Banks cannot declare advocates professionally incompetent through Caution List: Supreme Court

NEW DELHI: The Supreme Court on Tuesday ruled that banks and the Indian Banks' Association (IBA) cannot include advocates in the banking sector's Caution List merely on allegations of professional negligence, holding that only Bar Councils have the authority to determine professional misconduct under the Advocates Act, 1961.

A bench of Justices PS Narasimha and Alok Aradhe allowed an appeal by advocate Ajay Vijh, set aside the Allahabad High Court's order, and directed the immediate removal of his name from the IBA's Caution List.

The court held that while banks may discontinue the services of panel advocates, they cannot use the Caution List to circulate allegations of professional negligence, as doing so effectively declares an advocate professionally incompetent and affects the right to practise.

It also clarified that the Reserve Bank of India's Caution List framework is intended for cases involving fraud and cannot be extended to alleged negligence or erroneous legal opinions rendered by advocates.

The dispute arose after Canara Bank removed Vijh from its panel and recommended his inclusion in the IBA's Caution List over an allegedly erroneous legal opinion on a mortgaged property. His name was subsequently listed under the category "Third Party Entities Involved in Fraud."

The Supreme Court held that allegations of professional negligence or misconduct against advocates must be examined only by the disciplinary authorities under the Advocates Act, and that banks cannot bypass this statutory framework.

The court also directed the Bar Council of India (BCI) to conduct a performance audit of its disciplinary mechanisms and those of State Bar Councils. It further asked the BCI to institutionalise Continuing Legal Education (CLE) for advocates and examine the feasibility of establishing a National Legal Academy for structured post-enrolment training.

The matter will next be heard on August 31 to review the BCI's compliance with these directions. (IANS)

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