New Delhi: In a significant verdict, the Supreme Court on Tuesday held that banks and the Indian Banks' Association (IBA) cannot put the advocates in the "caution list" merely on allegations of professional negligence.

Reinforcing the independence of the legal profession, a bench of Justices P S Narasimha and Alok Aradhe held that blacklisting lawyers amounted to an impermissible encroachment upon the statutory disciplinary jurisdiction of the Bar Councils.

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“We direct the Bar Council of India to constitute a team of senior and junior lawyers as well as experts in the field of establishing academic institutions for considering, discussing and evolving the idea of establishing National Legal Academy (for lawyers).

“We hope and trust the BCI will rise to the occasion and reflect on all these issues and inform the court of its decision,” Justice Narasimha, who authored a 41-page judgement, said.

The verdict clarified the scope of judicial review under Article 226 of the Constitution and held that writ petitions are maintainable against the IBA as now the Article is not confined merely to statutory authorities or instrumentalities of the State falling within Article 12 and the expression “any person or authority” has consistently received a “wider and more liberal interpretation”.

The judgment rejected the Allahabad High Court's view that a writ petition was not maintainable because the IBA is not "State" under Article 12.

“In the present case, where the allegation against the appellant pertains solely to negligence, the inclusion of his name in the Caution List is unsustainable. In view of the above discussion and analysis, we hold that the respondent Bank and IBA cannot include the name of the appellant in the Caution List. Consequently, we direct them to remove the appellant’s name from the Caution List with immediate effect,” it directed.

The bench said the alleged allegations of professional negligence or misconduct on the part of the appellant-advocate, even if true, fall within the exclusive jurisdiction of the disciplinary authorities contemplated under the Advocates Act.

“Independence of the legal profession is as important as independence of judiciary. In fact, their independence from the executive and the legislature is the foundation of the rule of law and democracy,” it said.

The principle of self-regulation has historically been regarded as the defining feature of independence of the legal profession, it said.

“If the Bank is of the opinion that the appellant is guilty of professional negligence or misconduct in discharge of legal duties as an advocate, the appropriate remedy is to place the relevant material before the competent State Bar Council to take necessary action under the Advocates Act,” it said.

The bench, however, said the concerns expressed by banks and financial institutions regarding diligence, quality and reliability of legal opinions furnished by advocates cannot be ignored. The duties of the State Bar Councils and the BCI extend beyond merely processing individual complaints, it said.

Having regard to the importance of maintaining public confidence in the institution of lawyers, it is desirable the BCI undertakes a comprehensive performance audit of the disciplinary mechanisms administered by it and the State Bar Councils, the bench said.

“We direct the BCI to constitute a committee and seek an objective assessment of its duties of self-regulation of professional conduct and discipline, consider the report and file an affidavit of the action proposed/taken,” it said.

The verdict also dealt with the duty of lawyers in reducing pendency cases and said there was a “compelling need” to kindle among advocates a deeper and a renewed sense of bond and shared responsibility for timely disposal of cases.

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“There is no dispute that mounting pendency of cases across District Courts, High Courts, and the Supreme Court poses one of the greatest challenges to the justice delivery system in India. The constitutional courts have rightly assumed responsibility for addressing this problem, and judges at all levels remain deeply concerned about delays and arrears. Yet, pendency continues to be viewed almost exclusively as a judicial responsibility,” it said.

This approach overlooks a fundamental reality that the Bar is not merely a stakeholder but an equal institutional partner in the administration of justice, it said.

“Despite frequent references to the Bar and Bench as the ‘two wheels of the chariot of justice’, the Bar is seldom called upon to share responsibility for reducing delays and improving efficiency. A paradigm shift is necessary. Tackling pendency must become a collaborative mission of the Bench and the Bar...,” it said.

The dispute arose after Canara Bank removed lawyer Ajay Vijh from its panel following allegations that a legal opinion furnished by him in 2015 negligently failed to detect earlier sale transactions relating to a mortgaged property.

The bank subsequently recommended his inclusion in the IBA's Caution List under the category of "Third Party Entities Involved in Fraud", with remarks that he had provided a "wrong legal opinion" and acted negligently, thereby exposing the bank to financial risk.

The top court observed that the allegations against the advocate related only to negligence and did not involve fraud, collusion or criminal misconduct.

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