New Delhi, July 8 -- The Supreme Court on Tuesday ruled that neither banks nor the Indian Banks' Association (IBA) can bypass the disciplinary framework under the Advocates Act by declaring an advocate professionally negligent or incompetent through circulation of caution lists, holding that such action is "illegal, unsustainable and impermissible". In a parallel push to strengthen accountability within the legal profession, a bench of justices PS Narasimha and Alok Aradhe directed the Bar Council of India (BCI) to undertake a comprehensive performance audit of the disciplinary mechanisms of the BCI and state bar councils, and asked it to consider establishing a National Legal Academy on the lines of the National Judicial Academy to institutionalise continuing legal education and professional training for lawyers. Authored by Justice Narasimha, the court held that while banks are free to discontinue the services of a panel advocate if dissatisfied with the quality of legal advice, they cannot publicly brand a lawyer as professionally incompetent or circulate adverse remarks among other banks. If a bank believes an advocate has committed professional negligence or misconduct, the court held, its remedy lies in approaching the concerned state bar council, which alone has exclusive disciplinary jurisdiction under the Advocates Act. "The appropriate remedy is to place the relevant material before the competent State Bar Council... 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," said the bench. The court added that such parallel mechanisms undermine the Bar's constitutionally protected independence and its self-regulatory character, which forms an integral part of judicial independence. The judgment arose from an appeal filed by an advocate whose name was included in an IBA caution list circulated among banks after Syndicate Bank (now Canara Bank) alleged that he failed to disclose that part of a mortgaged property had already been sold while furnishing a title verification report. The lawyer contended that the listing destroyed his professional reputation, led to termination of empanelment by several banks and was carried out without following principles of natural justice. Allowing the appeal, the Supreme Court set aside the Allahabad High Court's judgment and directed the immediate removal of the advocate's name from the caution list. It also held that the writ petition challenging the IBA's action was maintainable because maintenance and operation of the caution list has sufficient public law character despite the IBA not being "State" under Article 12. A central feature of the judgment is the court's distinction between fraud and professional negligence. Examining RBI's circulars from 2009 onwards governing reporting of third parties involved in banking frauds, the bench held that the regulatory framework was designed exclusively to identify professionals who knowingly facilitate fraud and not lawyers accused of rendering negligent legal opinions. "The 2009 Circular deals only with fraud and has no bearing on professional advice of a lawyer," noted court after examining the RBI guidelines. The bench added that while fraud necessarily involves dishonest intent or collusion, the present case involved only alleged negligence in conducting title verification. "An erroneous legal opinion or an omission in the course of due diligence, absent any allegation of dishonest intent or deliberate facilitation of illegality, cannot be elevated to the level of fraud," it said. The bench also clarified that banks remain free to assess the quality of legal services received and terminate or refuse empanelment since such relationships are contractual and founded on trust. However, circulating caution lists portraying an advocate as professionally incompetent amounts to "professional blacklisting" with serious consequences for the advocate's fundamental right to practice under Article 19(1)(g). The judgment contained an elaborate discussion on the constitutional status of the legal profession. Calling the legal profession "sui generis", the bench said advocates cannot be equated with other professionals because they are officers of the court and indispensable participants in the administration of justice....