Ajay Vijh v. Indian Banks' Association (2026): banks cannot 'Caution List' an advocate for negligence

When a bank is unhappy with a panel advocate's legal opinion, it can drop him from its panel — that much is contract. But can it, and the Indian Banks' Association (IBA), then circulate his name industry-wide on a list titled "Third Party Entities Involved in Fraud"? In Ajay Vijh v. Indian Banks' Association, decided on 7 July 2026, a Bench of Justices Pamidighantam Sri Narasimha (who authored the judgment) and Alok Aradhe held that they cannot — at least not where the only allegation is negligence. The Court used the occasion to reaffirm the independence and self-regulation of the Bar, and to float a set of systemic reforms whose fate is still open.

The facts

The appellant, an advocate enrolled in 1998, had served on the panels of several banks and financial institutions, including the respondent Canara Bank from September 2010. The dispute traces to a communication dated 27 July 2018, in which the Bank's regional manager alleged that a legal opinion the appellant had furnished on 8 August 2015 — clearing certain immovable property offered as security for a ₹2 crore credit facility — was erroneous. The land, opined to be wholly owned by the guarantor, M/s Pushpanjali Buildwell Private Limited, had in fact been partly alienated three years earlier under sale deeds dated 31 October 2012, an alienation the opinion missed.

The appellant's explanation of 17 August 2018 was that his opinion rested on a search certificate from the Sub-Registrar, Hapur, and inspection of the records, in which the sale transactions were not discernible at the relevant time. The Bank, unpersuaded, removed him from its panel by communication dated 31 January 2019 for "negligence in verification of title". It did not stop there: it forwarded his name to the IBA, and with effect from 5 February 2020 his name was entered on the Caution List titled "Third Party Entities Involved in Fraud", with the remark that he had given a "Wrong Legal Opinion And Negligence in Conducting Search". He says this was done without notice or hearing, and that its cascading effect cost him empanelment with other banks. The Allahabad High Court dismissed his writ petition on 20 November 2023, holding it not maintainable because the IBA is not "State" under Article 12.

Issue 1: Article 226 is not shackled to Article 12

The High Court's error, the Court held, was to read Article 226 through the narrow lens of Article 12. The appellant's real grievance was not his de-empanelment — a contractual matter — but the industry-wide adverse accreditation that the Caution List entry effected, casting aspersions on his competence and integrity and striking at his fundamental right to practise under Article 19(1)(g).

Tracing the settled shift from asking who the respondent is to asking what function it performs, the Bench relied on Andi Mukta Sadguru Trust v. V.R. Rudani (1989), Zee Telefilms v. Union of India (2005) and the recent S. Shobha v. Muthoot Finance (2025) for the proposition that a body — public or private — discharging a public duty is amenable to Article 226 wherever the impugned action carries a public-law element and affects legal rights. The Bombay High Court's decision in Kishor S. Bhat v. IBA, on which the High Court had leaned, was distinguished as a purely private service dispute. Here, by contrast, the challenge went to a sector-wide list issued under RBI guidelines; and the Caution List, the Court added, has a statutory footing. The writ was maintainable.

Issue 2: the Caution List is a fraud instrument, not a negligence sanction

The Court then examined the regulatory scaffolding. The RBI, exercising its power under Section 35A of the Banking Regulation Act, 1949, issued the Circular dated 16 March 2009 on the "Circulation of the names of third parties involved in frauds". Reading that circular closely, the Bench found it "deals only with fraud and has no bearing on professional advice of a lawyer". The later instruments the respondents invoked — the RBI (Frauds Classification and Reporting) Directions, 2016 and the Master Directions on Fraud Risk Management, 2024 — merely consolidate and continue the same fraud-focused framework.

The distinction the Court drew is between disengagement and declaration. A bank may freely assess a professional's work and decline to continue the engagement; an advocate has no right to be empanelled. But once banks and the IBA place an advocate's name on a list circulated to all banking institutions, that circulation "operates as a declaration" about his competence and character with serious consequences for his right to practise.

Since the case involved no allegation of fraud, collusion or criminal misconduct — only negligence in title verification — the inclusion was "unsustainable in law". The Court directed the Bank and IBA to remove the appellant's name from the Caution List with immediate effect.

Issue 3: professional conduct is the Bar Councils' exclusive domain

The third strand is the most doctrinally significant. Independence of the legal profession, the Court held, is as important as the independence of the judiciary, and is secured through self-regulation — a principle given statutory form by the Advocates Act, 1961. Drawing on Bar of Indian Lawyers v. D.K. Gandhi (2024), which held the legal profession to be sui generis, and on Supreme Court Bar Association v. Union of India (1998) and Bar Council of Maharashtra v. M.V. Dabholkar (1975), the Bench held that questions of an advocate's professional conduct, competence or negligence fall within the exclusive jurisdiction of the State Bar Councils and the Bar Council of India under Sections 35 to 38 of the Act — a complete hierarchy of notice, charge, evidence and appeal, culminating in appeal to the Supreme Court under Section 38.

The systemic directions — a work in progress

Careful to say the judgment does not undermine accountability, the Court added that the answer to concerns about the quality of legal opinions "lie not in creation of parallel structures, like declarations in Caution List's ... but in strengthening the existing regulatory mechanisms" under the Advocates Act itself. To that end it issued two forward-looking directions. First, invoking Yash Developers v. Harihar Krupa Co-operative Housing Society (2024), it directed the Bar Council of India to constitute a committee and undertake a performance audit of the disciplinary machinery it and the State Bar Councils administer — examining pendency, disposal times, regional variation and transparency — and to file an affidavit on the action proposed.

Second, it directed the BCI to institutionalise Continuing Legal Education (CLE) and to consider establishing a National Legal Academy for lawyers, modelled on the National Judicial Academy, drawing on the 184th Law Commission Report and the lapsed Advocates (Amendment) Bill, 2003, and on comparative practice in the United States, the United Kingdom, Singapore, Canada and Australia. These CLE and Academy directions are not final: the Court expressly listed the appeal for further directions on 31 August 2026, asking the BCI to file an affidavit a week in advance. They are best read as proposals in progress — a strand worth following.

Why it matters

Ajay Vijh draws a clear line around a quietly consequential banking practice. Panel advocates, valuers and chartered accountants have long faced the prospect of a Caution List entry that follows them across the sector with no hearing and no appeal. The judgment confirms two things: that such entries are reviewable under Article 226 despite the IBA's non-State status, and that the list is a fraud instrument that cannot be repurposed to punish professional negligence. For advocates specifically, it reasserts that only the Bar Councils may sit in judgment on professional conduct. The reform directions on disciplinary audit and continuing education, if they mature after 31 August 2026, could prove the more lasting legacy.

Related on Valkya

• Bar of Indian Lawyers v. D.K. Gandhi: advocates and consumer protection
• Baksish Ahmad v. Union of India: the territorial reach of Article 226
• United Bank of India v. Satyawati Tondon: writ jurisdiction and banking remedies
• Banking and SARFAESI: a May–June 2026 roundup

Sources

• Supreme Court of India, Ajay Vijh v. Indian Banks' Association & Ors., 2026 INSC 670 (judgment dated 7 July 2026)