From First Line of Defense to First Point of Exposure: In-House Counsel, Privilege, and the Supreme Court’s Recalibration

In today’s corporate setup, in-house counsels are the first line of defense approached by companies in cases of suspected internal wrongdoing or non-compliances, as a method of preempting and mitigating legal risk. These communications have always been deemed to be confidential, and this confidentiality is what enables corporates to effectively seek advice from the in-house counsel. However, the confidentiality of such communication has recently been discussed and brought into question by the Supreme Court of India in In Re: Summoning Advocates Who Give Legal Opinion or Represent Parties During Investigation of Cases^[1]. The Supreme Court has distinguished in-house counsel from practicing advocates who have attorney-client privilege. The judgement’s decision on confidentiality of in-house legal advice and the related communications has significant implications for the approach which companies have for sensitive legal issues.

The judgment followed a growing practice in which investigating agencies were summoning advocates who had rendered legal opinions or appeared for parties during the course of investigations. One such instance that led to the dispute was a case where an advocate was required to appear before the investigating officer and disclose the ‘true details’ of the case in which he had represented the accused. Such practices raised concerns that the attorney-client privilege will soon be eroded despite being a core aspect of the Indian legal system. In light of this, the Supreme Court took suo-moto cognizance of such matters and framed broader questions such as (i) whether and in what circumstances lawyers may be summoned, and (ii) whether existing statutory safeguards were sufficient to prevent investigative overreach.

Attorney–Client Privilege under Indian Law: The Statutory Baseline

Indian law establishes attorney-client privilege under Sections 132 to 134 of the Bharatiya Sakshya Adhiniyam, 2023 (“BSA”). In simple terms, advocates are bound by confidentiality obligations whereby they are prohibited from disclosing the advice provided to an individual and all such communications and documents which formed the basis of such advice, unless the individual has consented to such disclosure. The attorney-client privilege survives the termination of the engagement of the advocate as an attorney and is subject only to narrow statutory exceptions, including communications made in furtherance of an illegal purpose or facts evidencing a crime or fraud committed after the commencement of such engagement.^[2]

When Legal Advice Loses Privilege: The Court’s Treatment of In-House Counsel

The Supreme Court while delivering the judgement specifically discussed in-house counsel and whether they come under the purview of attorney-client privilege. The Court held that ‘advocates’ under Section 132 of the BSA does not include in its purview the in-house counsel who is a full-time salaried employee in the roles of the company. Accordingly, the Supreme Court ousted such in-house counsel and their communications with their employers from the purview of attorney-client privilege under Indian law. The Supreme Court’s reasoning was that attorney-client privilege requires professional independence of the legal attorney, and that such independence is absent in the cases of a traditional employer-employee relationship. The Court further observed that the commercial motivation of the company affects the in-house counsel which in turn has an impact on the advice that they offer to their employers, i.e., the companies. On this basis, the Court distinguished between in-house counsel and independent advocates and excluded in-house counsel from traditional attorney-client privilege. However, the Court also remarked that such in-house counsel may have limited protection for their conversations under Section 134 of the BSA.

Separately, the Supreme Court also relied on the Advocates Act, 1961 and the Bar Council of India Rules (Rule 49), which provides that advocates who take up full time employment must cease their practice.^[3]

The Impact on Internal Investigations and Early Legal Assessment

The Supreme Court’s decision has an immediate consequence on the handling of internal investigations by companies, especially in cases which involve a sensitive matter. Ordinarily, in situations that require remedial steps or legal risk assessment, companies generally turn to their in-house counsel for immediate advice and practical guidance on the next course of action. However, exclusion of privilege for communications with the in-house counsel is naturally going to discourage companies from being completely truthful in their conversations. This would significantly impact the accuracy of advice rendered by the in-house counsel in such situations.

Consequently, the judgement undermines the entire purpose for which corporations stress on onboarding in-house counsel. This would also lead to companies avoiding approaching their in-house counsel and rather reaching out to their external legal counsel where neither confidentiality nor the legal advice would be compromised. Additionally, by exposing internal legal issues and risk assessment to potential disclosure, the judgement also risks causing a shift in the approach of corporations from transparent internal governance to defensive and evasive legal strategies, thereby weakening the corporate governance ecosystem that global regulatory frameworks seek to promote.

What the Judgment Means for Corporate Legal Setups and the Way Forward

This judgement has made way for a reconsideration of how modern corporate setups align with attorney-client privilege or its absence in internal discourse. Currently, in-house counsel play a crucial role in ensuring compliance, risk management, and ethical decision-making. Their exclusion from the protective ambit of attorney client privilege risks discouraging corporations from early legal consultation and undermining corporate self-policing. While the Court’s reaffirmation of privilege for practicing advocates strengthens the independence of the Bar, the exclusion of in-house counsel leaves a critical gap in the legal framework. It will be interesting to see if this gap is addressed by judicial clarity or legislative reform and as a result, whether in-house counsel remain a company’s first line of defense or become its first point of exposure.

References

[1] In Re: Summoning Advocates Who Give Legal Opinion or Represent Parties During Investigation of Cases and Related Issues, 2025 INSC 1275

[2] Section 132, Bharatiya Sakshya Adhiniyam, 2023

[3] Rule 49, Bar Council of India Rules, 1975

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