Claim for fee by lawyer based on percentage of decretal amount is professional misconduct-SC

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The Supreme Court today held that a claim for fee made by an advocate based on the percentage of decretal amount is an act against public policy and amounts to professional misconduct.

A Bench of Justices AK Goel and UU Lalit also held that such a claim cannot form the basis of a complaint under Section 138 of the Negotiable Instruments Act. The judgment was rendered in an appeal filed against a decision of the Andhra Pradesh & Telangana High Court.

Advocate K Parameshwar appeared for the appellant B Sunitha while Senior Advocate Rakesh Kumar Khanna appeared for the respondents.

The appellant’s husband had died in a motor accident in 1998. She had filed a claim before the Motor Accident Claims Tribunal (MACT) through the respondent advocate T Sharath. The MACT awarded compensation to the appellant. The appellant had paid a sum of Rs.10 lakhs towards fee to the respondent on various dates. However, the respondent forced the appellant to sign another cheque of Rs.3 lakh despite her stating that she was unable to pay more fee as she had no funds in her account. The respondent sent an e-mail on November 2, 2014 claiming his fee to be 16 percent of the amount received by the appellant.

When the cheque was dishonoured, a complaint was filed under Section 138 of the Negotiable Instruments Act stating inter alia that the cheque which was issued in discharge of liability, was returned unpaid for want of funds. The appellant was summoned by the Court against which she approached the High Court stating that there was no legally enforceable debt as the fee claimed was exorbitant and against law. She further contended that 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.

The High Court held that the 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 prompting an appeal to the Supreme Court.

The Supreme Court proceeded to frame three questions.

Whether fee can be determined with reference to percentage of the decretal amount?
Whether the determination of fee can be unilateral 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?
Whether the professional ethics require regulation of exploitation in the matter of fee?
For answering these questions, the Court placed reliance on the Bombay High Court judgment in Re: KL Gauba and Supreme Court judgments in in the matter of Mr. G.: A Senior Advocate of the Supreme Court and VC Rangadurai versus D. Gopalan.

Further, reliance was placed on Rule 20 of Part VI, Chapter II, Section II of the Standard of Professional Conduct and Etiquette.

The Court then proceeded to hold that a claim based on percentage of subject matter in litigation cannot be the basis of a complaint under Section 138 of the Act. It also held that making such a claim amounts to professional misconduct.

“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. 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.”

The Court also noted the submission of the respondent that he wanted to withdraw the complaint against the appellant, Disallowing the same, the Court held that the appellant has committed serious professional misconduct and that the same has to be dealt with by the appropriate forum.

“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.

Thus, while proceedings against the appellant will stand quashed, the issue of professional misconduct is left to be dealt with at the appropriate forum.”

Interestingly, the Court, addressing the issue of regulation of legal profession, referred to its directions in the judgment in Mahipal Singh Rana wherein it had asked the Law Commission to have a re-look at the regulatory mechanism for lawyers.

It proceeded to express hope that the concerned authorities in the Government will take cognizance of the issue of introducing requisite legislative changes for an effective regulatory mechanism to check violation of professional ethics and also to ensure access to legal services.