ED withdraws summons to senior lawyers after SC advocate body writes to CJI

The Enforcement Directorate (ED) on Friday (June 20) withdrew its summons issued against senior Supreme Court lawyers Arvind Datar and Pratap Venugopal.

The summons pertained to an investigation involving the Employee Stock Option Plan (ESOP) granted by Care Health Insurance to former Religare Enterprises Chairperson Rashmi Saluja.

Arvind Venugopal was the Advocate-on-Record for a legal opinion authored by Senior Advocate Arvind Datar, which supported the grant of stock options to former Religare enterprises chairperson Rashmi Saluja.

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Breach of lawyer-client confidentiality

The summons drew strong condemnation from the Supreme Court Bar Association (SCBA) and the Supreme Court Advocates on Record Association (SCAORA).

In a strongly-worded letter, SCAORA President Vipin Nair described the ED’s action as “a deeply disquieting development” that poses a serious threat to the foundational principles of lawyer-client confidentiality and the independence of the legal profession.

SCAORA emphasised that Venugopal is "a widely respected member of the legal fraternity," whose professional record and sincerity led to his designation as a Senior Advocate earlier this year.

"These actions, by the ED, we believe, amount to an impermissible transgression of the sacrosanct lawyer-client privilege," the letter stated, warning that such coercive measures could have a chilling effect on the legal community.

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Bar condemns ED actions

The SCBA, too, condemned the ED summons to Venugopal and Datar, saying the actions “reflect a disturbing trend, striking at the very foundations of the legal profession and undermining the independence of the Bar”.

The SCBA continued, "Independent judiciary and independent bar are the backbone of the democracy and if advocates or senior advocates are targeted in such manner then it is hitting the independence of the legal profession in its root."

"Every person has a right for a legal representation and thus, advocates cannot be targeted for rendering his assistance and giving legal opinion," the SCBA statement said. Even otherwise, advocates cannot be summoned for rendering professional advice in view of Section 132 of Bhartiya Sakshya Adhiniyam (BSA) of 2023 which deals with professional privilege, it added.

"Advocates are officers of the court, and their role is integral to the fair and impartial administration of justice. The manner in which the Enforcement Directorate has sought to summon respected members of our Bar reflects an illegal, perverse and intimidatory use of state power," the SCBA said.

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ED retreats after backlash

The ED 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 probe agency 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.

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ED withdraws summons

The ED circular says that Sec 132 of BSA 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 provision 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" and has been communicated to him.

"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, people in the know said it has not been withdrawn but kept in abeyance, and no new notice will be issued to him.

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Background to summons

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.

(With agency inputs)