Ajay Vijh v. Indian Banks' Association
“No Blacklisting of Lawyers by Banks: Caution List Is for Fraud, Not Negligence, and Advocates Answer Only to Bar Councils”
TL;DR
The Supreme Court held that a writ petition under Article 226 is maintainable against the Indian Banks' Association (IBA) over the Caution List, even though the IBA may not be "State" under Article 12, because the function carries a public law character and affects the right to practise a profession under Article 19(1)(g). On the merits, it held that the RBI-backed Caution List is meant for cases of fraud, dishonesty, criminality or serious misconduct, not alleged negligence or errors of professional judgment. Advocate Ajay Vijh, listed with remarks of "wrong legal opinion" and negligence, had his inclusion declared impermissible and without jurisdiction, and the bank and IBA were directed to remove his name immediately. The Court also held that professional misconduct of advocates falls within the exclusive domain of the Bar Councils under the Advocates Act, 1961, and directed the Bar Council of India to carry out a performance audit of its disciplinary mechanism and to work towards Continuing Legal Education and a possible National Legal Academy.
The Bottom Line
Banks can drop a lawyer from their panel, but they cannot publicly label a lawyer as incompetent or negligent by placing the lawyer on a sector-wide fraud Caution List. The Supreme Court ruled that such a label is for the Bar Councils to decide through the disciplinary process under the Advocates Act, not for banks or the IBA. The advocate's name was ordered removed from the list with immediate effect. At the same time, the Court asked the Bar Council of India to audit how well its own disciplinary system works and to build continuing education for lawyers.
Case Timeline
The journey from FIR to Supreme Court verdict
Legal Opinion Given
The advocate rendered a legal opinion on immovable property offered as security for a Rs. 2.00 crore credit facility.
Legal Opinion Given
The advocate rendered a legal opinion on immovable property offered as security for a Rs. 2.00 crore credit facility.
Bank Alleges Erroneous Opinion
The Bank's regional manager alleged that the opinion was erroneous because a portion of the land had been sold under sale deeds dated 31.10.2012, and called for his explanation.
Bank Alleges Erroneous Opinion
The Bank's regional manager alleged that the opinion was erroneous because a portion of the land had been sold under sale deeds dated 31.10.2012, and called for his explanation.
Removed from Bank Panel
After considering his explanation dated 17.08.2018, the Bank removed him from its panel on the ground of negligence in verification of title.
Removed from Bank Panel
After considering his explanation dated 17.08.2018, the Bank removed him from its panel on the ground of negligence in verification of title.
Name Included in IBA Caution List
The advocate's name was included in the Caution List titled "Third Party Entities Involved in Fraud" with a remark about wrong legal opinion and negligence.
Name Included in IBA Caution List
The advocate's name was included in the Caution List titled "Third Party Entities Involved in Fraud" with a remark about wrong legal opinion and negligence.
Allahabad High Court Dismisses Writ Petition
The High Court held that a writ petition was not maintainable because the IBA is not State under Article 12 and dismissed it without examining the merits.
Allahabad High Court Dismisses Writ Petition
The High Court held that a writ petition was not maintainable because the IBA is not State under Article 12 and dismissed it without examining the merits.
Supreme Court Allows Appeal
The Supreme Court held the writ petition maintainable, declared the inclusion in the Caution List impermissible and without jurisdiction, and gave directions to the Bar Council of India.
Supreme Court Allows Appeal
The Supreme Court held the writ petition maintainable, declared the inclusion in the Caution List impermissible and without jurisdiction, and gave directions to the Bar Council of India.
The Story
Ajay Vijh, an advocate enrolled in 1998, had been on the panel of several banks and financial institutions for legal advisory services. He claims to have been on the panel of Canara Bank from September 2010. On 27.07.2018 the Bank's regional manager alleged that a legal opinion he gave on 08.08.2015 on immovable property offered as security for a credit facility of Rs. 2.00 crore was erroneous. The opinion had stated that the land was wholly owned by M/s Pushpanjali Buildwell Private Limited, the guarantor, but a portion had in fact been sold three years earlier under sale deeds dated 31.10.2012, which the opinion failed to examine.
The advocate replied on 17.08.2018, explaining that his opinion was based on a search certificate issued by the office of the Sub-Registrar, Hapur, and inspection of the records, and that the sale transactions were not discernible from the records then available. By communication dated 31.01.2019, the Bank removed him from its panel on the ground of negligence in verification of title.
The Bank then forwarded his name to the Indian Banks' Association (IBA) for inclusion in the Caution List, and with effect from 05.02.2020 his name was incorporated in a list titled "Third Party Entities Involved in Fraud". The remark against his name read: "Given Wrong Legal Opinion And Negligence in Conducting Search and Bank Was Exposed to Loss and Financial Risk". He asserted that this was done without prior notice or an opportunity to be heard, and that it had a cascading effect, with other banks terminating his empanelment and harming his reputation. He came to know of the inclusion much later.
He challenged the Bank's and IBA's action by a writ petition before the High Court of Judicature at Allahabad (Civil Misc. Writ Petition No. 12074 of 2023). By judgment and order dated 20.11.2023, the High Court dismissed the petition without examining the merits, on the ground that the IBA is not "State" under Article 12 and a writ would not lie, relying on the Bombay High Court decision in Kishor S. Bhat v. Indian Banks' Association. The advocate appealed to the Supreme Court. Because of the significance of the issues of autonomy, self-regulation and accountability of the legal profession, the Court heard the parties and Mr. Maninder Singh as Amicus Curiae on maintainability as well as merits.
Legal Issues
Click each question to reveal the Supreme Court's answer
Arguments
The battle of arguments before the Supreme Court
Petitioner
Vihaan Kumar
Inclusion in the Caution List violated Article 19(1)(g) and natural justice
The appellant argued that the inclusion of his name with remarks about wrong legal opinion and negligence was done without notice or hearing, in breach of procedural guidelines, and had a cascading effect on his professional engagements with other banks, seriously damaging his reputation and right to practise.
Professional negligence is for the disciplinary authorities
The appellant, the Bar Council of India, the Ministry of Law and Justice and the Amicus Curiae uniformly submitted that allegations of professional negligence or misconduct, even if true, fall within the exclusive jurisdiction of the disciplinary authorities under the Advocates Act, 1961, and that neither the Bank nor the IBA could effectively blacklist a lawyer.
Respondent
State of Haryana
The IBA is not State under Article 12, so no writ lies
The first respondent contended that it is neither a statutory body nor State within Article 12. The High Court accepted this and relied on Kishor S. Bhat v. Indian Banks' Association (Bombay High Court) in dismissing the writ petition.
The Caution List is justified by RBI circulars on frauds
The respondents relied on the regulatory framework evolved by the RBI for reporting third-party entities involved in banking frauds, including the Circular dated 16.03.2009, the 2016 Frauds Classification and Reporting Directions and the Master Directions on Fraud Risk Management, 2024, to justify including the appellant's name.
Court's Analysis
How the Court reasoned its decision
On maintainability, the Court held that the High Court took a narrow view of Article 226. Relying on Kaushal Kishor, Andi Mukta, Zee Telefilms and S. Shobha v. Muthoot Finance, it explained that the test has shifted from who the respondent is to the function performed and the effect on legally protected rights, and it distinguished Kishor S. Bhat as a purely contractual service dispute. On the scope of the Caution List, the Court examined the RBI Circular of 16.03.2009, the 2016 Directions and the 2024 Master Directions and found that they deal only with fraud. Fraud involves mens rea, and an erroneous legal opinion or omission in due diligence cannot be elevated to fraud without allegations of dishonest intent. Banks may disengage panel advocates but cannot circulate a declaration of incompetence. On the third issue, the Court described the legal profession as sui generis, explained that its independence is secured through self-regulation under the Advocates Act, 1961, and noted the exclusive disciplinary jurisdiction of Bar Councils under Sections 35 and 36 with appeals under Sections 37 and 38. It then went beyond the individual dispute and, citing Yash Developers on performance audit, directed the Bar Council of India to audit its disciplinary mechanism, and urged institutionalised Continuing Legal Education and a proposed National Legal Academy.
an action in the nature of public declaration to all other banks about the conduct, competency or incompetency of an advocate is clearly beyond their power and jurisdiction and clearly illegal.
Para 2.3
Summarises the central holding: banks may disengage an advocate, but cannot publicly declare an advocate incompetent.
the nature of the function performed, the source of power exercised, and the effect of the impugned action on legally protected rights.
Para 12
States the functional test that makes the writ petition maintainable regardless of whether the body is State under Article 12.
An erroneous legal opinion or an omission in the course of due diligence, absent any allegation of dishonest intent or deliberate facilitation of illegality, cannot be elevated to the level of fraud.
Para 27
Keeps the fraud-focused Caution List from being stretched to cover negligence or errors of professional judgment.
Independence of legal profession is as important as independence of judiciary.
Para 31
Grounds the self-regulation of the Bar in the rule of law and democracy.
Matters concerning the professional conduct of an advocate are within the exclusive province of the disciplinary authorities contemplated under the Advocates Act.
Para 36
Points banks to the State Bar Council rather than to unilateral blacklisting.
The Verdict
Relief Granted
The advocate obtained removal of his name from the Caution List and a declaration that the inclusion was without jurisdiction. The Court kept the matter alive for further directions on institutional reforms for the Bar.
Directions Issued
- The judgment and order of the High Court of Judicature at Allahabad is set aside
- Inclusion of the appellant's name in the Caution List is declared impermissible and without jurisdiction
- The respondents shall remove the appellant's name from the Caution List with immediate effect
- The Bar Council of India shall 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 Bar Council of India shall constitute a team of senior and junior lawyers and experts to consider and evolve the idea of establishing a National Legal Academy, and inform the Court of its decision
- The appeal is listed on 31.08.2026 for considering Continuing Legal Education and the proposal for a National Legal Academy, and the Bar Council of India may file an affidavit a week before the listing
Key Legal Principles Established
A writ petition under Article 226 can lie against a body that performs a public function or exercises power with a public law element, even if it is not State under Article 12.
The Caution List maintained by the IBA under RBI guidelines is meant for fraud, dishonesty, criminality or other serious misconduct, not for alleged negligence or errors of professional judgment.
A bank may disengage a panel advocate, but cannot publicly declare to other banks that an advocate is incompetent or negligent.
Fraud imports mens rea; an erroneous legal opinion cannot be elevated to fraud absent dishonest intent or deliberate facilitation of illegality.
Professional misconduct and negligence of advocates are within the exclusive jurisdiction of the State Bar Councils and the Bar Council of India under the Advocates Act, 1961.
The independence of the legal profession depends on self-regulation, which in turn must be accountable, transparent and effective.
The Bar Council of India should audit the performance of its disciplinary mechanism and institutionalise Continuing Legal Education for advocates.
Key Takeaways
What different people should know from this case
- A bank can stop using a particular lawyer, but it cannot brand that lawyer as fraudulent or incompetent across the entire banking sector over a mere mistake or alleged negligence.
- If a lawyer is accused of professional misconduct or negligence, the complaint goes to the State Bar Council, where the lawyer gets a hearing under a set procedure.
- Lawyers, doctors, architects and other professionals are all answerable, but the legal profession has its own regulator, the Bar Council.
- Being put on a blacklist without notice can seriously affect a person's livelihood, and courts can examine such action under Article 226.
Legal Framework
Applicable laws and provisions
Constitutional Provisions
Article 226
Constitution of India
“Power of High Courts to issue writs to any person or authority for the enforcement of fundamental rights and for any other purpose.”
Relevance: The Court held that the words "any person or authority" are not confined to the State and that the writ petition was maintainable.
Article 19(1)(g)
Constitution of India
“Right to practise any profession, or to carry on any occupation, trade or business.”
Relevance: The Caution List entry affected the advocate's right to practise his profession, giving the grievance a constitutional dimension.
Article 12
Constitution of India
“Defines "the State" for the purposes of Part III.”
Relevance: The High Court dismissed the writ petition because the IBA is not State under Article 12; the Supreme Court held this approach too narrow for Article 226.
Statutory Provisions
Sections 35 to 38
Advocates Act, 1961
“Vest disciplinary jurisdiction over advocates in the State Bar Councils and the Bar Council of India, and provide for appeals under Sections 37 and 38.”
Relevance: The Court held that allegations of professional negligence or misconduct fall within this exclusive statutory disciplinary scheme.
Section 35A
Banking Regulation Act, 1949
“Empowers the Reserve Bank to issue directions to banking companies in public interest, in the interest of banking policy and for proper management.”
Relevance: The RBI circulars on frauds and Caution Lists derive from this power, but the Court held they cannot authorise listing advocates for mere negligence.
Related Cases & Precedents
Andi Mukta Sadguru Shree Muktajee Vandas Swami Suvarna Jayanti Mahotsav Smarak Trust v. V.R. Rudani
followed(1989) 2 SCC 691
Held that "any person or authority" in Article 226 is not confined to statutory authorities and can cover any body performing a public duty.
Zee Telefilms Ltd. v. Union of India
followed(2005) 4 SCC 649
Recognised that private bodies exercising public functions remain amenable to a writ petition under Article 226.
S. Shobha v. Muthoot Finance Ltd.
followed2025 SCC OnLine SC 177
Reiterated the function test for writs: where a public law element is present, the remedy cannot be denied merely because the body is not State.
Kishor S. Bhat v. Indian Banks' Association
distinguished2018 SCC OnLine Bom 2857
Arose from an inter se service dispute treated as a purely private contractual matter, unlike the sector-wide Caution List challenged here.
Bar of Indian Lawyers v. D.K. Gandhi PS National Institute of Communicable Diseases
followed(2024) 8 SCC 430
Held that the legal profession is sui generis and cannot be equated with other professions.
Supreme Court Bar Association v. Union of India
followed(1998) 4 SCC 409
Held that the power to punish an advocate for professional misconduct vests exclusively in the statutory authorities under the Advocates Act, 1961.
Bar Council of Maharashtra v. M.V. Dabholkar
followed(1975) 2 SCC 702
Explained the scheme under which the Bar Council receives complaints and initiates disciplinary proceedings against advocates.
Yash Developers v. Harihar Krupa Co-operative Housing Society Ltd.
cited(2024) 9 SCC 606
Emphasised the need to assess whether a statutory framework achieves its purpose, used to justify a performance audit of the Bar's disciplinary mechanism.
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Ajay Vijh v. Indian Banks' Association - Kannada Explanation
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Ajay Vijh v. Indian Banks' Association - Tamil Explanation
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Ajay Vijh v. Indian Banks' Association - Telugu Explanation
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Ajay Vijh v. Indian Banks' Association - Hindi Explanation
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Ajay Vijh v. Indian Banks' Association - English Explanation
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