Supreme Court Criminal liability against opining advocate arises only when the lawyer was an active participant in the plan to defraud

The Supreme Court, in a recent decision in Central Bureau of Investigation, Hyderabad vs. K. Narayana Rao ruled that a lawyer cannot be prosecuted for a criminal offence if he gave a legal opinion to a bank, which was found to be wrong, unless there was evidence to show that he was part of a conspiracy for causing a loss to the bank..The Supreme Court, in a recent decision in Central Bureau of Investigation, Hyderabad vs. K. Narayana Rao ruled that a lawyer cannot be prosecuted for a criminal offence if he gave a legal opinion to a bank, which was found to be wrong, unless there was evidence to show that he was part of a conspiracy for causing a loss to the bank..The Division Bench of Justices P. Sathasivam and Ranjan Gogoi said, “Merely because a lawyer’s opinion may not be acceptable, he couldn’t be mulcted with the criminal prosecution, particularly, in the absence of tangible evidence that he associated with other conspirators”..The apex court was hearing an appeal filed by the CBI against a decision of the Andhra Pradesh High Court wherein the High Court had quashed criminal proceedings against one K. Narayana Rao, a legal practitioner and panel advocate for Vijaya Bank. Upholding the decision of the High Court, the Supreme Court said, “Liability against an opining advocate arises only when the lawyer was an active participant in a plan to defraud the Bank”..The allegation against KN Rao was that he had submitted a false legal opinion to Vijaya Bank in respect of 10 housing loans in the capacity of a panel advocate and defrauded the Bank. It was alleged that KN Rao did not point out the actual ownership of the properties nor did he point out the falsities in the permissions for construction issued by the Municipal Authorities. Thus the KN Rao’s legal opinion, it was alleged, had caused a huge loss to the Bank..Additional Solicitor General, H.P. Raval appeared for the CBI while KN Rao was represented by Senior Advocate Venkataramani..Senior Advocate Venkataramani argued that KN Rao had rendered Legal Scrutiny Reports in all the cases after perusing the documents submitted by the Bank. It was argued that the rendition of legal opinion cannot be construed as an offence. He further pointed out that it is not possible for the panel advocate to investigate the genuineness of the documents and in the present case, he only perused the contents and concluded whether the title was conveyed through a document or not..The Court held, “There is no evidence to prove that the advocate was abetting or aiding the original conspirators. At the most, he may be liable for gross negligence or professional misconduct if it is established by acceptable evidence but cannot be charged for the offence under Section 420 (cheating) and 109 (abetment) along with other conspirators without proper and acceptable link between them”..The Court also made some interesting observations on lawyers rendering legal opinion:.“In the banking sector in particular, rendering of legal opinion for granting of loans has become an important component of an advocate’s work. .In the law of negligence, professionals such as lawyers, doctors, architects and others are included in the category of persons professing some special skills..A lawyer does not tell his client that he shall win the case in all circumstances. Likewise a physician would not assure the patient of full recovery in every case.…. The only assurance which such a professional can give or can be given by implication is that he is possessed of the requisite skill in that branch of profession which he is practising and while undertaking the performance of the task entrusted to him, he would be exercising his skill with reasonable competence. This is what the person approaching the professional 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.”.The Court also referred to an earlier decision Pandurang Dattatraya Khandekar vs. Bar Council of Maharashtra & Ors. wherein the Court had held 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 part of a legal practitioner in the exercise of his profession does not amount to professional misconduct.”.However, the Court said, “it is beyond doubt that a lawyer owes an ‘unremitting loyalty’ to the interests of the client and it is the lawyer’s responsibility to act in a manner that would best advance the interest of the client.”