CLIENTS DOCUMENTS - REFUSAL TO RETURN IS NOT PROPER AND IS MISCONDUCT.

[C.A. DEV KUMAR KOTHARI]

Good professional conduct:

A professional person is a social person, as in case of respect in society, respect in profession is very important. By nature one need to behave in a manner that he gain respect.

Good conduct is essential for any person to maintain good relations with others, maintain goodwill in business and profession. A professional person has respectability and it need to be improved and preserved. The respect, prestige, reputation can be improved by good conduct in day to day dealing with clients, concerned authorities, and related people. Bad conduct will impair reputation and goodwill. A professional has also to maintain professional decency and conduct himself so as to maintain and improve the image of the profession in which he is engaged. Statutory provisions and governing bodies also provide guidelines about professional conduct and misconduct. The examples of misconducts as provided are not exhaustive and the governing bodies have wider power to enquire other misconducts also.

In this write-up besides general professional conduct and misconduct matter relating to records of client and other documents is considered. It has been held by the courts that refusal to return documents of client unless fees is paid is a professional misconduct.

Records obtained for the purpose of professional jobs:

Advocates, Chartered Accountants, Cost Accountants, Company Secretaries and Pleaders while performing work on behalf of their client receives documents, papers of several types like: -

(a) Copy of correspondences between the parties. Generally Xerox copies are kept. However, many times original documents are also required and they are also kept with the professional for the time being in connection with work.

(b) Documents relating to properties - Many times original documents like title deed properties, conveyance deed, share certificates, bond certificates, debentures etc. are also kept with the professionals for verification, production before courts and authorities.

(c) The documents prepared on behalf of client and submitted to other parties/ authorities are like documents received from client.

All these documents are valuable and useful for the client. Even original documents relating to correspondences may be equally important, as they may be required as a piece of evidence and for future reference.

Documents prepared for performance of duties:

The documents prepared by the professional during course of conducting his professional assignment like preparatory notes, points of arguments, audit papers are the property of professional and not documents of client. The professional is not bound to provide the same to the client or the new incoming professional in case of a change. However, as a matter of good practice, the professional may provide a copy f such documents to the client for reference in future.

UTILITY IN THE HANDS OF PROFESSIONALS

The utility of the documents in the hands of professionals is only in connection with the professional assignment, which he is handling and for which these documents are required. However, once the work is completed there is no utility for the concerned professional. Except that some times copy of documents may be kept as model draft documents for reference in future for similar drafting.

USE AS A TOOL TO EXPEDITE RECOVERY OF PROFESSIONAL REMUNERATION IS NOT PROPER:

Sometimes professionals may apply the tactics of holding these documents with a view that a professional fee which is receivable is recovered faster or sometimes a higher fee may be bargained. Many times the clients may be forced to cough up the arrear and even excessive charges because he wants to have his documents and reports and do not want to indulge in litigation and also not to impair relations with the concerned professional. However, it would not be proper for the professional to adopt such practices because in true sense it may amount to blackmailing the client.

THE LAW LAID DOWN BY THE SUPREME COURT

In case of New India Assurance Company Limited Vs. A.A. Saxena (2004) Company Cases 284 (SC), the Supreme Court held that the Advocate is duty bound to return files to his clients. There is no lien over papers of clients for payment of remuneration. However, the Advocate may take other steps or initiate separate proceeding for recovery of fees. In this case the Supreme Court has reversed the judgment of the Allahabad High Court. The Supreme Court relied on elaborate judgment earlier rendered by the Supreme Court in case of R.D. Saxena Vs. Balaram Prasad Sharma (2001) 105 Company Cases 83 (SC).

REFUSAL IS MISCONDUCT

In case of R.D. Saxena (Supra), the Supreme Court held that papers entrusted by client to the Advocate in connection with the cases are for doing the professional work and it is not a case of bailment of goods. The Advocate is not entitled to retain documents and there is no entitlement for retaining lien against unpaid fees in view of section 148 and 171 of Indian Contract Act, 1872 and Section 35 of Advocate Act, 1961.

Refusal to return to the clients, papers relating to cases were held as misconduct in view of the section 35 of Advocate Act, 1961 and Rule 28 and 29 of Bar Counsel of India Rules. In this case the Supreme Court interalia held that:

The word "misconduct" is a relative term. It has to be construed with reference to the subject matter and context wherein such term occurs. It is literally means wrong conduct or improper conduct.

The refusal to return the files to the bank (client) when it demanded the same amounted to misconduct under section 35 of the Advocates Act, 1961, and the appellant was liable to punishment for such misconduct.

The case papers entrusted by the client to his counsel are not goods in his hands upon which he can claim a retaining lien till his fee or other charges incurred are paid.

Provision of the Indian Contract Act, 1872:

S.148. "Bailment", "bailor" and "bailee" defined - A "bailment" is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them. The person delivering the goods is called the "bailor." The person to whom they are delivered is called the "bailee"

Explanation - If a person, already in possession of the goods of another, contracts to hold them as a bailee, he thereby becomes the bailee, and the owner becomes the bailor, of such goods although they may not have been delivered by way of bailment.

S.171. General lien of bankers, factors, wharfingers, attorneys and policy-brokers. - Bankers, factors, wharfingers, attorneys of a High Court and policy brokers may, in the absence of a contract to the contrary, retain as a security for a general balance of account any goods bailed to them; but no other persons have a right to retain, as security for such balance, goods bailed to them, unless there is an express contract to that effect.

Analysis: A reading of the above provisions would shows that when a professional receives some goods, documents, files from client, for the purpose of professional assignment, he receives the documents in a trust for specific purpose. The position of the client is like a bailor and the professional is like a bailee. Though, case papers entrusted to the professional cannot be called 'goods', in its strict sense but they are in deed akin to goods, and therefore strictly speaking there will be no bailment within meaning under section 171 of the Contract Act, however, it is akin to bailment not goods but of documents. Thus, the position is similar to a bailment. As per S. 148, after the purpose of the goods (or documents) obtained is accomplished, the professional should return the documents or goods to the client. In this case there cannot be a case of disposal as per directions of client, because a professional person in his professional capacity is not supposed to engage in disposal of goods of client.

As per S. 171 OF THE contract Act, a Chartered Accountant, Cost Accountant, Company Secretary has no lien. Even in case of Advocates only an attorney of High Court may retain as a security for a general balance of account any goods bailed to them, and for no other purpose.

The supreme court in the case of R.D.Saxena V Balram Prasad (2001) 105 Co. Cases 83 held that files containing copies of the records (perhaps some original documents also) cannot be equated with the "goods" referred to in section 171 of the Contracts, Act, 1872. In the case of litigation papers in the hands of the advocate there is neither delivery of goods nor any contract that they shall be returned or otherwise disposed of. The advocate keeping the files cannot amount to "goods bailed."

True, as held by the supreme court, there is no delivery of documents, however, even if the advocate come to have documents - like those prepared by him- petition, written submission, copies of proceedings etc. the advocate receive them as representative of his client therefore it is similar to receiving delivery from the client. Therefore, there is some thing very similar to bailment. The advocate holds those documents for the purpose of the case and for no other purpose. In case he wants copies for future reference, he can have copies but cannot deny returning the original documents.

Definition of professional misconduct for other professionals:

The term 'professional misconduct' has been generally and broadly defined in section 22 of the Chartered Accountants Act, 1949 with reference to certain deemed instances of professional misconduct enumerated in the First and Second Schedules separately for members in practice and members in service in different parts in schedules. Furthermore the council of the Institute has been given wider powers to enquire into the conduct of the members of the institute under any other circumstances.

There is no specific provision for returning of documents in the Schedules. However, in respect to money received from client for his work, the following entry is found in The Second Schedule in part I, the relevant portion reads as follows:

A Chartered Accountant in practice shall be deemed to be guilty of professional misconduct, if he—

(10) fails to keep moneys of his client in a separate account or to use such moneys for the purposes for which they are intended.

On the similar lines are provisions in respect of Company Secretaries and Cost Accountants in respective enactments.

Therefore, it is found that there is no lien even in respect of moneys received from client for specified purposes. However, by an understanding he may hold moneys for expenses as well as for fees. In that case fees may also be retained out of money received on account of fees and expenses. Regarding retention of documents, the general rule of good conduct will be applicable. Accordingly, the professional must return documents of the client on demand and or when not needed. Thus irrespective of prescribed types of professional misconduct, these professional may be held guilty of professional misconduct. Therefore general rule of bad, improper, or inappropriate conduct with reference to the subject matter and context will be applicable. 

MORAL OBLIGATION

Irrespective of the strict legal position, a professional should adopt good practice and once an assignment is taken, he must perform his functions with sincerity, honesty, and commitment to the client. Even in case of honorary assignments accepted, there should not be lacking of sincerity and honesty towards professional work. If it is felt that the payment of fees may not be made properly or timely the professional may ask for advance payment of fee. In that case, there is no

Professional misconduct or unethical action. However, if a job is taken up, without negotiation of fees and time of payment which is left for decision by mutual consent or trade practices and thereafter if work t is not done with sincerity for the reason that fees may not be recovered, this may amount to delinquency and a professional misconduct. If according to the conduct of the client, it appears that fees may not be forthcoming, the professional may relinquish the job. However, he should give sufficient time, return the documents etc., and also brief the other professional, if required, by the client so that the client is not left in lurch and he may make arrangement with other professional.