Bombay High Court Grants Relief To Advocate Put On Indian Bank Association's 'Caution List' For Alleged Negligence In Vetting Properties

A division bench Justice AS Chandurkar and Justice Jitendra Jain observed that the empanelled advocate was not responsible for obtaining certified copies of documents and conducting inspection of the properties against which loans, that later turned out to be fraudulent, were issued.

“the reasons given for placing the Petitioner on Caution List were really the responsibility of the officials of Respondent No.1 (SBI) as per these guidelines, which appears to have not been observed by the officials of Respondent No.1. These responsibilities, now post unearthing of the fraud, cannot be shifted to the Petitioner to pass the buck.”

The Court allowed Advocate Shailesh Vishwanath Jambhale's writ petition seeking a direction to the IBA to remove his name from the caution list.

In 2012, Jambhale, a practicing advocate, was empanelled as a Panel Advocate of the State Bank of Hyderabad, now merged with the State Bank of India (SBI). The bank engaged Jambhale to obtain Search and Title Reports for properties intended for loan sanction.

Jambhale issued three Search and Title Reports to SBI in October and November 2014. Subsequently, it came to light that loans sanctioned by SBI against these properties were associated with fraudulent activities.

SBI issued show cause notices to Jambhale in June 2015 and June 2016, alleging lapses in furnishing the Title and Search Reports without due care and caution. Jambhale denied these allegations, contending that he discharged his duties diligently.

In August 2018, the IBA informed him of his placement on the "Caution List". The reasons cited for this action included Jambhale's purported failure to obtain certified copies of link documents, examine original documents, and adequately compare documents with records from the Sub-Registrar's office.

Further, the advocate's alleged gross negligence in verification of documents resulted in preparation of a fraud of Rs. 4.69 Crores in respect of 6 Housing/Mortgage loans, as per the bank. Thus, Jambhale filed the present petition before the high court.

The court scrutinized the guidelines issued by SBI, noting that responsibility for ensuring compliance rested primarily with the bank officials. As per the guidelines, the bank officials had the responsibility of conducting independent property inspections and obtaining affidavits that the mortgager has full and absolute powers to mortgage, free of any encumbrances.

The court observed that these guidelines were not followed, and highlighted discrepancies in SBI's conduct, such as issuing demand drafts before receipt of title reports.

The court noted that Jambhale explicitly stated in the Search and Title Reports that the documents scrutinized were photocopies provided by the bank. The court emphasized that the bank was aware of this fact and thus could not allege negligence against the petitioner for using photocopies instead of certified copies. The petitioner had also highlighted steps to be taken by the bank for due diligence before sanctioning loans, the court noted.

The court further noted that certain circulars addressing procedures were not brought to the petitioner's attention during empanelment. The court also pointed out specific instances where SBI's actions contradicted allegations against the petitioner.

The court also noted the lack of adverse remarks against the petitioner's performance before 2015 and questioned the absence of show cause notices in similar fraud cases involving the petitioner.

The bank's admission that the petitioner wasn't involved in fraud or loan processes, coupled with the absence of criminal proceedings against him, further weakened the negligence claim. The court highlighted the petitioner's eight-year professional setback due to being on the Caution List and held that permanent listing in the Caution List is too harsh.

The court concluded that the petitioner's listing lacked fraud elements and disregarded the petitioner's expressed opinions in the reports. It directed the removal of the petitioner's name from the Caution List.

Case no. – Writ Petition No. 14373 of 2018

Case Title – Shailesh Vishwanath Jambhale v. The General Manager, State Bank of India

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