An Advocate represented its Client before a Motor Accident Claims Tribunal and charged a fee of Rs. 10,00,000 [Rupees Ten Lakhs]. The Tribunal awarded compensation. The Client was compelled to sign a further cheque, in favour of the Advocate, towards payment of a certain percentage of the decretal amount. That cheque stood dishonoured and the Advocate in due time initiated proceedings under Section 138 of The Negotiable Instruments Act, 1881.
The Client’s main contention was that ‘charging a percentage of decretal amount by an advocate’ is hit by Section 23 of The Contract Act, 1872 being against professional ethics and public policy, and the cheque issued by her was not in discharge of any liability and no presumption arose in favour of her Advocate that the cheque represented a ‘legally enforceable debt’. In any case, such presumption stood rebutted by settled law that claim towards advocate’s fee based on a percentage of the result of litigation was illegal.
Recently the SC, while quashing the proceedings against the Client, in B. Sunitha v. The State of Telengana, [Criminal Appeal No. 2068 of 2017] held the following:
“The Bombay High Court in Re: KL Gauba, AIR 1954 Bom 478 held that fees conditional on the success of a case and which gives the lawyer an interest in the subject matter tends to undermine the status of the profession. The same has always been condemned as unworthy of the legal profession. If an advocate has interest in success of litigation, he may tend to depart from ethics.
In the matter of Mr. G.: A Senior Advocate of the Supreme Court, (1955) 1 SCR 490 the SC held that the claim of an advocate based on a share in the subject matter is a professional misconduct.
Rule 20 of Part VI, Chapter II, Section II of The Standard of Professional Conduct and Etiquette reads as follows: “An advocate shall not stipulate for a fee contingent on the results of litigation or agree to share the proceeds thereof.”
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. Claim based on a percentage of subject matter in litigation cannot be the basis of a complaint under Section 138 of the Act.”
A cheque issued by a client to its advocate towards payment of a certain percentage of the decretal amount is thus not representative of a ‘legally enforceable debt’ within the meaning of the Section.