Calcutta HC Drops Charges Against Vijaya Bank's Panel Advocate Accused in Loan Fraud Says Trial Court Acted as Prosecution’s "Mouthpiece" [Read Order]

The CalcuttaHigh Court has quashed criminal proceedings against an empanelled advocate ofVijaya Bank, holding that the materials on record did not disclose any offence beyond possible professional negligence.

It was held that the trial court had acted “like a mouthpiece of the prosecution” in framing charges without assessing the broad probabilities of the case or the totality of evidence.

The petitioner had been engaged by Vijaya Bank in 2005 to conduct a legal scrutiny of a residential property offered as security for a ₹10‑lakh housing loan. The borrower, Saradendu Kundu, and the vendor, Tapan Kumar Kundu, were later accused of defrauding the bank by availing loans on the basis of forged documents.

The CBI alleged that the petitioner had issued a non‑encumbrance certificate without proper verification, despite the property being under an equitable mortgage with Punjab National Bank (PNB) since 2002.

The trial court rejected the petitioner’s discharge plea under Section 227 CrPC, holding that although an imperfect legal scrutiny report does not by itself constitute a criminal offence, there existed prima facie material suggesting his involvement in a conspiracy with the principal accused.

The High Court found this reasoning contradictory and unsupported by the record.

The Court noted that the petitioner was not named in the FIR, and the investigation did not reveal any material indicating that he had conspired with the borrower, vendor, or bank officials. There was no allegation of wrongful gain, pecuniary benefit, or any form of active participation in the alleged fraud.

The only allegation was that he failed to detect an existing mortgage created under Section 58(f) of the Transfer of Property Act by deposit of title deeds—an encumbrance that leaves no trace in public records.

The bench of Justice Dr Ajoy Kumar Mukherjee accepted the petitioner’s contention that equitable mortgages are not discoverable through registrar searches and that no centralised banking database existed at the time. It also noted that the legal scrutiny report was submitted in the bank’s prescribed format, and the advocate was not required to physically inspect the property.

The DRT proceedings relied upon by the prosecution commenced only after 2007, whereas the petitioner’s report was issued in December 2005.

In assessing whether such lapses could attract criminal liability, the High Court relied extensively on established jurisprudence distinguishing professional negligence from criminal misconduct.

The Court referred to Jacob Mathew v. State of Punjab (2005), where the Supreme Court held that negligence must be judged against the standard of an ordinary competent professional, and that criminal liability arises only when negligence is gross and accompanied by mens rea. The Court highlighted that professionals are not expected to possess the highest level of expertise, and errors of judgment do not automatically attract penal consequences.

The Court also cited Pandurang Dattatraya Khandekar v. Bar Council of Maharashtra (1984) 2 SCC 556, which held that mere negligence without moral delinquency does not amount to professional misconduct, much less a criminal offence.

Further, the High Court relied on CBI v. K. Narayana Rao (2012) 9 SCC 512, where the Supreme Court held that criminal prosecution of bank panel advocates based on bald allegations of collusion or false legal opinions constitutes an abuse of process unless supported by tangible evidence of conspiracy. The Court reiterated that an advocate’s legal opinion, even if erroneous, cannot be treated as a criminal act in the absence of material showing intentional wrongdoing.

The Court also referred to Surendra Nath Pandey v. State of Bihar (2020) 18 SCC 730, where the Supreme Court quashed proceedings against panel advocates accused of issuing false search reports, holding that vague and omnibus allegations without specific attribution of criminal intent cannot sustain prosecution.

Applying these principles, the High Court held that the petitioner’s conduct, at worst, amounted to professional negligence, which may attract disciplinary consequences but not criminal prosecution under Sections 420, 467, 468, or 120B IPC. The trial court, it observed, failed to apply judicial mind and mechanically accepted the prosecution’s case without examining the inherent improbabilities or the absence of incriminating material.

Finding “basic infirmities” in the decision to frame charges, the High Court allowed the revision and quashed the proceedings in Special Case No. 02 of 2013, qua the petitioner alone, clarifying that its observations were confined to him.

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