BAR COUNCIL OF ANDHRA PRADESH v. K.

SATYANARAYANA

BENCH: J. V.N. KHARE and J. A. BHAN

Dated: 15.11.2002

FACTS OF THE CASE

1. The Bar Council of Andhra Pradesh has filed this appeal against the order of the Disciplinary
Committee of the Bar Council of India dated 28 th March, 1999 by which the Bar Council of
India has set aside the order passed by the State Bar Council removing the name of the
Kurapati Satyanarayana from the roll of the State Bar Council as he was found guilty of grave
professional misconduct in discharge of his duties.

2. Initially, O.S. No 1624 of 1991 was filed by the Shri. Gutta Nagabhushanam on the file of the
Additional District Munsif Magistrate. The said suit was decreed and the Execution Petition
No. 112 of 1995 was instituted for realization of the decretal amount. Mr. K. Satyanarayana
was engaged as counsel by Shri. G. Nagabhushanam in the execution proceedings[1].

3. K. Satyanarayana received a total sum of Rs. 14600/- on various dates in the execution
proceedings but he did not make the payment of same to Shri. G. Nagabhushanam. Hence,
on 18th October, 1996 Shri. G. Nagabhushanam filed a complaint with the Additional District
Munsif, who then transferred the matter to the Bar Council of Andhra Pradesh.

4. The complaint filed and important documents were forwarded to the state Bar Council and
Mr. K. Satyanarayana chose not to file a counter. Hence the matter went to its Disciplinary
Committee which after examining the witnesses produced came to the conclusion that Mr.
K. Satyanarayana received the total sum of Rs. 14600/- belonging to Shri. G.
Nagabhushanam and retained the same with him. Hence, the disciplinary committee of the
State Bar Council concluded that the advocate had retained the money with him and was
thus guilty of “professional misconduct.” He was directed to return the money to the
complainant[2].

5. K. Satyanarayana asserted that he had informed Shri. G. Nagabhushanam through a post

card about the receipt of the decretal amount and that on 24 th April, 1996 he paid Rs.
11000/- to Shri. G. Nagabhushanam. However, these were not accepted by the Disciplinary
Committee as Mr. K. Satyanarayana failed to produce any evidence proving the payment of
the sum of Rs. 11000/-[3].

6. K. Satyanarayana then filed an appeal before the Disciplinary Committee of the Bar
Council of India. The Disciplinary Committee of the BCI agreed with the finding of fact
recorded by the State Bar Council that Mr. K. Satyanarayana failed to pay the amount of Rs.
14600/- received by him on the behalf of Shri. G. Nagabhushanam in the execution
proceedings but came to the conclusion that Mr. K. Satyanarayana did not commit any
professional misconduct though there might have been some negligence on his part[4].
 7. The Disciplinary Committee of BCI observed that the conduct of the appellant shows that
Mr. K. Satyanarayana never refused to return the money the same and also he had made
part payment of the total amount. Perusal of the file shows that Mr. K. Satyanarayana could
not make the payment of the remaining amount because of his family circumstances as the
remaining amount was utilized by him in his treatment. The Committee concluded that Mr.
K. Satyanarayana never wanted to misappropriate the decretal amount and hence, the BCI
set aside the State Bar Council’s order holding that the delinquent had not committed any
professional misconduct though there might have been some negligence on his part, which
did not involve any moral turpitude[5].

8. The Bar Council of Andhra Pradesh has filed this appeal against the aforesaid order of the
Disciplinary Committee of the Bar Council of India.

ISSUES INVOLVED

1. Whether or not retaining client’s money in this case amounts by an advocate amounts to
professional misconduct?

2. Whether or not in this case retaining client’s money is just negligence on the part of K.
Satyanarayana?

3. Whether or not K. Satyanarayana is guilty of professional misconduct?

ARGUMENTS BY BOTH THE PARTIES

 The appellant Bar Council of Andhra Pradesh filed appeal petition against the order of the
Bar Council of India which set aside its order of removing the name of K. Satyanarayana from
the State roll as it was of view that he committed one of the gravest professional misconduct
as he retained money belonging to Shri. G. Nagabhushanam[6].

 The point which was raised by the respondent that the appeal filed by the Bar Council of
Andhra Pradesh is not maintainable as it is not the person aggrieved so this appeal is not
maintainable.

DECISION BY THE SUPREME COURT

 The Supreme Court said that the pleading of the point raised by the respondent that the
appeal filed by the Bar Council of Andhra Pradesh is not maintainable need not be
dilated as seven Judge Constitution Bench of this Court held in Bar Council of
Maharashtra  M. V. Dabholkar and others[7], that the role of Bar Council is of dual capacity,
one as the prosecutor through its Executive Committee and the other quasi-judicial
performed through its Disciplinary Committee.

 The Supreme Court said that the finding of the BCI that there was no intention on the part
of the advocate to misappropriate the money of his client was not only “unfounded and
perverse” but also lacked the serious thought which was required to be given to the
disciplinary committee of the BCI in the discharge of quasi-judicial functions while probing
into such grave instances.
  Further, it said that it was neither pleaded nor shown that Mr. K. Satyanarayana was in dire
financial difficulty which promoted him to utilize the decretal amount for his treatment
which was with him in trust. This is an act of breach of trust. It said that “we are firmly of
the view that such types of excuses cannot be entertained being frivolous and
unsustainable”.

 Bench comprising Justice V. N. Khare and Justice Ashok Bhan said “adherence to correct
professional conduct in the discharge of one’s duties as an advocate is the backbone of legal
system. Any laxity while judging the misconduct which is not bona fide  and dishonest
advocate would undermine the confidence of the litigant public resulting in the collapse of
legal system[8].”

 The Supreme Court referred to the case of Harish Chandra Tiwari  Baiju[9], in which it was
held that “Amongst the various types of misconduct envisaged for a legal practitioner the
misappropriation of the client’s money must be regarded as one of the gravest.” It was
observed that, “Among the different types of misconduct envisaged for a legal practitioner
misappropriation of the client’s money must be regarded as one of the gravest. In his
professional capacity, the legal practitioner has to collect money from the client towards
expenses of the litigation or withdraw money from the Court payable to the client or take
money of the Client to be deposited in Court. In all such cases, when the money of the client
reaches his hand it is a trust. If a public servant misappropriates money he is liable to be
punished under the present Prevention of Corruption Act, with imprisonment which shall
not be less than one year. He is certain to be dismissed from service. But if an advocate
misappropriates money of the client there is no justification in de-escalating the gravity of
the misdemeanor. Perhaps the gravity of such breach of trust would be mitigated when the
misappropriation remained only for temporary period. There may be a justification to award
a lesser punishment in a case where the delinquent advocate the money before
commencing the discplnnary proceedings.”

 Setting aside the BCI’s order, the Bench said that “the conduct of the delinquent, who is an
elderly gentleman, is reprehensible and is unbecoming of an advocate. It deeply pains us
that the delinquent who claimed to have practised for three decades and has worked as
Government advocate for four years should have been guilty of such serious misconduct.”

 Hence, the Supreme Court has upheld an order of the Andhra Pradesh Bar
Council removing the name of a lawyer from its rolls after he was found guilty of “grave
professional misconduct” in the discharge of his duties and also the appellant shall be
entitled to the costs of this appeal, which was assessed as Rs. 5000/-.

STATUTORY LAW

 An advocate is the most accountable, privileged and erudite person of the society and his
acts are role model for the society, which are necessary to be regulated[10]. Professional
misconduct is the behaviour outside the bounds of what is considered acceptable or worthy
of its membership by the governing body of a profession[11]. Professional misconduct refers
to disgraceful or dishonourable conduct not befitting an advocate[12].
  The Advocates Act, 1961 as well Indian Bar Council are silent in providing exact definition for
profession misconduct because of its scope, though under Advocate Act, 1961 to take
disciplinary action punishment are prescribed when the credibility and reputation on the
profession comes under a clout on account of acts of omission and commission any member
of the profession.

 Chapter V of the Advocate Act, 1961, deals with the conduct of Advocates. It describes
provisions relating to punishment for professional and other misconducts. Section 35(1) of
the Advocate Act, 1961, proviso says, is relevant in this context. This proviso say, where on
receipt of a complain otherwise a State Bar Council has reason to believe that any advocate
on its roll has been guilty of professional or other misconduct, it shall refer the case for
disposal to it disciplinary committee.

 Under Section 35 of the Act, the State Bar Council is empowered to initiate proceedings
against an advocate for misconduct, either on a complaint or on its own. The Bar Council of
India under Section 36 can likewise initiate such proceeding and also has the power to
withdraw such proceedings pending before any State Bar Council and inquire into such cases
on its own. If misconduct is proved in such case before the Bar Council such action may be
taken, such as suspension of practice for a period, or in grave cases striking the name of such
advocates of the roll. In such cases the advocate can prefer an appeal to the Bar Council of
India, and further to the Supreme Court under section 37 and 38 respectively. It is
noteworthy that the Act does not provide for withdrawal of complaint. A complaint once
filed cannot be withdrawn and the process of inquiry once set in motion cannot be stopped.

 Part-VI, Chapter- II of the Bar Council of India Rules provide Standards of Professional
Conduct and Etiquette for advocates. Rule 24 of the aforesaid Chapter provides that an
advocate shall not do anything whereby he abuses or takes advantage of the confidence
reposed in him by his client and then Rule 25 says that an advocate should keep accounts of
the client’s money entrusted to him.

Further Rule 27 provides that where any amount is received or given to him on behalf of his client,
the fact of such receipt must be intimated to the client, as early as possible[13].

POSITION OF LAW BEFORE THIS JUDGMENT

In the case of Smt. Siya Bai v. Sita Ram[14], the advocate withdrew the decretal amounts paid and
did not make the payment to the client. He pleaded that the amount withdrawn was adjusted
towards the fee and other expenses but it was not found true and not accepted and therefore,
found guilty of professional misconduct for illegally retaining the amount. The Disciplinary
Committee of the Bar Council of India ordered the advocate to refund the money to the complainant
along with the 10% interest per annum and also ordered suspension of advocate for a period of one
year.

Also, Kerala High Court In Re: An Advocate vs Unknown[15], it was found that the Advocate had
withdrawn Rs. 270/- deposited by the judgment-debtor in the case for payment to the complainant-
decree-holder as per the Debt Relief Act, but has not paid the same to the complainant in spite of
repeated demands and a registered notice through counsel and it was held by the Court that “It is
the imperative duty of the counsel on receipt of the client’s money, to inform the client thereof and
pay him without any delay the amount under receipt. For non-fulfillment of this duty on the part of
the counter-petitioner we suspend him from practice for a period of six months with effect from the
date of service on him of a copy of this order by the learned Munsiff of Pathanamthitta in whose
court he is reported to be practising[16].”

Hence, from the above judgments, we can see that earlier also, retaining and misappropriation of
Client’s money by an advocate was held to be a professional misconduct by the Disciplinary
Committee of BCI and the Hon’ble High Court and now also, Supreme Court has held it to be one of
the gravest professional misconducts by an advocate. So, we can say that there is no significant
change in the position of law before the judgment was passed and after it.

SIGNIFICANCE OF THE JUDGMENT

 The Supreme Court in this case reiterated the observations made in Bar Council of
Maharashtra  M. V. Dabholkar and others[17] that the role of Bar Council is of dual capacity,
one as the prosecutor through its Executive Committee and the other quasi-judicial
performed through its Disciplinary Committee. Hence, being the prosecutor, the State Bar
Council would be an ‘aggrieved person’ and therefore, the appeal under section 38 of the
Advocates Act, 1961 would be maintainable.

 The Supreme Court also reiterated the principle that Misappropriation of client’s money is
an act of grave misconduct[18].

 It was observed by the Hon’ble Supreme Court that this is an act of breach of

trust. Advocate is the backbone of legal system. Any laxity while judging the misconduct
which is not bona fide  and dishonest advocate would undermine the confidence of the
litigant public resulting in the collapse of legal system.

POSITION IN AMERICA

Disciplinary Rule [DR] 9-102 of the American Bar Association (ABA) Code[19] requires that client
funds should be deposited and maintained in a separate bank account apart from funds belonging to
the lawyer or law firm. The Disciplinary Rules are mandatory in character[20]. They “state the
minimum level of conduct below which no lawyer can fall without being subject to disciplinary
action”.

The New Jersey Supreme Court in In re Lennan[21] reaffirmed the rule that misappropriation will
trigger automatic disbarment. Moreover, the court in Lennan  essentially stated that no mitigating
circumstances would prevent disbarment where the attorney knowingly misappropriates funds.

Moreover, In re Addams[22], Washington D.C. Court of Appeals held that except where the
misappropriation is the result of simple negligence, virtually in all cases of misappropriation,
disbarment will be the appropriate action[23].

Hence, we can see that position of law in America and in India in case of misappropriation of
client’s money is almost same.

CONCLUSION
The role of the lawyers in the society is of great importance. They being part of the system of
delivering justice holds great reverence and respect in the society. Each individual has a well defined
code of conduct which needs to be followed by the person living in the society. A lawyer in
discharging his professional assignment has a duty to his client, a duty to his opponent, a duty to the
court, a duty to the society at large and a duty to himself. It needs a high degree of probity and poise
to strike a balance and arrive at the place of righteous stand, more so, when there are conflicting
claims. While discharging duty to the court, a lawyer should never knowingly be a party to any
deception, design or fraud. While placing the law before the court a lawyer is at liberty to put forth a
proposition and canvass the same to the best of his wits and ability so as to persuade an exposition
which would serve the interest of his client and the society.
Supreme Court of India
Bar Council Of Andhra Pradesh vs Kurapati Satyanarayana on 15 November, 2002

Author: Bhan

Bench: V. N. Khare, Ashok Bhan

CASE NO.:
Appeal (civil) 3412 of 2001

PETITIONER:
Bar Council of Andhra Pradesh

RESPONDENT:
Kurapati Satyanarayana

DATE OF JUDGMENT: 15/11/2002

BENCH:
V. N. Khare & Ashok Bhan

JUDGMENT:

J U D G M E N T Bhan, J.

Bar Council of Andhra Pradesh, for short "the State Bar Council", has filed this appeal
against the order of the Disciplinary Committee of the Bar Council of India in D.C.
Appeal No. 39 of 1997 dated 28th March, 1999 by which the Bar Council of India has set
aside the order passed by the State Council removing the name of Kurapati
Satyanarayana, hereinafter referred to "the Delinquent", from the roll of the State Bar
Council as he was found guilty of grave professional misconduct in the discharge of his
duties as an advocate.

O.S. No. 1624 of 1991 was filed by Sri Gutta Nagabhushanam, hereinafter referred to
"the de-facto complainant", on the file of the Additional District Munsif Magistrate, West
Godavari District, Eluru through the delinquent advocate. The said suit having been
decreed, Execution Petition No. 112 of 1995 was instituted for realisation of the decretal
amount. Delinquent was engaged as the counsel for the de-facto complainant in the
execution proceedings as well. The Delinquent received a total sum of Rs. 14,600/- on
various dates in the execution proceedings but did not make payment of the same to the
de-facto complainant. On 18th October, 1996 the de-facto complainant filed a complaint
with the Additional District Munsif, Eluru. On the said complaint Additional District
Munsif, Eluru passed the following orders:

"Decree Holder present. Sri K. Satyanarayana absent perused the entire record. The
memo filed by D.H.R. along with original receipt issued by Sri K.

Satyanarayana, Advocate, Dt. 2.4.1996 and the photostat copy of calculation memo dt.
16.8.1996 prepared by Sri K. Satyanarayana, Advocate, which is not signed by D.Hr. and
along with this complaint and counter be submitted to the Secretary, Bar Council of A.P.
in High Court premises, through the Hon'ble District and Sessions Judge, West Godavari,
Eluru for taking necessary action with covering letter, D. Hr. is informed in open Court."

The complaint filed by the de-facto complainant along with the reply filed by the
Delinquent and the connected documents were forwarded to the Bar Council of the
Andhra Pradesh in the High Court premises for appropriate action. The State Bar Council
took notice of the complaint filed and issued a notice to the Delinquent. The Delinquent
in spite of the service of notice did not choose to file a counter. The State Bar Council
referred the matter to its Disciplinary Committee. The State Disciplinary Committee after
examining the witnesses produced by the complainant came to the conclusion that the
Delinquent had received a total sum of Rs. 14,600/- belonging and payable to the de-facto
complainant on different dates and retained the same with him.

Assertion of the Delinquent that he had informed the complainant through a post-card
about the receipt of the decretal amount was not accepted. That in spite of an undertaking
(Ex.C-1)dated 24th April, 1996 given in writing by the Delinquent to pay a sum of Rs.
11,000/- to the complainant, the same was not paid. The story put-forth that he paid a sum
of Rs. 11,000/- on 4th September, 1996 was not accepted because the Delinquent failed to
produce any receipt given by the complainant evidencing the payment of the said amount
to the complainant. It was noted that only on 19th August, 1997 a demand draft No.
808327 of Rs. 3,600/- and a demand draft No. 0142169 dated 17th October, 1997 for Rs.
2,900/- drawn on State Bank of Hyderabad in favour of the complainant were sent. The
Committee directed that the said two drafts be forwarded to the complainant without
prejudice to his any other right, if any. It was specifically mentioned that the payment of
the said two amounts would not obliterate the misconduct of the Delinquent.

The Delinquent preferred an appeal before the Disciplinary Committee of the Bar Council
of India. The Disciplinary Committee of the Bar Council of India agreed with the finding
of fact recorded by the Disciplinary Committee of the State Bar Council that the
Delinquent had failed to make the payment of Rs. 14,600/- received by the Delinquent on
behalf of the complainant in the execution proceedings, but came to the conclusion that
the Delinquent had not committed any professional misconduct though there might have
been some negligence on his part which did not involve any moral turpitude. For coming
to this conclusion, the Disciplinary Committee of the Bar Council of India recorded the
following findings: "One thing is very clear from the conduct of the appellant that no
doubt, he had withdrawn the money on behalf of the complainant being his counsel, but
he never refused to return the same to the complainant. It has also come in evidence that
the appellant had made part payment of the total amount before filing of the present
complaint by the complainant before the Disciplinary Committee of Andhra Pradesh.
Perusal of the file shows that the appellant could not make the payment of the remaining
amount because of his family circumstances. There seems to be weight in the arguments
of the appellant to the effect that he could not make the payment of the remaining amount
to the complainant as the said amount was utilised by him on his treatment. This type of
events are very common when some body is in trouble. At this stage, we are to see as
what was the intention of the appellant with respect to utilisation of the said amount. We
are to see whether he had the intention of misappropriating the money of his client in
order to defraud him or he was compelled by the circumstances in not returning the said
amount as and when demanded by the complainant. During the course of arguments it
was brought to our notice that the appellant had already returned the total decretal amount
with interest to de-facto complainant. He has further brought to our notice that he was
still suffering from serious heart ailment and he has also sought appointment with a
doctor for undergoing surgery in near future. The Committee is of the considered view
that the appellant from the very beginning never wanted to misappropriate the decretal
amount of the de-facto complainant and the lapse on his part to return the same was
because of his domestic circumstances, as explained."

Counsel for the parties have been heard at length. The first point raised before us on
behalf of the Delinquent that the appeal filed by the Bar Council of the Andhra Pradesh
would not be maintainable as not being the "person aggrieved" need not be dilated upon
in view of the Seven-Judge Constitution Bench judgment of this Court in Bar Council of
Maharashtra Vs. M.V. Dabholkar & Ors., 1975 (2) SCC 702. It has been held in the said
case that the role of the Bar Council is of dual capacity, one as the prosecutor through its
Executive Committee and the other quasi- judicial performed through its Disciplinary
Committee. Being the prosecutor the State Bar Council would be an "aggrieved person"
and therefore the appeal under Section 38 of the Advocates Act, 1961 would be
maintainable on its behalf.

On merits we find that the order of the Disciplinary Committee of the Bar Council of
India is unsustainable. It is sad that the Disciplinary Committee of the Bar Council of
India, which is the highest body, to monitor the probity of the legal profession in the
country chose to trivialise and treat a very grave professional misconduct on the part of
the Delinquent lightly by saying that the Delinquent did not make the payment to the de-
facto complainant as he had utilised the money for his personal need for treatment and
that such like instances do take place when a person is in trouble. It was neither pleaded
nor shown by the Delinquent that he was in dire financial difficulty which promoted him
to utilise the decretal amount for his treatment which was with him in trust. This is an act
of breach of trust. We are firmly of the view that such types of excuses cannot be
entertained being frivolous and unsustainable. Adhernce to the correct professional
conduct in the discharge of one's duties as an advocate is the backbone of legal system.
Any laxity while judging the misconduct which is not bonafide and dishonest would
undermine the confidence of the litigant public resulting in the collapse of legal system.
This is an act of grave professional misconduct. This Court in Harish Chandra Tiwari Vs.
Baiju, 2002 (2) SCC 67, held that amongst the various types of misconduct envisaged for
a legal practitioner the misappropriation of the client's money must be regarded as one of
the gravest. It was observed: "Among the different types of misconduct envisaged for a
legal practitioner misappropriation of the client's money must be regarded as one of the
gravest. In his professional capacity the legal practitioner has to collect money from the
client towards expenses of the litigation, or withdraw money from the court payable to the
client or take money of the client to be deposited in court. In all such cases, when the
money of the client reaches his hand it is a trust. If a public servant misappropriates
money he is liable to the punished under the present Prevention of Corruption Act, with
imprisonment which shall not be less than one year. He is certain to be dismissed from
service. But if an advocate misappropriates money of the client there is no justification in
de-escalating the gravity of the misdemeanour. Perhaps the dimension of the gravity of
such breach of trust would be mitigated when the misappropriation remained only for a
temporary period. There may be justification to award a lesser punishment in a case
where the delinquent advocate returned the money before commencing the disciplinary
proceedings."

The conduct of the Delinquent, who is an elderly gentleman, is reprehensible and is

unbecoming of an advocate. It deeply pains us that the Delinquent who claimed to have
practised for three decades and has worked as Government advocate for four years should
have been guilty of such serious misconduct. The finding of the Disciplinary Committee
of the Bar Council of India that there was no intention on the part of the Delinquent
advocate to misappropriate the money of his client or to de-fraud him is not only
unfounded and perverse but also lacks the serious thought which was required to be given
by the Disciplinary Committee of the Bar Council of India in the discharge of quasi-
judicial function while probing into the grave charge of professional misconduct by an
advocate in the discharge of his duties as a counsel.

We find the Delinquent guilty of grave professional misconduct. Having given our
anxious consideration, we feel that having regard to the serious nature of misconduct the
punishment of removal of his name from the roll of Bar Council would be the only
appropriate punishment and accordingly we set aside the order passed by the Disciplinary
Committee of the Bar Council of India and restore that of the Disciplinary Committee of
the State Bar Council. Appeal is allowed.

Accordingly, we direct the removal of his name from the roll of the Bar Council. The
appellant shall be entitled to the costs of this appeal, which we assess as Rs. 5,000/-.