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TMI Blog2022 (8) TMI 1541X X X X Extracts X X X X X X X X Extracts X X X X ..... s his client that the opinion so rendered by him is after taking due precaution and care. Like any other profession, the only assurance which an Advocate can give and may be implied from an Advocate while acting in professional capacity is that his possesses the requisite skill in his field of practice and while undertaking the performance of the work entrusted to him, he would exercise his skill with reasonable competence. If the show cause notice dated 22.07.2020 is perused it makes reference to the guidelines and states that if it was established that there was gross negligence on the part of the petitioner or that he had colluded with the borrower in causing pecuniary damage/loss to the Bank, his name could be recommended for being included in the Caution List - the Bank had already arrived at a conclusion that the title search report submitted by the petitioner was wrong and there was gross negligence on the part of the petitioner thus facilitating commission of fraud by the borrower. After recording that conclusion, the Bank has called upon to show cause why his name should not be sent to the IBA for being added in the Caution List. Considering the object of the Guidelines an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more than 30 years. 3. In the year 2012, the petitioner was asked by Bank of Baroda, Branch at Jalna for title report (search report) in respect of property belonging to M/s. Krishidhan Seeds Limited. The petitioner was asked to submit search report of Nazul Plot No.6/3, Sheet No.26-D, situated in the area known as Mangaldas Market, Akola, Taluka and District Akola, admeasuring area 1702 sq.ft. along with building constructed thereon. Accordingly, he had perused the documents supplied to him by the Bank and carried the requisite search at the office of Sub-Registrar, Akola of 30 years. The petitioner had submitted the title report on 11.5.2012. As per the contention of the petitioner he had prepared said title report with utmost care and by due diligence by safeguarding the interest of the Bank. But suddenly on 21.12.2019 he had received a communication dated 16.12.2019 by which it was intimated to him that his name was removed from the list of Bank s Panel Advocates. As per the contention of the petitioner the action of de-empanelment is completely stigmatic and arbitrary. His name was removed from the panel of Advocates by the Bank on an allegation that the search report submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nctioned the financial facilities to M/s. Rajendra Agri Products Private Limited. Subsequently, the loan account of the borrower became NPA on 30.6.2015. Therefore, the Bank had issued notice dated 6.7.2015 under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as, the SARFAESI Act ) to the borrower and the guarantors calling upon them to pay the outstanding amount of Rs. 10,26,82,816.87 as on 14.2.2015 with interest. As per the notice the borrower had not repaid the amount and hence the Bank had taken physical possession of the entire mortgage property except 7 shops situated on the ground floor. The Bank could not take possession of 7 shops as it was objected by the shop owners on the ground that they are the owners and in possession of the said shops and they had purchased it from M/s. Krishidhan Seeds Limited. Thus, for the first time the Bank came to know that M/s. Krishidhan Seeds Limited had already sold 7 shops situated on the ground floor prior to mortgaging entire property in favour of the Bank securing the financial facilities. Therefore, the Bank engaged other empanelled Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visor for the Bank and that all pending matters had been returned back. 6. In support of his contention he placed reliance in the case of Mahabir Auto Stores and Others vs. Indian Oil Corporation and others, reported in (1990) 3 SCC 752, wherein it is held that every action of the State or an instrumentality of the State in exercise of its executive power, must be informed by reason. In appropriate cases, actions uninformed by reason may be questioned as arbitrary in proceedings under Article 226 or Article 32 of the Constitution. He also relied upon Union of India and another vs. Kunisetty Satyanarayana, reported in (2006) 12 SCC 28, Siemens Ltd. vs. State of Maharashtra and others, reported in (2006) 12 SCC 33, Kalabharati Advertising vs. Hemant Vimalnath Narichania and others, reported in (2010) 9 SCC 437 and Om Prakash Chautala vs. Kanwar Bhan and others, reported in (2014) 5 SCC 417 to urge that a show-cause notice issued with premeditation was bad in law. 7. On the basis of above decisions of the Hon ble Apex Court he submitted that reputation is fundamentally a glorious amalgam and unification of virtues which makes a man feel proud of his ancestry and satisfies him to beque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the year 2012 the petitioner was requested by the Bank of Baroda, Branch at Jalna for issuing his title opinion report in respect of the property belonging to M/s. Krishidhan Seeds Limited, Jalna. As per the Bank, the Director of M/s. Krishidhan Seeds Limited stood as a guarantor to the loan obtained by M/s. Rajendra Agri Products Pvt. Ltd. The cash credit limit of Rs. 10/- crore was granted to the borrower on various terms and conditions including the mortgage of Nazul Plot No.6/3, Sheet No.26-D, admeasuring 1702 sq. ft. along with building constructed thereon situated in the area known as Mangaldas Market, Akola. It is submitted on behalf of the petitioner that after a request was made by the Bank of Baroda for issuing a search report, he had perused the documents supplied to him and carried the requisite search at the office of Sub- Registrar, Akola of 30 years. Accordingly, he had submitted title report on 11.5.2012. He had prepared said title report with utmost care and by due diligence by safeguarding the interest of the Bank, whereas it is submitted by the Bank that when the cash credit account became NPA the Bank has issued a notice under Section 13(2) of the SARFAESI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aroda A.B. Road Branch, Indore, application submitted by M/s. Krishidhan Seeds Limited to TILR Akola for deleting the entry of charge of Bank of Baroda in Indore. Thus, it is apparent that while preparing the search report petitioner had visited the Sub- Registrar s Office, carried out the inspection of various documents and on the basis of said document he prepared the search report. At the same time he also recommended that additional affidavit of any of the Directors may be obtained to ascertain that the Company had not secured loan from any other financial institution and the property had a clear and marketable title. 11. Now a days it is a settled practice that for obtaining loan or while granting loan rendering a legal opinion has become an integral component of an Advocate s work in Banking sector. Therefore, an Advocate on his part has responsibility to act to the best of his knowledge and skills and to exhibit an unremitting loyalty to the interest of his client. An Advocate is required to exercise due diligence in a manner that would advance the interest of his client. However, while acting so the Advocate never assures his client that the opinion so rendered by him is af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal can expect. Judged by this standard, a professional may be held liable for negligence on one of the two findings, viz., either he was not possessed of the requisite skill which he professed to have possessed, or, he did not exercise, with reasonable competence in the given case, the skill which he did possess. In Pandurang Dattatraya Khandekar vs. Bar Council of Maharashtra, reported in (1984) 2 SCC 556, it is held by the Hon ble Apex Court that there is a world of difference between the giving of improper legal advice and the giving of wrong legal advice. Mere negligence unaccompanied by any moral delinquency on the part of a legal practitioner in the exercise of his profession does not amount to professional misconduct. It is held by the Hon ble Apex Court that, therefore the liability against an opining advocate arises only when the lawyer was an active participant in a plan to defraud the Bank. To determine whether the person charged has been negligent or not, he has to be judged like an ordinary competent person exercising ordinary skill in that profession. It is not expected that every professional possesses the expertise in the said branch which he practices. 12. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Index-II register no entries of the sale-deeds dated 24.04.2001, 31.08.2001, 28.09.2001 and 28.09.2001 had been made. From the aforesaid, it becomes clear that the communication dated 16.12.2019 stating that the petitioner had submitted a wrong title search report does not disclose the correct state of affairs. While the petitioner has relied upon the Index-II register of the property obtained in the year 2012 as well as in the year 2019 to support his opinion that the property had a clear and marketable title, the Bank has found that 7 shop blocks had been sold out in 2001 as per the title search report obtained by it. In this context, the advice given by the petitioner in his title search report dated 11.05.2012 that affidavit of the Directors of the Company be obtained stating that it had not obtained any loan from any financial institution and that the title was clear and marketable becomes relevant. The Bank did not obtain such affidavit from any Director of the Company. In that view of the matter it can also be said that the Bank did not exercise due care and caution despite the opinion of the petitioner contained in the title search report before advancing the loan to the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show cause within 15 days from the receipt of this show cause notice (latest by 10.08.2020) as to why your name not to be given to IBA for adding in Caution List, failing which bank will proceed ex-parte and shall at the liberty to write to IBA for adding your name in the caution list. In this context, it is also necessary to refer to Clause 3.2.3 of the Master Circular updated by the Reserve Bank of India in the matte of reporting frauds to the Reserve Bank of India. The said clause reads as under : 3.2.3. Banks should exercise due diligence while appraising the credit needs of unscrupulous borrowers, borrower companies, partnership/proprietorship concerns and their directors, partners and proprietors, etc. as also their associates who have defrauded the banks. In addition to above borrower- fraudsters, third parties such as builders, warehouse/cold storage owners, motor vehicle/ tractor dealers, travel agents, etc. and professionals such as architects, valuers, chartered accountants, advocates, etc. are also to be held accountable if they have played a vital role in credit sanction/ disbursement or facilitated the perpetration frauds. Banks are advised report to Indian Bank Assoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the show cause notice is issued thereafter, it would indicate that the Bank has made up its mind of referring the name of the professional to the IBA for inclusion in the Caution List. The opportunity of being heard thereafter would be nothing but an empty formality. Needless to state that inclusion of a professional s name in the Caution List results in far-reaching consequences, professionally as well as socially. It would have a definite effect on the career of the concerned professional. Hence, for giving a meaningful opportunity of being heard as per Clause 3.2.3 of the Master Circular, the same ought to be given to a third party prior to the Bank recording its satisfaction about the involvement of a third party-professional as regards his/her gross negligence, as in the present case. Here though the Bank has referred to a fresh title search report obtained by it on 15.10.2018, the same was neither supplied to the petitioner nor has it been placed on record in the writ petition. Had it been supplied to the petitioner, he would have had an opportunity to counter the same. On the contrary, the petitioner has placed on record material obtained after issuance of the show-cause n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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