Shire Development LLC et al v. Cadila Healthcare Limited et al

Filing 209

OPINION re privileged communication. Signed by Justice B.N. Srikrishna on 6/27/12. (ntl)

Justice B. N. SRIKRISHNA (Retd.)

Former Judge, Supreme Court of India

O P I N I O N

Shire Development LLC and Ors………Plaintiffs
Vs
Cadila Healthcare Ltd and Another…….Defendants

I have been requested by the learned Judge of the
United States Court of Appeals For the Third Circuit, Wilmington,
DE USA (Hon’ble Kent A. Jordan) to express my opinion on the
following question :“Whether a communication between an employer and
his employee in-house counsel, would be privileged
communication within the meaning of Sections 126 and
129 of the Indian Evidence Act, 1872 ?”

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Sections 126 and 129 of the Indian Evidence Act, 1872, read
as under :“126. Professional Communications –
No barrister, attorney, pleader or vakil, shall at any time be
permitted unless with his client’s express consent to disclose
any communication made to him in the course and for the
purpose of his employment as such barrister, pleader, attorney
or vakil, by or on behalf of his client, or to state the contents or
condition of any document with which he has become
acquainted in the course and for the purpose of his professional
employment or to disclose any advice given by him to his client
in the course and for the purpose of such employment.
129. Confidential communication with Legal AdvisersNo one shall be compelled to disclose to the Court any
confidential communication which has taken place between him
and his legal professional adviser, unless he offers himself as a
witness in which case he may be compelled to disclose any
such communication as may appear to the Court necessary to
be known in order to explain any evidence which he has give,
but not others.”

Section 126 attaches privilege to communication made
during the course of “professional employment” with a class of
lawyers such as ‘barrister, advocate, pleader or a vakil’ and
enjoins against disclosure of any advice given to the client or
against disclosure of communication made during the course of his
employment as a barrister, attorney, pleader or vakil. I may
straightaway mention that Indian Evidence Act is of 1872 vintage
when legal profession was pursued by different classes of

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professionals like barristers, attorneys, pleaders and vakils, each
of which had different rights of audience before different courts.

The Advocates Act, 1961, which came into force from
19th May 1961, was enacted `to amend and consolidate’ the law
relating to “legal practitioners” and to provide for constitution of Bar
councils and All India bar. The Advocates Act, 1961 by one fell
swoop abolished the distinction between different kinds of legal
practitioners and now provides for only one class of legal
practitioners known as advocates. The term “advocate” is defined
in Section 2(a) of the Advocates Act, 1961 to mean an advocate
entered in any roll under the provisions of the Act. Under that Act
each State Bar Council is required to maintain a roll of Advocates
on which names advocates may be entered. Section 29 of the
Advocates Act, 1961 provides that after the Act came into force
there shall be only one class of persons entitled to “practice the
profession of law”, namely, advocates. Section 30 of the said Act
gives an advocate whose name is entered in the State roll a right
to practice throughout the territories of India in all courts, before
any tribunal or person legally authorized to take evidence or
before any other authority etc. Section 33 provides that except as
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otherwise provided in the Act or any other law for the time being in
force, “no person shall, on or after the appointed day, be entitled to
practice in any court or before any authority or person unless he is
enrolled as an advocate under the Act.” The statute invests the
power of making rules in the Central Government. The Indian Bar
Councils Act, 1926 deals with setting up of State bar Councils,
disciplinary proceedings against members of bar and so on and
empowers the Bar Councils to prescribe rules for governing the
conduct of legal profession in India.

Rule 49 framed by the Bar Council of India (Part-VI,
chapter-II) prescribes the “Standards of Professional Conduct and
Etiquette” for advocates.

Rule 49 specifically provides that an

advocate shall not be a full time salaried employee of any person,
government, firm, corporation or concern “so long as he continues
to remain” on the Rolls and shall upon taking up any employment,
intimate the fact to the Bar Council and “shall thereupon cease to
practice as an advocate so long as he continues in such
employment”.

There is, however, an exception made in the case

of Law Officers of the Central Government, State Government or

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Public Corporation or Body constituted by statute, which does not
concern us.

The plain language of Sections 126 and 129 of The
Evidence Act does not indicate that ‘in-house lawyers’ or ‘salaried
legal advisers’ fall within their purview. Notably, the legislature has
specifically used the words “barrister, attorney, pleader, or vakil” in
Section 126 and not chosen to amend the same; and used a
broader term “legal professional adviser” in Section 129. The
language of the provision does not afford scope for widening the
ambit of Section 126 to include an in-house counsel or a salaried
legal adviser.

The distinction between a “barrister”, “vakil”, “attorney”
and a “pleader” no longer exists since Section 29 of the 1961 Act
specifically provides that there shall be only one class of persons
entitled to practise the profession of law, namely ‘Advocates’.
However, on an interpretation of the Advocates Act and the Bar
Council Rules, in-house counsel would not come within the
definition of ‘advocate’ since and ‘advocate under Section 2(1)(a)

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of the Advocates Act means an advocate entered in any roll under
the provisions of the Advocates Act.

The legal position in India with regard to practice of law
currently is: (a) only an advocate is exclusively entitled to practice
the profession of law and (b) a person who is in full time
employment of an employer ceases to be an advocate.

The question that needs examination is: what is the
status of a full time employee in-house counsel, who is not an
advocate on the rolls of the Bar Council, even if he be qualified in
law by holding a law degree from a recognized academic
institution?

Section 126 would not apply to the case of such a full
time employee as he would not fall within the description “barrister,
attorney, pleader or vakil”.

With regard to communication with a full time
employee giving legal advice, the privilege attached to such
communication would have to be tested only with reference to
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Section 129 of the Indian Evidence Act, 1872.

The privilege

provided by Section 129 of the Indian Evidence Act applies only to
communication between a person and his “legal professional
adviser”. In fact, nothing prevents a person from taking advice,
even on a question of law, from a friend, relative or an employee in
whom he has confidence. I am, however, of the opinion that such
friend or relative who gives advice is not a “professional legal
adviser”, unless he is qualified to practice the profession of law
and is entitled to do so under the Advocates Act, 1961, Rules
made thereunder and the Rules made by the Bar Council of India.

I have reviewed all the material made available to me
including several judgments of the Indian Courts on which both
sides have placed reliance. The only judgment which deals with
the question squarely is the judgment of the Bombay High Court in
Municipal Corporation of Greater Bombay and another vs Vijay
Metal Works, AIR 1982 BOM 6. This judgment of a learned Single
Judge takes the view that the privilege under Section 129 should
attach to communications between a full time employee and the
employer, The Bombay Municipal Corporation. The learned Judge
relied on the observations of Lord Denning M.R. in (1972) 2 QB
7

102 to the effect that “communication between the legal adviser
and their employer (who is their client) are the subject of legal
professional privilege”.

With great respect to both the learned

Judges, I am unable to accept this proposition of law as currently
valid in the Indian context. Neither of them considered the impact
of the Advocates Act, 1961 and the Rules made by the Bar
Council, which have been considered by later judgments.

In the judgment of Larsen & Toubro Ltd vs Prime
Displays Pvt. Ltd. and others, Vol.114 Company Cases 141, the
Division Bench of the Bombay High Court skirted the issue and did
not answer the question as to whether in construing the term “legal
professional adviser” the provisions of the Advocates Act, 1961
have to be taken into consideration and as to whether in view of
the judgment of the Supreme Court of India in the case of Satish
Kumar Sharma vs Bar Council of H.P., (2001) 2 SSC 365, the
judgment in Municipal Corporation of Greater Bombay vs Vijay
Metal Works (supra) was not good law. These issues were not
decided by the Division Bench of the Bombay High Court.
However, the Bombay High Court does reiterate that what is
contemplated by Section 129 is “communication between a person
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and his legal professional adviser”. The Bombay High Court
judgment also does not consider the impact of Advocates Act,
1961 and the Rules framed thereunder.

In my opinion, therefore, the judgment of the Bombay
High Court in Municipal Corporation of Greater Bombay vs Vijay
Metal Works (supra) cannot be considered to be good law in view
of the later developments in law to which I shall advert.

A judgment of great import on the question under
consideration is the judgment of the Division Bench of the Bombay
High Court in Lawyers Collective vs Bar Council of India and
others, (2010) 2 Comp LJ 108 (Bom), which authoritatively holds:
“….. when the Parliament has enacted the 1961 Act to regulate
the persons practicing the profession of law, it would not be correct
to hold that the 1961 Act is restricted to the persons practising in
litigious matters and that the said Act does not apply to persons
practicing in non litigious matters. There is no reason to hold that
in India the practice in non litigious matters is unregulated”. (Vide
paragraph 54). The Counsel for Union of India had contended to
the contrary, by pointing out that, if the 1961 Act was held to be
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applicable to persons practicing in non-litigious matters, then no
bureaucrat would be able to draft or give any opinion in nonlitigious matters without being enrolled as an advocate.

This

argument was categorically rejected by the Division Bench of the
Bombay High Court by observing, “.. there is a distinction between
a bureaucrat drafting or giving opinion, during the course of his
employment and a law firm or an advocate drafting or giving
opinion to the clients on professional basis.

Moreover, a

bureaucrat drafting documents or giving opinion is answerable to
his superiors, whereas, a law firm or an individual engaged in non
litigious matters, that is, drafting documents/giving opinion or
rendering any other legal assistance are answerable to none. To
avoid such anomaly, the 1961 Act has been enacted so as to
cover all persons practicing the profession of law be it in litigious
matters or in non-litigious matters within the purview of the 1961
Act”.

The High Court decision suggests that the difference

between a professional legal adviser like an Advocate and an
employee lawyer is that the professional can give independent
advice subject to the rules and ethics of professional conduct while
the employee lawyer is likely to be influenced by his employer to
whom he is subordinate and answerable.
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Another

important

judgment

regarding

the

interpretation of (unamended) Rule 49 of the Bar Council Rules
came up before the Supreme Court in Satish Kumar Sharma v.
The Bar Council of Himachal Pradesh.1 In this case, the Supreme
Court was concerned with Rule 49 prior to its amendment (post
this decision in 2001)–
“Rule 49. An Advocate shall not be a full-time salaried
employee of any

person, Government, firm, corporation or

concern, so long as he continues to practise and shall, on
taking up any such employment intimate the fact to the Bar
Council on whose roll his name appears, and shall thereupon
cease to practise as an Advocate so long as he continues in
such employment.

The

Supreme

Court

observed

that

the

phrase

“Practice of law” under Sub-Rule (xx) of Rule 2 under the Bar
Council of India Rules “means and includes (a) practicing before
the Court, Tribunal, Authority, Regulator, Administrative Body or
Officer and any Quasi Judicial and Administrative Body, (b) giving
legal advice either individually or from a law firm either orally or in
writing, (c) giving legal advice to any government, international
body or representing any international dispute resolution bodies
1

AIR 2001 SC 509.

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including International Court of Justice, (d) engaged in Legal
Drafting and participating in any Legal Proceedings and (e)
representing in Arbitration Proceedings or any other ADR
approved by law.”

In Sushma Suri vs Government of National Capital
Territory of Delhi, (1999) 1 SCC 330, the Supreme Court of India
pointed out that practice with the profession of law was the genus
within which fell activities such as appearing and pleading before
the Courts or Tribunals as also activities of rendering professional
advice, drafting documents, etc as carried on outside the Courts.

In my opinion, the phrase ‘practice of law’ under Rule
2(xx) is very wide and includes giving of legal advice and
contemplates a degree of independence and neutrality in the legal
advice given and does not appear to include legal advice given by
in-house counsel (that is, a salaried employee of a Company etc.)
to their employer. Thus, in-house counsel cannot be considered to
be into ‘practice of law’ or a ‘legal professional legal adviser’ within
the meaning of section 129 of the Evidence act. Nor, are they
advocates within the meaning of Section 2(a) of the Act of 1961.

The Madras High Court decision in A.K.Balaji v.
Government of India & Ors.2 is more pertinent. The Court ruled
2

W.P. No. 5614 of 2010 and M.P. Nos. 1, 3 to 5 of 2010 (Decided On: 21/02/2012).

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that there is no bar under Indian law for the foreign law firms or
foreign lawyers to visit India for a temporary period on a 'fly in and
fly out' basis, for doling out legal advise to their Indian clients on
foreign law or their own system of law and on diverse international
legal issues. However, the Court declined to permit them to
practice law in India (litigation or non-litigation), unless they fulfill
the requirements under the Advocates Act and the Bar Council of
India Rules.

The European perspective may also be noticed here,
even if not strictly relevant to the Indian law. The European Court
of Justice (ECJ) in Akzo Nobel Chemicals Ltd v. European
Commission (C-550/07 P)3 decided on 14th September 2010 held
that legal professional privilege at Community level applied to
written communications between clients and independent lawyers,
but not to written communications between undertakings and inhouse lawyers. Briefly, in this case the European Commission had
investigated a Company and its subsidiary for possible anticompetitive practices and its officials took copies of documents at
their premises. The Commission decided that two emails between
the lawyer and manager were not privileged, and the General
Court refused the companies’ application to annul that decision.
The ECJ upheld the decision of the General Court and held that –
a. Notwithstanding his enrolment with a bar or law society of
a member state and the fact that he was subject to
3

[2011] 2 A.C. 338.

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professional ethical obligations, it followed from an inhouse lawyer’s economic dependence and close ties with
his employer that he did not enjoy the level of professional
independence comparable to that of an external lawyer inhouse lawyers were not independent for the purposes of
the condition for legal professional privilege;
b. Since in-house lawyers were in a fundamentally different
position from external lawyers, so their respective
circumstances were not comparable, the fact that they
were treated differently with regard to legal professional
privilege did not violate the principle of equal treatment;
c. That when an undertaking sought advice from an in-house
lawyer, it was not dealing with an independent third party,
but

one

of

its

employees,

notwithstanding

any

professional obligations resulting from enrolment at a bar
or law society; that, in any event, the rules on legal
professional privilege formed part of the restrictions and
conditions applicable to a lawyer’s profession; that the fact
that an undertaking which sought advice from an in-house
lawyer had to accept those restrictions and conditions
could not be regarded as affecting the rights of defence;
d. An in-house lawyer cannot, whatever guarantees he has
in the exercise of his profession, be treated in the same
way as an external lawyer, because he occupies the
position of an employee which, by its very nature, does
not allow him to ignore the commercial strategies pursued

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by his employer, and thereby aspects his ability to
exercise professional independence.

It is important to note that only a minority of the 27 EU member
states extends legal professional privilege to in-house lawyers
under their national laws. These are the United Kingdom and
Ireland, and the Netherlands, Greece, Portugal and Poland. The
remaining majority, including Germany and France (most civil law
countries), do not extend legal professional privilege to in-house
lawyers. The ECJ's decision needs to be understood in this
context. This is an area where the Indian law differs from the
English law because of the effect of the 1961 Act.

On interpretation of Sections 126 and 129 of the
Evidence Act, in my opinion, that legal privilege is restricted to
professional communication with a ‘barrister’, ‘vakil’, ‘pleader’ or an
‘attorney’ (section 126)

and

“legal professional adviser”

(section129), but does extend to an ‘in-house counsel’. Such
interpretation seems to be in consonance with the law, the
decisions of the superior courts in India and also with the decision
of the ECJ in Akso Nobel Chemicals. It is also to be noticed that

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the majority of the European Union members does not extend
legal professional privilege to in-house counsel.

In my opinion, no person can be said to be engaged as
a “legal professional adviser” unless he is permitted by the law (the
Advocates Act, 1961) and the Rules made thereunder and the
Rules made by the Bar Council to practice the profession of Law
as such. I am of the opinion that an employee in-house counsel
rendering advice even on matters of law, however valuable, does
not qualify to be a “legal professional adviser” within the meaning
of Section 129 of the Indian Evidence Act, 1872. There would
thus be no privilege attached to his advice or communications with
him, as neither Section 126 nor 129 would apply to such advice or
communication.

Mumbai
June 27, 2012

(B.N. SRIKRISHNA)

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