Legal Privilege is Questioned After ED Summons Advocates

Source: The post Legal Privilege is Questioned After ED Summons Advocates  has delivered stable outcomes has been created, based on the article “Limits of professional privilege” published in “Financial Express” on 5th July 2025

UPSC Syllabus Topic: GS Paper2- Structure, organisation and functioning of the Executive and the Judiciary And Statutory, regulatory and various quasi-judicial bodies.

Context: The Enforcement Directorate’s (ED) summons to senior advocates Arvind Datar and Pratap Venugopal, over their advisory roles in a corporate probe, sparked sharp opposition from India’s legal fraternity. This incident has triggered a vital debate—should legal professionals be shielded from investigative scrutiny due to professional privilege?

Background of the Controversy

1. Questionable Grant of Esops: In November 2023, InGovern Research flagged the issuance of Esops by Care Health Insurance to Rashmi Saluja, despite explicit rejection by the IRDAI. Saluja received over ₹7,400 crore worth of Esops, accounting for more than 80% of the total, which was seen as contrary to shareholder interests and the law.
2. Advisory Roles of Advocates: ED summoned Datar and Venugopal under Section 50 of the PMLA due to their advisory roles. Notably, Venugopal was also an independent director at Care Health Insurance, giving him access to non-legal operational information.
3. Legal Community’s Objection: The legal fraternity protested, citing attorney-client privilege, and accused the ED of overreach, warning it could undermine professional independence.

Re-examining Attorney-Client Privilege

1. Privilege Has Legal Limits: India’s new Bhartiya Sakshya Adhiniyam, 2023 states that communications used to further illegal acts or fraud are not protected. Privilege cannot be misused as a shield for misconduct.
2. Global Legal Norms: International laws also support exceptions to privilege where it might aid wrongdoing, ensuring that legal confidentiality does not become a cover for impunity.
3. PMLA’s Broad Mandate: Section 50 of the PMLA allows ED to summon “any person” with relevant knowledge. There is no exception for lawyers, reinforcing Parliament’s intent for unrestricted but lawful access to facts.

Lawyers and Their Multiple Capacities

1. Dual Professional Roles: Venugopal was more than legal counsel—he also had a board-level role. Lawyers in such dual roles hold information that is not necessarily protected by privilege.
2. Separating Counsel from Governance: It is essential to differentiate between legal advice and executive functions. Otherwise, operational facts could be wrongly hidden under privilege.

Judicial Perspective and Legal Precedent

1. Courts Clarify Scope of Privilege: Indian courts have repeatedly held that privilege is a safeguard, not a sanctuary. It should not obstruct legitimate investigations.
2. Permissibility of Regulator Access: Regulatory bodies are allowed to interact with lawyers within legal limits, affirming that lawful scrutiny is not a violation of privilege.

ED’s Withdrawal and Its Consequences

1. Signals of Unequal Treatment: The ED’s prompt withdrawal may suggest that professional prominence can derail investigative process, thereby undermining institutional fairness.
2. Necessity of Cooperative Engagement: Protecting privilege should not mean avoiding all scrutiny. Lawful cooperation on factual and procedural matters enhances both transparency and trust.

Conclusion

1. Justice Over Immunity: Lawyers are responsible to both clients and the justice system. Privilege must not translate into investigative immunity.
2. Call for Balanced Conduct: Transparent, legal cooperation with authorities ensures accountability while safeguarding the integrity of legal privilege and institutional legitimacy.

Question for practice:

Examine whether attorney-client privilege can be an absolute protection against investigative scrutiny in cases involving alleged financial misconduct.