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CORPORATE LAW PROJECT

TOPIC- PRIVILEGE COMMUNICATION AND

SECTION 227

SUBMITTED BY: Mayank Mishra

12/BBA/027
NATIONAL LAW UNIVERSITY, ODISHA

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Table of Contents
Introduction......................................................................................................................................4
Statement of problem.......................................................................................................................5
Scope objective and significance.....................................................................................................5
Research Questions..........................................................................................................................5
Chapterisation..................................................................................................................................6
Chapter I- Origin of section 227..................................................................................................6
Chapter II- Privilege Communication.........................................................................................6
Chapter III- Exceptions to legal client privilege..........................................................................6
Chapter IV Punishment for breaching this kind of privilege....................................................6
Origin of section 227.......................................................................................................................7
Corresponding section.................................................................................................................7
Need of this sectiom....................................................................................................................7
Privilege Communication................................................................................................................9
Lawyer Client Privilege Communication in criminal law...........................................................9
Rule in England.........................................................................................................................11
Exceptions to legal client privilege................................................................................................14
Punishment for breaching privilege by lawyers............................................................................14
Conclusion.....................................................................................................................................16
Biblography...................................................................................................................................17
Cases..........................................................................................................................................17
Statues........................................................................................................................................17
Books.........................................................................................................................................18
Miscellaneous............................................................................................................................18
Articles and Journals..................................................................................................................18
Websites:....................................................................................................................................19

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Introduction
Chapter XIV of the Companies act 2013 deals with Inspection Inquiry and Investigation. Under
this chapter registrar or govt. or tribunal may order for the inspection of the books of the
company or investigation into the affairs of the company if in their opinion some additional
information or any additional document is required which the company had not voluntarily
furnished which makes such enquiry necessary.
Section 2271 is like an exception to this chapter it protects the disclosure of information of the
company if that information:
1) Falls within the category of privileged communication between a lawyer and a client and
a lawyer can only disclose the name and address of the client2
2) Fall within the category of bankers client confidential information and such bankers of
any company cannot disclose information about the affairs of the customer except the
information of such company or body corporate or person.
Therefore it can be said that this section protects legal advisers from the disclosure of any
information which concern his client if the information which is demanded consists of any
privileged communication made by the client to him in such capacity. He can only disclose the
name and address of the client. Similarly it also protects the bankers of any company, person or
body corporate from the disclosure of any information which is related as to the affairs of any of
their customers except the company, person or body corporate of which he is a banker3

1 Section 227, Companies act 2013.

2 Section 227(1), Companies act 2013.
3 A Ramaiya , Guide to Companies act, 3311(17th ed. 2010).
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Statement of problem
In section 227 the term privilege communication is not very clearly defined and the reason of its
existence and the consequences of it not been followed is not laid down which is very important
for the interpretation of the section.

Scope objective and significance

In this project I have studied about the scope of section 227 in the companies act and its
significance and tried to define the meaning of the term Privilege Communication used in this
section. My major objective in making this project is to have in depth knowledge about section
227 and to know its evolution in India.

Research Questions
Q.1) How section 227 originated?
Q.2) What is the need of this section?
Q.2) What is the meaning of the term privilege communication used in this section?
Q.3)What are the exceptions to lawyer Client Privilege?
Q.4) What are punishments given to the lawyer for disclosing such information?

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Chapterisation
Chapter I- Origin of section 227
In this chapter I have tried to mention the root of this section that is the sources from which this
section has been taken and also the importance of this section, and made a jurisprudential study
of the terms used in this section.

Chapter II- Privilege Communication

This chapter explains the meaning of privilege communication between lawyer and client and
states the laws from criminal field regarding the same. It also explained the which is prevalent in
England and its compared it with Indian law.

Chapter III- Exceptions to legal client privilege

As the name suggest this chapter defined what are the various exceptions which is present
relation legal client privilege and when can this privilege be breached.

Chapter IV Punishment for breaching this kind of privilege

The measure which is taken if lawyer breaches its privilege is mentioned in this section. Bar
council forms certain basic rules relating to the code of ethics of the lawyers and if these rules
should not be breached by any lawyer.

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Origin of section 227

Corresponding section
This section corresponds to section 251 of the companies act 1956 4 which originated from
section 175 of the English act 19485. Section 175 of 1948 the companies act later turned into
section 452 of the companies act 19856.

Need of this sectiom

Section 2277 provides immunities to two types of relationship from sharing any information
which is privileged and confidential respectively they are
1) Lawyer Client Relationship
2) Banker Customer Relationship
The origin, need and importance this type of immunity is discussed as follows:Lawyers client relationship:-This immunity is important as the relationship between the lawyer
and client is fiduciary. The client has faith over the authors implicity which is a very important
feature of this relationship as then only a client will share all his information with his attorney
which will be required by the lawyer to protect him. A client trusts his lawyer while sharing his
information and this trust exist only through lawyers moral fiber or ethical norms, but every
time only moral or ethical norms is not sufficient for the client and there the role of Specific legal
rules comes into play which will bind the lawyer from sharing any information which can be
used against his client.

4 Section 251, Companies Act,1956.

5 Section 175, The English act 1948.
6 Section 452, English companies act 1985.
7 Section 227, Companies act 2013.
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The situation created if there is no privilege given is one of every man being forced to defend
himself instead of hiring a lawyer, or people telling their lawyers only half the story.8
This is the main idea behind granting this privilege. It is based on the Idea that legal business
cannot be conducted without professional help and that professional help will be effective only
when full information is shared by client.9 In the case of V.C. Rangadurai v. D. Gopalan,10
Justice Sen, has held that relationship between an attorney and his client is a personal
relationship involving the highest trust and confidence. As a result, the relationship is often
considered a fiduciary relationship, creating upon the attorney the duties that come with such a
relationship.11 An advocate must be considered more than just an agent of the client, as his role
and duties go beyond that. The Courts have also noted that a breach of this privilege by lawyers
affects not only the individual lawyer, but also the credibility, and therefore the ability of the
profession as a whole.12 It can be said that confidentiality of the information is both a right and
duty of the lawyer. It is a right as they cant be compelled to give information and it is a duty
because without the permission of client they cant disclose confidential information.
Bankers customer Relationship:- Similarly in the Banker Customer relationship the customer
share many confidential information with the bank therefore if the bankers are forced to share
that information than many customers might not be willing to share many essential information
which is necessary for the banking business in the fear of disclosure of that information and
which may lead to an abrupt end of the banking business.

8 Greenough v. Gaskell, (1824-34) All ER(Rep) 767.

9Jones v. Great Central Ry, 1910 AC 4.
10 V.C. Rangadurai v. D. Gopalan,, AIR 1979 SC 281.
11 Kailash Rai, Legal Ethics, Accountancy for Lawyers and Bench Bar Relations, (6th edn.,
Allahbad: Central Law Publications, 2005), at p. 61
12 The Council of the Institute of Chartered Accountants of India, New Delhi v. Mani S.
Abraham, AIR 2000 Ker 212.
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The relationship between a doctor and patient is of utmost trust and confidence as this is a kind
of a personal relationship and this relationship will only flourish if we make sure the
confidentiality of that information.13 Similar is the case of Banking, if we have to maintain the
flow of banking transaction then we have to maintain its confidentiality and the information
shared by the client
Therefore the above reason there is a protection given to the Bankers and the lawyers to the
central govt. or to the Registrar of the companies. The legal client privilege is more important in
the corporate world as the companies also share that information with their lawyers like trade
secret, merger information etc. on the disclosure of which company might loose its competitive
edge in the market.

Privilege Communication
Section 22714 also introduces a term Privileged Communication. In general terms it means any
confidential communication which should be withheld from the disclosure in the court
proceedings because disclosure of such information would be against public interest. In other
words any communication which is made between the parties who are in a confidential
relationship for example lawyer and client, husband and wife etc, the evidence of this
communication cannot be given without taking prior permission from the other party.15
In the current context it means any communication which is made between a lawyer and his
client or any person who is communicating anything to his lawyer with the purpose of becoming
his client with a view to taking any professional legal advice can be said to be a privilege
communication. However if a communication is made in furtherance of any crime or fraud then
this communication will not be protected under privileged communication.16
13 Kishore Lal v. Chairman, Employees State Insurance Corporation, AIR 2007 SC 1819.
14 Section 227 Companies act 2013.
15 KM Ghosh, Company law, 3565 (14th ed. Vol.2 2012)
16 Minter v. Priest, (1930) AC 558.
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Lawyer client attorney privilege is subset of privilege communication. This term has also been
discussed in criminal and constitutional law. This privilege is so important that courts in UK , Us
and India has decided that this privilege will extend even after the death of the client in both
civil and criminal even if it could save a person from being convicted wrongfully. The House of
Lords in the case of Bullivant and Others v. Attorney General of Victoria17 gave the same
judgment saying that the privilege do not end even after the death of any person. In India there is
no law in this point however a case has mentioned that the privilege extends after the death of the
client.18 A brief discussion about privilege communication in criminal law is necessary for
complete understanding.

Lawyer Client Privilege Communication in criminal law

This term has been defined in section 12619 and section 12920 of the Indian evidence act.
Section 126 says that no barrister, vakil or pleader can be permitted to disclose any
communication or disclose any document made or given by the client in the course of his
employment as barrister, vakil, or pleader. It also include any document which is prepared by the
client in the anticipation of litigation for seeking any legal advise. 21 This term has been defined
by the Gujrat High Court in the case of Gurunanak Provisions Stores v. Dulhonumal Savanmal
and Ors22 in which the court said that Neither a legal adviser nor his interpreter, clerk or even
servant could be permitted to disclose any communications made to him in the course and for
the purpose of professional employment of such legal adviser or to state the contents or

17 Bullivant and Others v. Attorney General of Victoria, (1901-03) All ER 812.

18 Ayesha Bi v. Peekam Shahib and Others, AIR 1954 Raj 741.
19 Section 127, Indian Evidence Act, 1872.
20 Section 128, Indian Evidence Act 1872.
21 Larsen & Toubro Limited vs. Prime Displays (P) Ltd., [2003] 114 Comp Cas 141(Bom).
22 Gurunanak Provisions Stores v. Dulhonumal Savanmal and Ors., AIR 1994 Guj 31.
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condition of any documents with which any such person has become conversant in the course
and for the purpose of such employment.
The court also explained the rationale for the existence of theese provisions and also the
impossibility of conducting legal business in the absence of such provisions. Then it further
stated that only those communication which are made to a legal adviser in the course of his
employment is protected and nothing in this section protects any communication which is made
in the absence of litigation for the purpose of disclosure.
Section 127 gives the protection to the lawyers. Another section that is section 129 gives the
protection to the client from disclosing any information which he has made to his lawyer unless
such person has volunteered himself as a witness in which case he may be compelled to disclose
any communication which may appear to the court necessary for explaining any evidence which
he has given and nothing else.23 The difference between 126 and 129 is that section 126 gives the
protection to the lawyers from being called to the stand this is not only a protection given to the
lawyer from the disclosure of information but is also entails a duty on the court to prohibit the
lawyer from disclosing any such information. However section 129 gives the protection to the
client from revealing any privileged communication between him and his lawyer but is do not
prohibit the client from any voluntary disclosure. He has the right to disclose any information if
he wants but legal adviser cant disclose any information without the consent of the lawyer. If he
do so may be charged of professional misconduct.

There are also some exceptions to this rule. This section does not protect:
1) Any communication which is made in furtherance of any illegal purpose;
2) Any fact observed in the course of employment showing that any crime or fraud has been
committed since the commencement of the employment.24
23 Section 129, Indian Evidence act, 1872.
24 Section 126, Indian Evidence Act, 1872.
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The protection under this section cannot be given against an order under section 91 of CrPC 25 the
document must be produced under section 16226 then it will be for the court to decide after
making complete inspection that whether the present document is admissible or not. 27 It should
also be kept in mind that not all communication between a person and lawyer is privileged and
only those communications which is made confidentially with a view to obtaining legal advice
can come under the category of privileged communication. Also the communication should be
made to the lawyer as a professional adviser28 and not as friend29.

Rule in England
In England there are mainly two type of legal professional privilege:
1) Legal Advice privilege : It protects the communication between a solicitor who is acting
in his professional capacity with his client for the purpose of taking any legal opinion.
This privilege is more or less similar to privilege under section 126 of the Indian
evidence act
2) Litigation privilege: This type of privilege starts after the litigation is commenced. Its
scope is wider than the legal advice privilege and it protects all those documents which
are produced for the purpose of the litigation, It includes all the communication between
a lawyer and his client or his non professional agents or any third party. This type of
protection is similar to section 127 and 129 of the Indian evidence Act.
The exceptions which applicable in Indian law are also applicable in England the only
difference is that under Indian law any communication which is made for an illegal purpose

25 Section 91, Code of Criminal Procedure, 1873.

26 Section 162, Code of Criminal Procedure, 1873.
27 Ganga Ram v. Habib Ullah, (1935)58 All 364.
28 Wallace v. Jefferson 2B 452..
29 Smith v. Duniell, 44 LJCh 189
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is not privileged but in England the communication which is made only for the for the
criminal purpose is not privilege.
An Important case in this field was Three Rivers District Council and others v. Governor &
Company of the Bank of England 30 in this case there was a litigation going on between Bank
of England and liquidators of BCCI in this case the liquidators of BCCI brought for the some
documents which were as follows:
1) Documents which were prepared by the employees of the bank that were sent to the
banks solicitors
2) Documents which were prepared by the employees of the bank for the sole purpose of
making the bank obtain legal advice which were not send to the Banks solicitors
3) Documents which were prepared by the employees of the bank not with the purpose
bank obtaining legal advice but was sent to the bank solicitors.
4) Documents which were prepared by the ex employees of the bank under the above three
points
The bank refused to disclose any of these documents on the ground that they are covered
under legal advice privilege. This claim for the privilege was refused by the court of appeal
discussed three questions of the legal advice privilege. They are:
1) Who is the client?
2) What constitutes legal advice privilege
3) Whether any evidential material obtained prior to the communication from the
employees is excluded from privilege?
1) Who is the client?
Though accepted that a corporation can only act through its employee but held that this is not in
itself sufficient to protect every communication between the employee and the employees
lawyer but the court did not have any clear cut guidelines as when an employee can be said to be
as client.
2) What constitutes legal advice privilege?
30 Three Rivers District Council and others v. Governor & Company of the Bank of England
, 1846, 16 LJCh 153.
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This court stated that legal advice only means advice given in relation to the law and it does
not cover any advice given by the lawyer. The courts also found that while giving legal
advice about the rights and liabilities lawyer might go beyond only advising about the law
for example lawyers very often advise about what the client should do in the furtherance of
advice and therefore all the communication which are inextricably linked to the provision of
legal advice remain privileged.

3) Whether any evidential material obtained prior to the communication from the employees
is excluded from privilege?
The court stated that document which are prepared for taking legal advice are only like a raw
material on which advice can be taken. The court therefore stated that following four type of
communication may not be protected by legal advice privilege:
1) Communication of any documents which is prepared by the employees of the client not
with the purpose of taking legal advice, but is intended to be sent to the lawyer and in
fact it is sent to the lawyer
2) Communication of any documents which is prepared by the independent third parties
like brokers economist or accountants with the purpose of obtaining legal advice and
then sent to the client but not sent to the lawyer.
3) Communication of any documents which is prepared by the independent third parties
like brokers economist or accountants with the purpose of obtaining legal advice for the
client and passed by the third party to the legal adviser of the client.

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Exceptions to legal client privilege

There are also many exceptions to this privilege. An exception to this rule is public interest. The
courts in India have additionally concurred that there is a public interest exemption to specialist
understanding secrecy, on account of a specialist telling his persistent potential wife that he is
HIV positive. Here, public wellbeing is viewed as more essential than privilege. Therefore, in
situations where a lawyer is mindful that a client is going to carry out a criminal activity, or can
do a substantial damage to an outsider, he can reveal this information, and privilege does not
matter. Another exception which is not currently added in the Indian law is when a client sues
his attorney. There is an assumption that if a client sued his attorney then he impliedly waives his
privilege.31 This has been recommended in the 185th Law Commission Report, but is not made
part of the law yet.32

Punishment for breaching privilege by lawyers

Bar council of India prohibits the lawyer from disclosing any information which comes under the
section 126. Part VI, Chapter II, Section II, Rule 17 of BCIR stipulates that "An advocate shall
not, directly or indirectly, commit a breach of the obligations imposed by Section 126 of the
Indian Evidence Act" thus it reiterates the spirit of attorney-client privilege, breach of which will
also lead to violation of the Bar Council Rules33. Also section 30 of the code of ethics laid down
by the bar council of India states that the lawyer has a duty to hold confidentiality of all
information which concerns the business and affairs of the client acquired in the course of the
professional relationship, and shall not divulge any such information except as expressly or
31 Andrew Boon and Jennifer Levin, The Ethics and Conduct of Lawyers in England and Wales
Oxford: Hart Publishing, 1999 at p. 261; See Lillicrap v. Nalder & Son, [1993] 1 All Er 724
(CA).
32 185th Law Commission Report.
33 Part VI, Chapter II, Section II, Rule 17 of Bar council of India Rules.
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impliedly authorized by the client, required by law or otherwise required by this Code. However
there are some exceptions to it which says,
(a)if a lawyer believes on reasonable grounds that there is an imminent risk to death and
grievous harm to any person which can include serious psychological harm that would
substantially interfere with health or well-being, the lawyer shall disclose confidential
information if it is necessary to do so in order for preventing death or harm but should not
disclose any other information
(b)

If the lawyer on reasonable grounds believs that a dangerous situation can develop at a

court or tribunal facility then he should inform the person responsible for security at the facility
and give particulars, but should not disclose confidential information except to the extent
necessary. If possible the lawyer should suggest solutions of the anticipated problem such as:
(i)

the need for further security;

(ii)

that judgment be reserved;

(iii)

such other measure as may seem advisable.

(c)

Disclosure may also be justified in order to establish or collect a fee, or to defend the

lawyer or the lawyers associates or employees against any allegation of malpractice or

misconduct, but only to the extent necessary for such purposes.
Therefore if any lawyer do not abide by the above rules and disclose any privilege information
then he will be seriously dealt with the bar Council of India and they may suspend or cancel the
lawyers license.

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Conclusion
In this paper the special privileges which is given to the lawyer against the inspector to the
companies lawyer and the protection of the confidential information by the bankers of the
company to their customer is discussed. Lawyer client communication is a very important form
of the privilege communication as it protects the lawyer from disclosing any confidential
information of the client and also assures the clients of the protection of the information. It is
very important in corporate world also as the rules of equity should be followed in all the fields
of law. The same is the case with bankers confidential information, if a inspector wants any
information of the customer of the bank apart from the company of the banker then there should
be protection given to the banker which also plays a vital role in gaining the customers
confidence for making them to invest.
The paper analyzes the rules governing this as they exist in various countries as well as the
exceptions to the same across the same jurisdictions. One common thread that seems to flow
across all jurisdictions is with regard to an exception when a crime is about to be committed. In
summary, the researcher would like to state that in his opinion, the exceptions to this rule should
be given a broader understanding.

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Biblography
Cases
1.) Greenough v. Gaskell, (1824-34) All ER(Rep) 767
2.) Jones v. Great Central Ry, 1910 AC 4
3.) V.C. Rangadurai v. D. Gopalan,, AIR 1979 SC 281
4.) The Council of the Institute of Chartered Accountants of India, New Delhi v. Mani S.
Abraham, AIR 2000 Ker 212.
5.) Kishore Lal v. Chairman, Employees State Insurance Corporation, AIR 2007 SC 1819.
6.) Minter v. Priest, (1930) AC 558
7.) Bullivant and Others v. Attorney General of Victoria, (1901-03) All ER 812
8.) Ayesha Bi v. Peekam Shahib and Others, AIR 1954 Raj 741.
9.) Larsen & Toubro Limited vs. Prime Displays (P) Ltd., [2003] 114 Comp Cas 141(Bom).
10.)

Gurunanak Provisions Stores v. Dulhonumal Savanmal and Ors., AIR 1994 Guj

31
11.)

Ganga Ram v. Habib Ullah, (1935)58 All 364.

12.)

Smith v. Duniell, 44 LJCh 189

13.)

Three Rivers District Council and others v. Governor & Company of the Bank of

England , 1846, 16 LJCh 153.

Statues
1.) Companies act 2013
2.) Companies Act, 1956.
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3.) The English act 1948

4.) English companies act 1985
5.) Indian Evidence act, 1872.
6.) Code of Criminal Procedure, 1873.
7.) Part VI, Chapter II, Section II, Rule 17 of Bar council of India Rules.

Books
1.) A Ramaiya , Guide to Companies act
2.) KM Ghosh, Company law, 3565 (14th ed. Vol.2 2012)

Miscellaneous
1) 185th Law Commission Report
2) 69th Law Commission Report

Articles and Journals

1.) Kailash Rai, Legal Ethics, Accountancy for Lawyers and Bench Bar Relations, (6th edn.,
Allahbad: Central Law Publications, 2005)
2.) Arti Joshi, Right to Confidentiality in an Attorney-Client Relationship, 2003 CILQR
486.
3.) C. S. Raghu Raman, Attorney-Client Privilege Does it Survive the Death of Client
State of Law in US, England and India, 2007 (3) Cri. L. J. 187.
4.) C.S. Raghu Raman, Child Care Proceedings Disclosure of Privileged
Communications Between Client and his Attorney, AIR 2007 Jour 56

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5.) Gavin Murphy, The Innocence at Stake Test and Legal Professional Privilege: A Logical
Progression for the Lawbut not in England, Crim. L.R. 2001, SEP, 728-731.
6.) Harry McVea, Heard it Through the Grapevine: Chinese Walls and Former Client
Confidentiality in Law Firms, Cam LJ 2000, 59(2), 370-389
7.) Karan Tyagi, Attorney Client Privilege and its Extension to Criminal Proceedings,
2008 (3) Cri L.J. 180.
8.) Soli J. Sorabjee, Lawyers as Professionals, AIR 2002 Jour 4.

Websites:
1) en.wikipedia.org/wiki/Attorneyclient_privilege
2) www.legalserviceindia.com/articles/pc.htm
3) www.legalsutra.org/wp...privilege/Client-Attorney-Privilege.doc
4) www.pennjil.com/jilp/1-1_Marble_Andrew.pdf
5) http://blog.ipleaders.in/privileged-communications-lawyers-duty-client-informationconfidential/
6) www.wc.com/assets/attachments/EP_(5).pdf
7) technet.microsoft.com/en-us/library/ff367906.aspx

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