Banks Cannot Blacklist Lawyers By Putting Them In Caution List : Supreme Court

The Supreme Court today held that the Indian Banks' Association cannot blacklist panel lawyers by putting their names in a 'caution list' prepared as per the guidelines of the Reserve Bank of India to alert banks about fraudulent borrowers.  

The Court held that while a bank can remove an advocate from its panel if there was negligence, there cannot be a public declaration of such action. It clarified that disciplinary power over advocates for professional misconduct solely remained with the Bar Council.

The Court held that the RBI-mandated caution list is intended to cover only unscrupulous borrowers and not negligent professionals. The judgment authored observed :

"The mechanism envisaged in the Caution List under the RBI circulars cannot be invoked to determine or punish alleged professional misconduct by advocates. 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. Consequently, we hold that the action of including appellant's name in the Caution List and the consequent comment on his competency is illegal and is set aside."

A bench of Justice PS Narasimha and Justice Alok Aradhe pronounced the judgment in a lawyer's petition filed against an Allahabad High Court judgment refusing to entertain his writ petition to quash the caution list.

"Matters relating to professional conduct or misconduct of advocates fall within the exclusive jurisdiction of the regulatory bodies constituted under the Act, namely the Bar Council of India and the respective State Bar Councils. Banks have the choice of disengaging a legal professional and also to remove his/her name from the panel if the services are not up to the mark, but 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."

The Court also directed the Bar Council of India to establish a National Legal Academy for Advocates, in the lines of the National Judicial Academy, to institutionalise the discipline and culture of continuing legal education.

While affirming the Bar's right to self-regulation through peer review, the Supreme Court stressed that this autonomy must be matched by transparency, accountability, and institutional effectiveness. It observed that public confidence in the legal profession depends on disciplinary mechanisms that are credible and trustworthy.

Accordingly, the Court directed the Bar Council of India to undertake a performance audit of the efficacy and credibility of its disciplinary powers and implement appropriate corrective and remedial measures based on the findings.

"The right and privilege of self-regulation of the Bar, through peer review, must withstand scrutiny on the touchstones of transparency, accountability, and institutional effectiveness."

Background

Syndicate Bank (now Canara Bank) alleged that the petitioner, who was a panel advocate for the bank, helped a borrower defraud the bank while preparing a search and title report for an immovable property to be given as and security for a loan. It is alleged that he issued a wrong legal opinion by failing to mention in the report that part of the property had been sold by the borrower, thereby exposing the bank to financial risk.

The lawyer had sought the quashing of the caution list dated February 05, 2020, in which the petitioner's name appeared at serial number 781. The 'caution list' was prepared in accordance with the Reserve Bank of India guidelines to alert banks about fraudulent borrowers.

He also sought a direction restraining the Indian Banks' Association from circulating the caution list to banks and financial institutions where the petitioner was empanelled as a panel advocate, and from advising such institutions to blacklist the petitioner.

IBA contended that the writ petition was not maintainable, as it does not fall within the scope of Article 12 of the Constitution.The High Court declined to entertain the petition and dismissed. Thus, he approached the Supreme Court.

The petitioner has contended that his name was placed in the Caution List hosted on the IBA website without following the Procedural Guidelines for Reporting Names of Third Parties involved in Frauds to IBA for inclusion in the Caution List, July 2009 of the RBI, without any prior notice, without affording a fair opportunity of hearing and without detailed examination and investigation into the alleged fraud.

He has further contended that other banks and financial institutions have terminated his service as panel advocate causing him not only a huge loss financial loss, but also loss of good will and reputation, and has affected his fundamental right.

During the hearing, Amicus Curiae Senior Advocate Maninder Singh opposed the plea, submitting that the list violates the petitioner's right to conduct his profession. He also submitted that the Bar Council of India has the exclusive jurisdiction to take disciplinary action against advocates for any professional misconduct as per the Advocates Act.

Advocate Radhika Gautam for BCI and Additional Solicitor General Archana Pathak Dave for the Union Law Ministry supported Singh's stance regarding the BCI's jurisdiction.

During the hearing, Justice Narasimha expressed concerns regarding the effectiveness of existing mechanisms for addressing professional misconduct by BCI and State Bar Councils.

Headnote

Constitution of India, 1950 — Article 226 — Maintainability of Writ Petition — Sector wide Caution List — Nature of Function Test vs. Formal Character of Respondent — Held: A writ petition under Article 226 challenging the inclusion of a professional's name in the Indian Banks' Association (IBA) Caution List is maintainable - The High Court erred in dismissing the petition on the narrow ground that the IBA is not "State" within the meaning of Article 12 - The judicial focus has shifted from the formal character of the body to the nature of the function performed and the effect of the impugned action on legally protected rights - The maintenance of a sector-wide Caution List possesses a sufficient public law character and operates as an industry-wide adverse accreditation that directly impacts an advocate's fundamental right to practice a profession under Article 19(1)(g) of the Constitution.

Banking Regulation Act, 1949 — Section 35-A — RBI Guidelines on Caution List — Scope of Caution List vs. Professional Negligence — Held: The Caution List mechanism maintained by the IBA under RBI guidelines is strictly intended to operate in cases involving fraud, dishonesty, criminality, or deliberate facilitation of fraudulent activity affecting the banking system - It is not designed to address cases resting merely on alleged negligence or errors of professional judgment - Fraud inherently imports mens rea and deliberate intent - An erroneous legal opinion or omission in title verification, absent dishonest intent, cannot be elevated to fraud - While a bank is free to disengage a panel counsel contractually, it has no power or jurisdiction to issue a sector-wide public declaration targeting an advocate's competency - the inclusion of the appellant's name in the Caution List solely on account of professional negligence is illegal and unsustainable. [Paras 25 – 35]

Advocates Act, 1961 — Sections 35 and 36 — Professional Misconduct — Exclusive Jurisdiction of Bar Councils — Autonomy and Self-Regulation — Held: The legal profession is sui generis(unique in nature) and cannot be equated with traditional commercial professions - The independence of the Bar, secured by the principle of self-regulation ("peers must regulate peers"), is an inextricable feature of the independence of the judiciary and the rule of law - Under the statutory scheme of the Advocates Act, 1961, the power to investigate, adjudicate, and punish an advocate for professional misconduct or negligence vests exclusively in the State Bar Councils and the Bar Council of India - Parallel adjudicatory mechanisms or unilateral blacklisting by external agencies like banks or banking associations are legally excluded - If a bank believes an advocate is guilty of misconduct, its appropriate remedy is to place the material before the competent State Bar Council. [Paras 30 - 36]

Professional Accountability & Legal Reforms — Performance Audit of Bar Councils — Continuing Legal Education (CLE) & National Legal Academy (NLA) — Held: The right of self-regulation must withstand scrutiny on transparency and institutional effectiveness - The Bar Council of India (BCI) is directed to undertake a comprehensive performance audit of its disciplinary mechanisms and those of State Bar Councils to tackle systemic delays and pendency - to maintain high professional standards, the BCI is directed to institutionalize Continuing Legal Education (CLE) for enrolled advocates and constitute a team to evolve the establishment of a National Legal Academy (NLA) for post-enrolment structured learning and capacity building. [Relied on Andi Mukta Sadguru Shree Muktajee Vandas Swami Suvarna Jayanti Mahotsav Smarak Trust v. V.R. Rudani, (1989) 2 SCC 691; Bar Council of Maharashtra v. M. V. Dabholkar, (1975) 2 SCC 702; Bar of Indian Lawyers v. D.K. Gandhi PS National Institute of Communicable Diseases, (2024) 8 SCC 430; Kaushal Kishor v. State of U.P., (2023) 4 SCC 1; Yash Developers v. Harihar Krupa Co-operative Housing Society Ltd., (2024) 9 SCC 606; S. Shobha v. Muthoot Finance Ltd., 2025 SCC OnLine SC 177; Yash Developers v. Harihar Krupa Co-operative Housing Society Ltd., (2024) 9 SCC 606; Paras 45-60]

Case no. – Diary No. 10787 / 2024

Case Title – Ajay Vijh v. Indian Banks Association

Citation : 2026 LiveLaw (SC) 656

Click here to read the judgment