A Legally Enforceable Debt III

Advocate represented its Client before a Motor Accident Claims Tribunal and charged a fee of Rs. 10,00,000 [Rupees Ten Lakhs]. Tribunal awarded compensation. Client was compelled to sign a further cheque, in favour of Advocate, towards payment of a certain percentage of decretal amount. That cheque stood dishonoured and Advocate in due time initiated proceedings under Section 138 of The Negotiable Instruments Act, 1881.

Client’s main contention was, ‘charging of a percentage of decretal amount’ is hit by Section 23 of The Contract Act, 1872 being against professional ethics and public policy, and cheque issued by her was not in discharge of any liability and no presumption arose in favour of her Advocate that cheque represented a ‘legally enforceable debt’. In any case, such presumption stood rebutted by settled law towards fee based on a percentage of result of litigation being illegal.

Recently SC, while quashing proceedings against Client, in B. Sunitha v. The State of Telengana, [Criminal Appeal No. 2068 of 2017] held:

Bombay High Court in Re: KL Gauba, AIR 1954 Bom 478 held, fees conditional on success of a case and which gives Lawyer an interest in subject matter tends to undermine status of profession. Same has always been condemned as unworthy of legal profession. If an Advocate has interest in success of litigation, he may tend to depart from ethics.

Mr. G: Senior Advocate of Supreme Court, (1955) 1 SCR 490 held, claim of an Advocate based on a share in subject matter is a professional misconduct.

Rule 20 of Part VI, Chapter II, Section II of The Standard of Professional Conduct and Etiquette reads: Advocate shall not stipulate for a fee contingent on results of litigation or agree to share proceeds thereof.

Thus, mere issuance of cheque by Client may not debar him from contesting liability. If liability is disputed, Advocate has to independently prove contract. A claim based on a percentage of subject matter in litigation cannot be basis of a complaint under Section 138.”