More Stories

Informist, Tuesday, Jul. 7, 2026

 

NEW DELHI – The Supreme Court Tuesday held that banks or the Indian Banks' Association cannot include names of lawyers on the caution list for cases of negligence or professional incompetence. An erroneous legal opinion or an omission in the course of due diligence, absent any allegation of dishonest intent or deliberate facilitation of illegality, couldn't be elevated to the level of fraud, the apex court said.

 

The apex court said while the RBI might issue directions to ensure integrity in banking transactions, such power does not include declaring an advocate professionally negligent by including his name on a caution list, which is meant to identify fraudulent entities.

 

The caution list, as contemplated under the Reserve Bank of India's guidelines, is a mechanism devised for the purpose of alerting banks and financial institutions about third-party entities, including advocates, valuers, chartered accountants, and other professionals, whose acts of omission or commission are perceived to have exposed banks to fraud or financial risk. The object underlying the maintenance and dissemination of information through such a list is to enable banks to exercise due caution while engaging or dealing with such entities in future transactions.

 

If the bank feels a lawyer 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, 1961, said a bench of Justice P.S. Narasimha and Justice Alok Aradhe. Matters concerning the professional conduct of an advocate are within the exclusive province of the disciplinary authorities contemplated under the Advocates Act, the bench said. The mechanism envisaged in the caution list under the RBI circulars cannot be invoked to determine or punish alleged professional misconduct by advocates, it said.

 

The apex court said that permitting banks or banking associations to bypass the disciplinary process under the Advocates Act and unilaterally portray an advocate as professionally incompetent by including his name in a caution list is illegal, unsustainable and impermissible. It would amount to circumventing the legal profession's freedom of self-regulation, which, in turn, is an inextricable feature of the independence of the judiciary, the apex court said.

 

The apex court set aside Canara Bank's action to include advocate Ajay Vijh's name on the caution list, maintained by the Indian Banks' Association, and the consequent comment on his competency. The inclusion of Vijh's name on the caution list, coupled with remarks imputing negligence and wrongful legal opinion, undeniably carried serious consequences, apart from affecting his fundamental right to practise the profession, the top court said. Such action effectively amounted to professional blacklisting, adversely affecting Vijh's standing and future professional engagements with other banks, it said.

 

To maintain public confidence in the institution of lawyers, the apex court asked the Bar Council of India to undertake a comprehensive performance audit of the disciplinary mechanisms administered by it and the state bar councils under the Advocates Act, 1961. The court asked the Bar Council 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 or taken. The purpose of this exercise is not to attribute blame but to identify systemic strengths and weaknesses, the court said. The objective should be evidence-based reform aimed at improving the effectiveness of the disciplinary framework while preserving fairness and professional independence, it added.

 

Further, the top court directed 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 a National Legal Academy, like the National Judicial Academy that has been established for training and capacity building for judges. Such an institution would enable post-enrolment structural learning, enhance professional competence, ethical awareness, technological adaptability, and long-term planning and corroboration, the court said. 

 

The case has its genesis in Vijh being in the panel of advocates for Canara Bank. In 2018, the regional manager of Canara Bank alleged that a legal opinion furnished by Vijh regarding certain immovable property offered as security for a credit facility was erroneous. The bank proceeded to remove Vijh from its panel on grounds of negligence and forwarded his name to the Indian Banks Association for inclusion on the caution list. In the remark column, it was recorded that Vijh gave wrong legal opinion and was negligent in conducting the search and the bank was exposed to loss and financial risk.

 

On Tuesday, shares of Canara Bank ended 1.1% lower at INR 125.03 on the National Stock Exchange.  End

 

Reported by Surya Tripathi

Edited by Himanshi Gupta

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

 

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2026. All rights reserved.