Supreme Court Rules In-House Company Lawyers Lack Attorney-Client Privilege

The Supreme Court of India has delivered a significant ruling that reshapes the confidentiality landscape for Indian corporations. In a clarification of the Indian Evidence Act, the court stated that lawyers employed full-time by a company cannot claim client-attorney privilege under Section 132 of the Bharatiya Sakshya Adhiniyam (BSA) when investigative agencies seek information. This protection, however, continues to be available to independent practising advocates.

The court's reasoning is that in-house counsels, due to their regular salaries and economic dependence on their employer, lack the professional independence required to be considered "advocates" under the Advocates Act. Their structural and financial ties distinguish them from external lawyers who operate independently. While full privilege is denied, in-house counsels are granted limited confidentiality protection under Section 134 of the BSA. This means communications directly with in-house counsel may not be privileged, but communications they make to external lawyers on behalf of the company remain protected.

Impact: This judgment is expected to fundamentally alter corporate handling of internal legal communications. Companies may shift towards verbal communication or direct engagement with external counsels for sensitive matters to maintain confidentiality, potentially leading to increased legal costs, especially for mid-sized firms. Lawyers advise reviewing internal protocols, marking documents carefully, and involving external counsel earlier in high-risk discussions. The ruling also comes as Indian companies' overall legal expenses are projected to rise significantly.

Heading: Impact Rating: 7/10

Difficult Terms: * **Client-Attorney Privilege**: A legal right that protects confidential communications between a client and their attorney from being disclosed to others. * **In-house Counsel**: A lawyer employed directly by a company to provide legal advice and services to that company. * **Practising Advocates**: Lawyers who are licensed to practice law independently and are not full-time employees of a single entity for legal advice purposes. * **Bharatiya Sakshya Adhiniyam (BSA)**: The new Indian Evidence Act, which replaced the Indian Evidence Act, 1872. * **Limited Confidentiality**: A lesser degree of protection compared to full privilege, where certain information might be shielded but not entirely from disclosure under all circumstances. * **Corporate Governance**: The system of rules, practices, and processes by which a company is directed and controlled.