Can a legal practitioner be held liable for a legal opinion provided by him?

The Supreme Court has recently decided on the nature and extent of criminal liability that may be imposed on a lawyer who issues a legal opinion that is found to be erroneous. In what might be a matter of some relief to the legal fraternity, the court has set very high standards to be satisfied by the prosecution to charge a lawyer for the crime of conspiracy in defrauding a bank.

In Central Bureau of Investigation,Hyderabad v. K. Narayana Rao, the lawyer concerned, being a panel advocate representing a bank, delivered a series of legal opinions relating to the title to several properties. The bank lent monies on the strength of the legal opinions, which were found to be erroneous. The lending transaction was found to be part of a larger scheme by several persons to defraud the bank by inducing it to lend monies that caused wrongful loss to the bank. The Central Bureau of Investigation (CBI), after investigation, filed charges against the lawyer. These charges were quashed by the Andhra Pradesh High Court, against which the CBI appealed to the Supreme Court.

After considering the available evidence, the court concluded that there was insufficient material to conclude that the lawyer was acting as a conspirator so as to be charged for the offence to defraud the bank.
In deciding whether a legal practioner has acted against moral turpitude , background of each case has to be looked into and to assess whether such practioner had deliberately acted with ill-failth and malafide intention.

SALE OF PROPERTY THROUGH `GPA Sales') or Sale Agreement/General Power of Attorney/Will transfers WILL NOT BE REGARDED AS A VALID TRANSFER – SUPREME COURT

SALE OF PROPERTY THROUGH `GPA Sales') or Sale Agreement/General Power of Attorney/Will transfers WILL NOT BE REGARDED AS A VALID TRANSFER – SUPREME COURT

Supreme Court in the case Suraj Lamp Industries Pvt. Ltd.... Vs... State of Haryana & Anr has held that had considered the ill - effects of what is known as General Power of Attorney Sales (for short `GPA Sales') or Sale Agreement/General Power of Attorney/Will transfers (for short `SA/GPA/WILL' transfers). Both the descriptions are misnomers as there cannot be a sale by execution of a power of attorney nor can there be a transfer by execution of an agreement of sale and a power of attorney and will. As noticed in the earlier order, these kinds of transactions were evolved to avoid prohibitions/conditions regarding certain transfers, to avoid payment of stamp duty and registration charges on deeds of conveyance, to avoid payment of capital gains on transfers, to invest unaccounted money (`black money') and to avoid payment of `unearned increases' due to Development Authorities on transfer.

Supreme Court viewed that SA/GPA/WILL transactions are not `transfers' or `sales' and that such transactions cannot be treated as completed transfers or conveyances. They can continue to be treated as existing agreement of sale. Nothing prevents affected parties from getting registered Deeds of Conveyance to complete their title. The said `SA/GPA/WILL transactions' may also be used to obtain specific performance or to defend possession under section 53A of TP Act. If they are entered before this day, they may be relied upon to apply for regularization of allotments/leases by Development Authorities

 

Strong Financial background of a company may not deter a court in refraining to pass an order of winding up at the request of a creditor

HIGH COURT OF GUJARAT -Baader Beteiligungs GMBH v. Parsoli Motor Works (P.) Ltd.

Even if a company which has good and solid financial foundation and also has capacity to pay, cannot avoid its obligation to pay and be allowed to neglect its financial obligations.

The proceedings under section 434 of the Companies Act ,1956  is not legitimate means to enforce payment of debt and cannot be permitted to be converted into proceedings which are ostensibly for winding up, but actually are meant to enforce payment of debt therefore, the court would also not allow the petitioner-claimant to use the remedy as arm twisting method and pressure tactics or as a weapon or a means for enforcing recovery/payment of debt, which is bona fide and substantially and genuinely disputed.

In instant case, it is prima facie established, from the facts that the respondent appears to be unable, within the meaning contemplated under section 434(1), to pay its debts and it prima facie appears that it would be just and equitable to grant order of admission of petition and winding up. However, before making such an order, it would be appropriate to allow an opportunity to the respondent company to deposit the amount in question.