Tuesday, 5 December 2017

Whether Advocate can file complaint U/S 138 of NI Act for his fees based on percentage of decretal amount?

In the case on
hand, the complainant being a practising advocate,
has not proved the debt amount payable towards
him by the accused, who has engaged him as his
lawyer to conduct the case. The finding of the trial
Court that there is no debt or legally enforceable
liability' does not suffer from any infirmity
warranting interference.”
14. The Bombay High Court in Re: KL Gauba AIR 1954 Bom 4789 held that fees conditional on the success of a case and which gives the lawyer an interest in the subject matter tends to undermine the status of
the profession. The same has always been condemned as
unworthy of the legal profession. If an advocate has interest in
success of litigation, he may tend to depart from ethics.
15. In in the matter of Mr. G.: A Senior Advocate of the
Supreme Court  (1955) 1 SCR 490
, this Court held that the claim of an advocate
based on a share in the subject matter is a professional
misconduct.
16. In VC Rangadurai versus D. Gopalan  (1979) 1 SCC 308, para 3110
, it was observed that
relation between a lawyer and his client is highly fiduciary in
nature. The advocate is in the position of trust.
17. Rule 20 of Part VI, Chapter II, Section II of the Standard of
Professional Conduct and Etiquette reads as follows :
“An advocate shall not stipulate for a fee
contingent on the results of litigation or agree to
share the proceeds thereof.”
18. Thus, mere issuance of cheque by the client may not debar
him from contesting the liability. If liability is disputed, the
advocate has to independently prove the contract. Claim based on percentage of subject matter in litigation cannot be
 the basis of a complaint under Section 138 of the Act.
19. In view of the above, the claim of the respondent advocate
being against public policy and being an act of professional
misconduct, proceedings in the complaint filed by him have to be
held to be abuse of the process of law and have to be quashed.
20. We may note that after the hearing was concluded, learned
counsel for Respondent No.2 mentioned the matter to the effect
that Respondent No.2 wanted to withdraw the complaint. An
e-mail to this effect was also handed over to Court. The same has
been kept on the record. However, we did not permit this prayer.
Having committed a serious professional misconduct, the
respondent No.2 could not be allowed to avoid the adverse
consequences which he may suffer for his professional misconduct.
The issue of professional misconduct may be dealt with at
appropriate forum.
21. Thus, while proceedings against the appellant will stand
quashed, the issue of professional misconduct is left to be dealt
with at the appropriate forum. 
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. 2068 OF 2017
(ARISING OUT OF SPECIAL LEAVE PETITION (CRL.) NO.10700 OF 2015)

B. SUNITHA  Vs THE STATE OF TELENGANA & ANR. 

Dated:5TH DECEMBER, 2017.

ADARSH KUMAR GOEL, J.

1. This appeal has been preferred against the order dated
14th October, 2015 of the High Court of Judicature at Hyderabad in
CRLP No.3526 of 2015, thereby, the High Court declined to quash
the proceedings initiated against the appellant under Section 138
of the Negotiable Instruments Act, 1881(‘the Act’).
2. The proceedings were initiated by the respondent who is an
advocate in whose favour the appellant executed a cheque
allegedly towards his fee. The same was dishonoured. The stand
of the appellant is that Section 138 of the Act is not attracted as2
there was no legally enforceable debt. The appellant having
already paid a sum of Rs.10 lakhs towards fee, the cheque was
taken from the appellant by way of abuse of position and the
transaction was void under Section 23 of the Indian Contract Act,
1872 (‘Contract Act’). Claim for fee based on percentage of the
decretal amount was unethical. It was submitted that the
appellant, as a client, being in fiduciary relationship, burden to
prove that the fee was reasonable and had been voluntarily agreed
to be paid was on the Advocate. The Advocate by using his
professional position could not be allowed to exploit a client by
taking signatures on a cheque and no presumption of enforceable
debt arises, specially when no account maintained in regular
course of business was furnished.
3. Reference may be briefly made to the facts on record. The
appellant’s husband died in a motor accident on 30th July, 1998.
She along with her children and parents of the deceased filed a
claim before the Motor Accident Claims Tribunal (MACT) through
the respondent as an advocate. The MACT awarded compensation.
The appellant paid a sum of Rs.10 lakhs towards fee on various
dates. However, the respondent forced the appellant to sign
another cheque of Rs.3 lakh on 25th October, 2014 despite her3
stating that she was unable to pay more fee as she had no funds in
her account. The respondent sent e-mail dated 2nd November,
2014 claiming his fee to be 16% of the amount received by the
appellant.
4. Complaint dated 11th December, 2014 was filed before the
Court under Section 138 of the Act stating inter alia that the
cheque which was issued in discharge of liability having been
returned unpaid for want of funds, the appellant committed the
offence for which she was liable to be punished. The appellant was
summoned by the Court against which she approached the High
Court stating that there was no legally enforceable debt as fee
claimed was exorbitant and against law. The claim was in violation
of Advocates Fee Rules and Ethics as fee could not be demanded
on percentage of amount awarded as compensation to the
appellant. Her signatures were taken when she was under
distress.
5. The petition was contested by the respondent by submitting
that the appellant having agreed to pay the professional fee and
having availed his professional services, she could not contest the
claim for fee. It was submitted that the respondent had engaged4
services of other senior advocates and paid huge amount for their
services at various courts including the Supreme Court.
6. The appellant, in support of her prayer for quashing, inter alia,
argued before the High Court that the fee claimed by the
respondent was against the A.P. Adovcates’ Fee Rules, 2010 of
Subordinate Courts. It was also submitted that the claim of the
respondent was against ethics and public policy and hit by Section
23 of the Contract Act.
7. The High Court held that Advocates’ Fee Rules are only for
guidance and there was no bar to fee being claimed beyond what
is fixed under the Rules. The claim of the respondent was that the
amount included his fee for engaging an advocate in the High
Court and the Supreme Court. Thus, the High Court dismissed the
quashing petition.
8. We have heard learned counsel for the parties and perused the
record.
9. The main contention raised on behalf of the appellant is that
charging percentage of decretal amount by an advocate is hit by
Section 23 of the Contract Act being against professional ethics
and public policy, the cheque issued by the appellant could not be5
treated as being in discharge of any liability by the appellant. No
presumption arose in favour of the respondent that the cheque
represented legally enforceable debt. In any case, such
presumption stood rebutted by settled law that claim towards
Advocate’s fee based on percentage of result of litigation was
illegal. Signing of the cheque was by way of exploitation of
fiduciary relationship of Advocate and the client.
10. In support of his submission that charging of exorbitant fee
and calculating the sum with reference to the result of the
litigation was against public policy, reliance has been placed on
judgments of this Court in In the matter of Mr. G., a Senior
Advocate of the Supreme Court1
, R.D. Saxena versus
Balram Prasad Sharma2
, V.C. Rangadurai versus D.
Gopalan3
11. Learned counsel for Respondent No.2-complainant supports
the impugned order. He submitted that the cheque of the
appellant having dishonored, statutory presumption was available
in his favour and no ground was made out for quashing. There was
no legal bar to the claim of the complainant towards his
1 (1955) 1 SCR 490 at 494
2 (2000) 7 SCC 264, para 41
3 (1979) 1 SCC 3086
professional fees. Learned counsel for the complainant did not
dispute that a sum of Rs.10 lakhs has already been received
towards fee. There was no written agreement about the quantum
of fee nor any account was maintained. He also did not dispute
the e-mail dated 2nd November, 2014 wherein basis of the claim of
fee is 16% of the decretal amount received by the appellant.
12. The first question which needs consideration is whether fee
can be determined with reference to percentage of the decretal
amount. Second question is whether the determination of fee can
be unilateral4
 and if the client disputes the quantum of fee whether
the burden to prove the contract of fee will be on the advocate or
the client. Third question is whether the professional ethics require
regulation of exploitation in the matter of fee.
13. One of the issues was dealt with by a single Bench Judgment
of the Madras High Court in C. Manohar versus B.R. Poornima5
.
R. Banumathi, J (as her Lordship then was) held that no
presumption could arise merely by issuance of a cheque that
amount stipulated in the cheque was payable towards fee. In
absence of independent proof, issuance of cheque could not
furnish cause of action under Section 138 of the Act in the context
4 J.S. Vasu versus State of Punjab (1994) 1 SCC 184, para 20
5 (2004) Crl.L.J 4437
of an advocate or client. The observations relevant in the context
are as follows :
“The case in hand is an example of the present day
trend of the legal profession. Legal profession is
essentially service oriental. Ancestor of today's
lawyers was no more than a spokesperson, who
rendered his services to the needy members of the
society, by putting forth their case before the
authorities. Their services were rendered without
regard to remuneration received or to be received.
With the growth of litigation, legal profession
became a full time occupation. The trend of the
legal profession has changed ... profession has
almost became a trade. There is no more service
orientation.
12. The relationship between the lawyer and the
client is one of trust and confidence. The client
engages a lawyer for personal reasons and is at
liberty to leave him for the same reasons.
Considering the relationship between the lawyer
and the client and the present day trend in the
profession, it has to be carefully seen whether the
complainant has proved that the amount due of Rs.
43.600/- is being payable towards him.
13. To attract the penal provisions under Section
138 N. I. Act, a cheque must have been drawn by
the accused on an account maintained by him with
a banker for payment of any amount of money to
another person from out of that account for the
discharge in whole or in part, of any debt or other
liability due. That means, the cheque must have
been issued in discharge of debt or other liability
wholly or in part. The cheque given for any other
reasons not for the satisfaction of any debt or other
liability, even if it is returned unpaid-, will not meet
with penal consequences.
14. Case of the complainant is that on behalf of the
accused, he has filed claim petitions in M. C. O. P.
Nos. 2339 of 1992 and 246 of 1993. Two civil cases
were also filed. There is nothing to show that the
complainant/Advocate himself has paid the stamp
duty and bore the legal fees. The complainant has
not produced any agreement showing as to what
was the arrangement between him and the
accused, as to how much is the fee payable and
whether the accused agreed for payment of stamp
duty by her counsel itself. In the absence of any
agreement, Ex. P-1 cheque cannot be said to have
been issued for the purpose of discharge of any
substantial debt or liability. Urging the Court to
raise the presumption under Section 139 N. I. Act,
the learned counsel for the appellant has relied
upon M/s. Modi Cements Ltd. versus Kuchil Kumar
Nandi [(1998) 3 SCC 249] wherein the Supreme
Court has held that once the cheque is issued by
the drawer a presumption under Section 139 N. I.
Act must follow and merely because the drawer
issues a notice to the drawee (Payee) or to the
Bank for stoppage of the payment it will not
preclude an action under Section 138 of the Act by
the drawee (Payee) or the holder of a cheque in
due course. Of course, under Section 139 N. I. Act,
there is a presumption that unless the contrary is
proved, the holder of the cheque received the
cheque for the discharge in whole or in part of any
debt or other liability. But even in Section 139 N. I.
Act, the legal presumption is created only for the
cheque so received for the discharge in whole or in
part of any debt or other liability. In the case on
hand, the complainant being a practising advocate,
has not proved the debt amount payable towards
him by the accused, who has engaged him as his
lawyer to conduct the case. The finding of the trial
Court that there is no debt or legally enforceable
liability' does not suffer from any infirmity
warranting interference.”
14. The Bombay High Court in Re: KL Gauba6
 held that fees
conditional on the success of a case and which gives the lawyer
6 AIR 1954 Bom 4789
an interest in the subject matter tends to undermine the status of
the profession. The same has always been condemned as
unworthy of the legal profession. If an advocate has interest in
success of litigation, he may tend to depart from ethics.
15. In in the matter of Mr. G.: A Senior Advocate of the
Supreme Court7
, this Court held that the claim of an advocate
based on a share in the subject matter is a professional
misconduct.
16. In VC Rangadurai versus D. Gopalan8
, it was observed that
relation between a lawyer and his client is highly fiduciary in
nature. The advocate is in the position of trust.
17. Rule 20 of Part VI, Chapter II, Section II of the Standard of
Professional Conduct and Etiquette reads as follows :
“An advocate shall not stipulate for a fee
contingent on the results of litigation or agree to
share the proceeds thereof.”
18. Thus, mere issuance of cheque by the client may not debar
him from contesting the liability. If liability is disputed, the
advocate has to independently prove the contract. Claim based on
7 (1955) 1 SCR 490
8 (1979) 1 SCC 308, para 3110
percentage of subject matter in litigation cannot be the basis of a
complaint under Section 138 of the Act.
19. In view of the above, the claim of the respondent advocate
being against public policy and being an act of professional
misconduct, proceedings in the complaint filed by him have to be
held to be abuse of the process of law and have to be quashed.
20. We may note that after the hearing was concluded, learned
counsel for Respondent No.2 mentioned the matter to the effect
that Respondent No.2 wanted to withdraw the complaint. An
e-mail to this effect was also handed over to Court. The same has
been kept on the record. However, we did not permit this prayer.
Having committed a serious professional misconduct, the
respondent No.2 could not be allowed to avoid the adverse
consequences which he may suffer for his professional misconduct.
The issue of professional misconduct may be dealt with at
appropriate forum.
21. Thus, while proceedings against the appellant will stand
quashed, the issue of professional misconduct is left to be dealt
with at the appropriate forum. 11
22. However, apart from the present individual case, the general
issue, having been highlighted, may need further consideration by
this Court in the larger interest of the legal profession and the
system of administration of justice.
23. Undoubtedly, the legal profession is the major component of
the justice delivery system and has a significant role to play in
upholding the rule of law. Significance of the profession is on
account of its role in providing access to justice and assisting the
citizens in securing their fundamental and other rights. Can justice
be secured with the legal professionals failing to uphold the
professional ethics? This Court has even earlier expressed the
concern on the falling professional norms in the legal profession9
.
In Tahil Ram Issardas Sadarangani versus Ramchand
Issardas Sadarangani10 , this Court noted the trend of increasing
element of commercialization and decreasing element of service.
In VC Rangadurai (supra)11
, this Court observed that confidence
of the public in the legal profession was integral to the confidence
of the public in the legal system. Commercialization to the extent
of exploiting the litigant and misbehavior to the extent of
9 R.K. Anand v. Delhi High Court (2009) 8 SCC 106, para 333 ; Sanjiv Datta, Deputy
Secretary, Ministry of Information and Broadcasting, In Re. (1995) 3 SCC 619, para 20.
10 1993 Supp. (3) SCC 256,
11 Paras 30 to 3212
browbeating the Court, breach of professional duties to the court
and the litigant on the part of some members of the legal
profession, affecting the right of the litigants to speedy and
inexpensive justice, need to be checked. This has also been
observed earlier in the decisions of this Court12
.
24. In its 131st Report dated 31st August, 1988, the Law
Commission of India, examined the role of the legal profession in
strengthening the system of administration of justice. The issue
considered included :
(i) the state of profession and its public
image;
(ii) profession’s attitude towards the
policy of social change intended
under the Constitution;
(iii) the functioning of the Bar Councils
and the question of disciplinary
jurisdiction;
(iv) the strike by lawyers, its implications
and fall out;
(v) the question of hobnobing between
the Bar and politicians, between the
Bar and the Judiciary;
(vi) regulation and standardization of fees
chargeable by the members of the
profession in relation to the
12 O.P. Sharma versus State of Punjab (2011) 6 SCC 86, paras 18 to 23; R.D. Saxena versus
Balram Prasad Sharma (2000) 7 SCC 264, paras 14,28,41,4213
monopolistic character of the
profession.”
25. It was observed that recurring strikes by the bar had
contributed to the piling up of arrears jeopardizing the consumers
of justice and has thus led to weakening the system of
administration of justice13. While considering the mounting cost of
litigation, it was observed that fee charged by some senior
advocates are astronomical in character. The corporate sector is
willing to retain talent at a high cost. It develops into a culture
and it permeates down below14. Role of the legal profession in
strengthening the administration of justice must be in consonance
with the mandate of Article 39A to ensure equal opportunity for
access to justice. The legal profession must make its services
available to the needy by developing its public sector. It was
observed that like public hospitals for medical services, the public
sector should have a role in providing legal services for those who
cannot afford fee15. Maintenance of irreducible minimum
standards of the profession is a must for ensuring accountability of
the legal profession16. The methodology was required to be devised
13 Para 2.17
14 Paras 2.22, 2.24
15 Para 3.30
16 Paras 3.4, 3.8, 3.2514
as a part of social audit of the profession wherein consumers of
justice were required to be given role17
.
26. Referring to the lawyers’ fee as barrier to access to justice, it
was observed that it was the duty of the Parliament to prescribe
fee for services rendered by members of the legal profession. First
step should be taken to prescribe floor and ceiling in fees18
.
27. With regard to the role of the legal profession for strengthening
the administration of justice, it was observed that members of the
legal profession could have a decisive say in law making being
largest group in legislative bodies19. They could contribute to
reduce the litigation instead of perpetuating disputes by
counseling the parties and could contribute to reduce the delay in
proceedings20. Alternative modes of resolution of disputes should
be explored and one such may be pre-trial conciliation
proceedings21. Reducing the number of witnesses to be examined
by deleting the irrelevant witnesses reducing the length of
cross-examination by avoiding unnecessary questions22 and
avoiding adjournments could help the administration of justice.
17 Para 3.31
18 Para 3.28
19 Para 3.6
20 Para 3.11, 3.13
21 Para 3.21
22 Para 3.1715
28. Though the 131st Report was submitted in the year 1988, no
effective law appears to have enacted to regularize the fee or for
providing the public sector services to utmost needy litigants
without any fee or at standardized fee. Mechanism to deal with
violation of professional ethics also does not appear to have been
strengthened. Success of administration of justice to a great
extent depends on successful regulation of legal profession in the
light of mandate under Article 39A for access to justice. Deficiency
in the working of the present regulatory mechanism has been
acknowledged by this Court in several decisions23. Mandate for the
Bench and the bar is to provide speedy and inexpensive justice to
the victim of justice and to protect their rights. The legal system
must continue to serve the victims of injustice.
29. In view of this mandate, this Court requested the Law
Commission to have a re-look at the regulatory mechanism and
expressed the hope that the Government of India will consider the
recommendation of the Law Commission. In its 266th Report dated
23rd March, 2017 submitted in the light of decision of this Court in
Mahipal Singh Rana (supra), it was noted that conduct of
members of the legal profession who do not follow ethics
23 Mahipal Singh Rana Advocate versus State of Uttar Pradesh (2016) 8 SCC 335, para 5616
contributes to the pendency of cases. Element of public service
has to remain predominant. The Commission noted that there was
a huge loss of working days by call of unjustified strikes in
jurisdiction of various High Courts resulting in denial of justice to
the litigant in public24. Such dilatory tactics including seeking
adjournments on unjustified grounds affect the speedy disposal of
cases. The Commission also noted the instances of browbeating
the courts for getting favourable orders obstructing administration
of justice25. The Law Commission also noted the contemptuous
conduct of some members of the legal profession26
.
30. The Law Commission thereafter considered the issue of review
of regulatory framework of the legal profession. Referring to the
developments in other countries it was observed that there was
dire necessity of reviewing regulatory mechanism not only in the
matter of discipline and misconduct but also in other areas. It was
suggested that constitution of the Bar Council required a change
for which an Amendment Bill was also recommended27
.
31. We hope that the concerned authorities in the Government will
take cognizance of the issue of introducing requisite legislative
24 Para 6.3
25 Paras paras 8.7 to 8.12, 8.14 to 8.19
26 Chapter IX
27 Para 17.1017
changes for an effective regulatory mechanism to check violation
of professional ethics and also to ensure access to legal services
which is major component of access to justice mandated under
Article 39A of the Constitution.
32. The appeal stands disposed of accordingly.
…………………………………..J.
 [ADARSH KUMAR GOEL]
…………………………………..J.
 [UDAY UMESH LALIT]
NEW DELHI;
5TH DECEMBER, 2017.

Print Page

No comments:

Post a Comment