'Advocate Cannot Be Criminally Prosecuted Merely Because Legal Opinion Turns Out Incorrect': Patna High Court

A Single Judge Bench of Justice Rana Vikram Singh quashed criminal proceedings against a UCO Bank panel advocate accused of involvement in a bank loan fraud involving allegedly forged property documents used as collateral security.

The Court was hearing a petition under Section 482 CrPC challenging an order dated January 21, 2016, passed by the Additional Chief Judicial Magistrate, Patna, taking cognizance of offences under Sections 406, 409, 420, 467, 468, 471 and 120B IPC against the advocate.

The case arose from an FIR registered in December 2008 on the complaint of the Chief Manager of UCO Bank's Exhibition Road Branch, Patna, concerning alleged irregularities in the sanction and disbursement of cash-credit facilities.

According to the allegations, certain bank officials had colluded with borrowers and guarantors while sanctioning credit facilities against properties offered as collateral security. The accounts subsequently became non-performing assets, causing losses to the Bank. It was alleged that the properties offered as security were not genuine and that their title documents were fraudulent and fabricated.

The petitioner, an advocate with over 35 years of professional experience, had served as an empanelled lawyer of the Bank. He had furnished legal opinions concerning two borrowers, M/s Jai Mata Di and M/s New Adarsh Medical Hall, in 2003 and 2002 respectively. The advocate contended that he had specifically advised the Bank to independently verify the original property documents before acting upon his legal opinions. He submitted that the decision to sanction and disburse loans rested entirely with bank officials and that he had no role in the decision-making process.

The principal question before the High Court was whether an advocate could be held criminally liable merely for rendering a legal opinion concerning property offered as security for a bank loan. Examining the professional responsibilities of advocates, the Court observed that a lawyer owes a duty of care to the client and may face consequences for professional negligence where an opinion is tendered carelessly or without examining the relevant material.

However, the Court distinguished professional negligence from conduct attracting criminal liability. It observed:

“An Advocate owes a duty of care to client if the opinion is tendered carelessly, negligently and without having examined and verified the factual substance, the Advocate can be sued for professional negligence in the form of disciplinary proceedings to be constituted by competent body, like the District Bar Association, State Bar Council or Bar Council of India, as the case may be. On the contrary, an Advocate can never be penalized for tendering his opinion simply because his opinion turned out to be incorrect or if a Court later took a different view of the law.”

The Bench further noted that the law is open to interpretation and that an error of judgment made in good faith is not actionable. At the same time, it clarified that an advocate cannot claim immunity where a legal opinion is deliberately falsified to facilitate a fraudulent transaction. The Court held:

“However, if an Advocate deliberately gives a false and misleading opinion to facilitate a scam fraudulently, certifying a property Title for a bank loan, if his opinion is tendered for illegal gratification, in collusion and connivance with the persons and if any opinion is tendered with mal intention of cheating his client, then he can face criminal liability for conspiracy, cheating and professional misconduct.”

The Court emphasised that rendering legal opinions for bank loans has become an integral part of an advocate's professional work. While a lawyer must exercise professional skill and act in the client's interest, the lawyer does not guarantee that every opinion will be flawless or necessarily produce a favourable result. It further observed that criminal liability in such cases arises where the lawyer actively participates in a scheme to defraud the Bank.

Turning to the allegations against the petitioner, the High Court found that the essential ingredients of criminal breach of trust under Sections 406 and 409 IPC were absent, since there was no allegation of entrustment of property or its dishonest misappropriation by the advocate. Similarly, the Court held that the offence of cheating under Section 420 IPC was not established, as there was no material showing that the petitioner had dishonestly induced anyone to deliver property or valuable security.

The Bench further observed that the FIR contained no allegation that the advocate had received illegal gratification or acted in collusion with the borrowers, bank officials or other accused persons. It noted that once legal advice is furnished, the client remains free to accept, reject or disregard it. An advocate cannot be criminally prosecuted merely because the client acts upon an opinion that subsequently proves incorrect.

Finding no material suggesting that the petitioner had participated in a conspiracy or deliberately facilitated the alleged bank fraud, the High Court characterised the proceedings against him as malicious and vexatious.

Accordingly, the Court allowed the petition, quashed the cognizance order dated January 21, 2016 insofar as it concerned the petitioner, and set aside all consequential criminal proceedings against him.

Appearance:

For the Petitioner/s: Mr. Siddhartha Prasad, Advocate; Mr. Om Prakash Kumar, Advocate; Mr. Shashank Shekhar, Advocate

For the State: Mr. Sanjay Kumar Tiwary, APP

For UCO Bank: Mr. Rajesh Kumar Pandey, Advocate