New Delhi: The Enforcement Directorate (ED), India’s central financial crime investigation agency, has issued a new directive clarifying that no summons shall be issued to advocates involved in legal advisory roles in money laundering cases, unless explicitly approved by the agency’s director. The statement comes in the wake of controversy triggered by the ED’s decision to summon senior Supreme Court lawyers Arvind Datar and Pratap Venugopal in connection with a probe into Care Health Insurance Limited’s (CHIL) Employee Stock Ownership Plan (ESOP) allocations.
The move prompted sharp reactions from key legal bodies including the Supreme Court Bar Association (SCBA) and the Supreme Court Advocates-on-Record Association (SCAORA), both of which condemned the summons as a “disturbing trend” that undermines the sanctity of lawyer-client privilege.
Summons to Lawyers Spark Legal Community Uproar
The summonses issued to eminent lawyers Datar and Venugopal were widely criticized as overreach, raising alarms over violation of Section 132 of the Bharatiya Sakshya Adhiniyam (BSA), 2023, which deals with privileged professional communication. The legal provision protects communications between a lawyer and their client, and prohibits disclosure unless the client consents.
Legal professionals warned that compelling lawyers to reveal advisory communications could set a dangerous precedent, jeopardizing the independence of the legal profession and weakening the constitutional right to legal counsel.
In response, the ED issued a circular to all field offices stating that no advocate should be summoned in violation of Section 132, and any exceptions must be approved by the agency’s Director.
FCRF x CERT-In Roll Out National Cyber Crisis Management Course to Prepare India’s Digital Defenders
ED Clarifies Role of Summoned Lawyers in CHIL Probe
In its detailed statement, the ED clarified that Pratap Venugopal was summoned not as a lawyer, but in his capacity as an Independent Director of Care Health Insurance Ltd (CHIL). The agency has since withdrawn the summons, and informed Venugopal that any required documents can now be submitted via email.
In the case of Arvind Datar, who allegedly advised CHIL on the disputed ESOP scheme, the ED has placed the summons “in abeyance”, signaling that no further action is currently being pursued against him, although the notice has not been formally withdrawn.
The investigation is being carried out by the Mumbai zonal office of the ED, and focuses on alleged violations related to the issuance of ESOPs to Rashmi Saluja, the former chairperson of Religare Enterprises and a key figure in the controversy.
Algoritha: The Most Trusted Name in BFSI Investigations and DFIR Services
ESOP Issuance Defied IRDAI Directives, Says ED
According to the ED, CHIL issued shares as ESOPs on May 1, 2022, at a discounted rate, despite the Insurance Regulatory and Development Authority of India (IRDAI) having rejected the proposal. The ED is probing how this was approved at the board level, and whether regulatory directives were deliberately bypassed.
On July 23, 2024, IRDAI formally directed CHIL to revoke any unallotted ESOPs, and imposed a penalty of ₹1 crore for non-compliance. The ED’s probe aims to determine if there was money laundering involved in the valuation and allocation process related to these stock options.
The agency said that the summons to Venugopal was part of efforts to understand the boardroom deliberations that led to the ESOPs being issued, even after IRDAI’s objection. However, in light of public and legal criticism, the ED has recalibrated its approach to dealing with legal professionals, reinforcing its respect for lawyer-client privilege.
