorbitant fee during the pandemic period and even beyond.
Q. How was the initial experience of switching to independent practice?
A. Since I had been given complete independence by my senior to draft matters, strategise and argue them during my initial years of practice,my transformation from a Junior Associate to an Independent Lawyer was relatively smooth. However, at that time, I started with a small client base. Additionally from the year 2001 onwards, I was also engaged by individual lawyers and mid-sized legal firms to argue matters before different courts and tribunals in Delhi, which enabled me to settle down faster in my independent practice. Owing to the experience and exposure in my initial years of practice, I could manage sufficient work in the next few years, which kept me busy, and the client base increased in the subsequent years.
Q. You have gained the accreditation of being the first lawyer who challenged the levy of Prepayment Penalty by Banks and other Financial Institutions before the CCI. What are the major takeaways from the case?
A. In the year 2009, I had filed a complaint under my name under Section 19(1) of The Competition Act, 2002 against Four (4) Banks. The complaint stated that they had indulged in the practice of imposing prepayment penalty charges for the foreclosure of housing loans ranging from 1 – 4 % either on the entire principal amount of the loan or on the outstanding balance of the loan. But the borrowers were pre-paying the loans for closing the loan account by raising a cheaper loan (also called refinancing the loan) from another bank. In my view, this practice prevented the borrowers from switching over from one bank to another offering a lower rate of interest and consequently the banks were contravening the provisions of Sec 3(1), 3(2), 3(3) (a) and 3(3) (b) and Sec 4(1), 4(2) (a) (i) of The Competition Act, 2002. My complaint was numbered as Case No. 5/2009 titled as Neeraj Malhotra, Advocate V/s Deutsche Post Bank Home Finance Ltd. & Ors.
The Commission after hearing me as the informant and considering the information and the documents filed by me concluded that a prima facie case existed against the four banks as mentioned in my allegations. The Commission after that ordered investigation by the Director-General, CCI (DG) vide its order dated10.09.2009.
The DG in his report recorded the finding that the allegation pertaining to the Banks imposing prepayment penalty/charges were found to be true. Further, concerning allegation for violation of Section 3(3) (a) & section 3(3)(b) of the act, the DG recorded his finding that violation of Section 3(3) (b) of the act was found to be true. The DG investigation further revealed that in the context of Section 19(3) of the Act, levying of prepayment penalty created a barrier to a new entrant in the market in a way that if the new entrant was providing competitive/lower interest rates, better services etc., the borrower of the existing banks could only avail the services of the new entrant by incurring an additional cost in the form of prepayment charges. The levy of prepayment penalty by banks made an exit expensive and thus acted as a deterrent to the borrower. It was further recorded that the group of banks (under the IBA) had come together and taken a collective decision to limit market competition and to generate fee-based income. The said collective decision of bank was beneficial to the banks and on the contrary, was anti-consumer and anti-competitive. Given above, levy prepayment charges by the banks violated the provision of Section 19(3) (a) (c) and (d) also.
By a majority judgment of 4:2 pronounced on 02.12.2010, it was held that there was no contravention of sections 3 and 4 of the Competition Act. However, the minority decision dissented from the majority judgment and held that the Banks could not enter into any agreement for charging the above prepayment penalty.
I think the major takeaway from the above case was that after the passing of the above judgment, the Reserve Bank of India took up the said issue and clarified that the Banks and NBFC’s could not impose prepayment penalties on loans sanctioned to individual borrowers.
Q. How has the experience of addressing the sitting judges of different High Courts been?
A. I have appeared before the Hon’ble Judges in different High Courts including Delhi High Court, High Court of Punjab & Haryana, High Court of Rajasthan, High Court of Gujarat, High Court of Uttarakhand, High Court of Uttar Pradesh, High Court of Andhra Pradesh and High Court of Tamil Nadu. My experience has been very enriching and very satisfactory. I found all the judges in the above High Courts to be very knowledgeable, besides being patient listeners. They could strike the right balance between law and equity whenever it was required and always ensured that the outstation lawyers were accommodated for their matters.
Q. What do you have to say about the growing trend of webinars in these times? Do you think they might replace classroom teaching soon?
A. Although webinars have contributed to the growth of the alternate method and manner of dissemination of knowledge across all quarters and have made life easy for all of us, it is unlikely that the said online platform could replace the conventional mode and manner of interactions, teachings and lectures, which are conducted through seminars. Though webinars carry with them the advantage of reduced costs and expenses, freedom from travelling and the comfort of speaking from one’s own home/office, the frequent online disruptions and connectivity issues cropping up during webinars is something to be reckoned. On the other hand, seminars carry with them the advantages of physical interaction with participants, vibrant venue and the availability of a physical platform for a more real feel. Moreover, since the concept of seminars has been embedded into our lives for the last many decades, changing the status quo would be indeed challenging, if not impossible.
Mr. Neeraj Malhotra