New Delhi, July 7 — The Supreme Court on Tuesday ruled that banks and the Indian Banks’ Association (IBA) cannot place advocates on the banking sector’s “Caution List” solely on allegations of professional negligence, saying such action amounts to an improper assessment of a lawyer’s competence that falls within the exclusive disciplinary domain of the Bar Councils under the Advocates Act, 1961.
A bench of Justices P.S. Narasimha and Alok Aradhe allowed an appeal by advocate Ajay Vijh, set aside the Allahabad High Court’s dismissal of his writ petition and ordered his immediate removal from the IBA’s Caution List.
The court held that while banks may end a lawyer’s empanelment for contractual reasons, they must not circulate adverse findings about an advocate’s professional conduct through the Caution List. The bench observed that circulation of the list to all banking institutions effectively declares an advocate incompetent and harms the right to practise.
The court clarified that Reserve Bank of India circulars on maintaining a Caution List are intended to flag fraud-related risks and cannot be stretched to cover alleged negligence or incorrect legal opinions given in the course of professional duties. In this case, where the accusation against the appellant related only to negligence, his inclusion on the list was found to be unsustainable.
The Supreme Court emphasised that allegations of professional misconduct or negligence against advocates can only be examined by disciplinary authorities constituted under the Advocates Act. It directed that if a bank believes an advocate is guilty of negligence or misconduct, the proper course is to place the material before the competent State Bar Council for action under the Act.
The bench said permitting banks or banking associations to bypass the Advocates Act and unilaterally brand an advocate professionally incompetent by listing them on the Caution List is “illegal, unsustainable and impermissible.”
The dispute arose after Canara Bank removed Ajay Vijh from its panel and recommended his inclusion in the IBA list over an allegedly erroneous 2015 legal opinion on title verification for a mortgaged property. His name was added under the category “Third Party Entities Involved in Fraud,” with remarks alleging a “wrong legal opinion” and negligence.
The court also held that the Allahabad High Court erred in rejecting the petition on the ground that the IBA is not a “State” under Article 12, noting the challenge implicated the advocate’s fundamental right to practise his profession under Article 19(1)(g).
Beyond granting relief to the appellant, the Supreme Court issued broader directions to strengthen oversight of the legal profession. It asked the Bar Council of India (BCI) to carry out a comprehensive performance audit of disciplinary mechanisms at the BCI and State Bar Councils, institutionalise Continuing Legal Education for advocates, and examine the creation of a National Legal Academy for structured post-enrolment training.
The court directed the BCI to form a team of senior and junior lawyers plus experts to study the proposals and listed the matter for further hearing on August 31, when the BCI must report steps taken in compliance with these directions.
Original Source: https://www.morungexpress.com/banks-cannot-declare-advocates-professionally-incompetent-through-caution-list-sc
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Publish Date: 2026-07-07 20:15:00
