SC lawyers controversy: ED directs investigators to not summon advocates in case against clients

New Delhi: The Enforcement Directorate (ED) on Friday said it has directed its investigating officers not to issue summons to any advocate in a money laundering investigation being carried out against their client, adding that exception to this rule can only be made after "approval" by the agency's director.

The statement from the federal probe agency came in the wake of the lawyer-client privilege linked controversy that erupted after the ED issued back-to-back summons to senior Supreme Court lawyers Arvind Datar and Pratap Venugopal for giving legal advice to Care Health Insurance Limited (CHIL) on the employee stock ownership plan (ESOP) given to Rashmi Saluja, former chairperson of Religare Enterprises.

The summons was condemned by the Supreme Court Bar Association (SCBA) and the Supreme Court Advocates on Record Association (SCAORA), which called it a "disturbing trend" that struck at the very foundations of the legal profession.

The bar bodies urged the Chief Justice of India (CJI) to take suo motu cognisance of the matter.

The ED, the central agency tasked with combating money laundering crimes, said in a statement that it has issued a circular for the guidance of its field formations, stating that "no summons" shall be issued to any advocate in violation of Section 132 of the Bhartiya Sakshya Adhiniyam (BSA), 2023.

"Further, if any summons needs to be issued under the exceptions carved out in proviso to Section 132 of the BSA, 2023, the same shall be issued only with the prior approval of the director, ED," the agency said.

This section on "professional communications" states that no advocate shall at any time be permitted, unless with his client's express consent, to disclose any advice or communication made to him in the course of his service. The provision is also commonly known as lawyer-client privilege.

The ED circular, which has been accessed by PTI, says that the said section makes it "amply clear that a legal practitioner cannot be compelled to disclose any communication made to him in the course and for the purpose of his professional service as such legal practitioner, by or on behalf of his client unless with his client's express consent".

The circular adds that the proviso to this section has carved out certain exceptions, which indicate furtherance of any illegal purpose.

The ED said the summons issued to Venugopal was in his capacity as the independent director of Care Health Insurance Ltd (CHIL) and it has now been "withdrawn".

This has been communicated to him (Venugopal), it said.

"In the said communication, it has also been stated that if any document is required from him in his capacity as an independent director of CHIL, the same will be requested from him to be submitted by email," the agency said.

In the case of the summons issued against Datar, agency sources said it has not been withdrawn but kept in abeyance, and no new notice will be issued to him.

Providing a background to the summons issued to Venugopal for appearance before the investigating officer on June 24, the ED said the case pertains to a money laundering probe being conducted by its Mumbai zonal office.

It has been alleged that shares of CHIL were issued at a much lower price in the form of ESOPs on May 1, 2022, in spite of the rejection of the same by the Insurance Regulatory and Development Authority of India (IRDAI).

As part of investigation, it said, a summons was issued to Venugopal, an independent director of CHIL, to understand the circumstances under which the company issued the ESOPs despite its rejection by IRDAI and subsequent discussions in the board of CHIL in this regard.

"It is also pertinent to note that IRDAI on 23.07.2024 directed the CHIL to revoke or cancel any ESOPs that are yet to be allotted, and also imposed a penalty of Rs 1 crore on CHIL for non-compliance with regulatory directions," the ED said.