PMLA and the practising professional: from applicability to defensibility

Introduction

On 31 October 2025, in In Re: Summoning Advocates who give legal opinion or represent parties during investigation of cases, (2025) INSC 1275, the Supreme Court of India held that an investigating officer may not summon an advocate merely for having advised or represented a client, except within the exceptions to section 132 of the Bharatiya Sakshya Adhiniyam, 2023. No equivalent privilege exists for a chartered accountant, a company secretary or a cost accountant. Neither the Chartered Accountants Act, 1949 nor the Company Secretaries Act, 1980 contains a privilege provision. A summons under section 50 of the Prevention of Money-Laundering Act, 2002 therefore reaches a practising professional's working paper file directly — with no exception to be identified, no superior officer's satisfaction to be recorded, and no interposed judicial review.

What the Supreme Court actually decided

The proceeding arose from an Ahmedabad police notice under section 179 of the BNSS issued to an advocate who had done nothing but file a successful bail application. A bench of Chief Justice B. R. Gavai with Justices K. Vinod Chandran and N. V. Anjaria issued four binding directions:

• an investigating officer may not summon an advocate representing an accused to learn the details of the case, unless a section 132 exception applies;

• where an exception is invoked, the summons must specify the facts relied upon and carry the recorded written satisfaction of an officer not below the rank of Superintendent of Police;

• the summons is subject to judicial review under section 528 of the BNSS;

• the privilege covers pre-litigation and non-litigious advice, but does not extend to in-house counsel.

The judgment followed the Enforcement Directorate's summonses in June 2025 to Senior Advocates Arvind Datar and Pratap Venugopal over legal advice in the Care Health Insurance ESOP matter. Both were withdrawn, and on 20 June 2025 the ED issued Technical Circular No. 03 of 2025 requiring the Director's prior approval before any advocate is summoned.

Section 3 of the PMLA does not wait for reporting-entity status

Most practices read the notifications of 3 May 2023 (S.O. 2036(E)) and 9 May 2023 (S.O. 2135(E)) and concluded, often correctly, that they are not reporting entities. That answers only one question.

Reporting-entity status under section 2(1)(sa)(vi) is a compliance obligation — FIU-IND registration through the Institute, an AML policy, client due diligence, a Principal Officer, monthly reporting, five-year retention — carrying a penalty of ₹10,000 to ₹1,00,000 for each failure under section 13.

Section 3 is separate. It applies to every person who knowingly assists, is knowingly a party to, or is actually involved in any process or activity connected with proceeds of crime. It does not ask whether the professional is a reporting entity, and it is not confined to the notified activities. A certificate, a valuation or a structuring opinion is enough to put a name in an Enforcement Case Information Report.

What the courts have held about professional liability

In Murali Krishna Chakrala v. Deputy Director, Directorate of Enforcement, the Madras High Court discharged a chartered accountant prosecuted over Form 15CB certificates issued against inflated import documentation, holding that his duty was to verify the taxability of the remittance under the Income-tax Act, 1961 and not to investigate the genuineness of client documents. The Supreme Court declined to interfere. Read with Vijay Madanlal Choudhary v. Union of India and Pavana Dibbur v. Directorate of Enforcement, the principle is that presence is not participation and knowledge is not presumed from proximity.

What produced that outcome, however, was not an argument of law made later. It was a defined role and a contemporaneous record.

What the full article covers

• 1. the two 2025 developments in full, with citations

• 2. the precise gap between section 132 BSA and section 50 PMLA

• 3. the distinction between reporting-entity compliance and section 3 exposure

• 4. five questions to test your engagement letter against — scope boundary, reliance versus verification, client representations on beneficial ownership and source of funds, the section 12(2) tipping-off clause, and the right to withdraw

• 5. six things a defensible working paper file must show — client identity at the 10 per cent beneficial ownership threshold, source of funds, contemporaneous commercial rationale, the instruction trail, verification separated from reliance, and the record of questions raised and resolved

FAQ

Does legal professional privilege apply to a chartered accountant in India? No. Section 132 of the Bharatiya Sakshya Adhiniyam, 2023, which replaced section 126 of the Indian Evidence Act, 1872, protects communications made to an advocate. There is no equivalent provision for a chartered accountant, company secretary or cost accountant, so their files are not privileged.

Can the Enforcement Directorate summon a CA or CS under the PMLA? Yes. Section 50 of the Prevention of Money-Laundering Act, 2002 empowers the authorities to summon any person, enforce attendance and compel production of records, and the statement recorded is admissible in evidence. None of the safeguards the Supreme Court laid down for advocates in October 2025 apply.

What did the Supreme Court hold in In Re: Summoning Advocates (2025)? On 31 October 2025 the Court held that an advocate cannot be summoned merely for advising or representing a client, except within the exceptions to section 132 BSA — and then only with facts specified and the written satisfaction of an officer not below SP rank, subject to judicial review under section 528 BNSS.

Is a chartered accountant a reporting entity under the PMLA? Only where both limbs are satisfied: the person holds a certificate of practice, and actually carries out a financial transaction on behalf of a client in relation to one of the five activities notified on 3 May 2023. Audit, tax filing, certification and advisory work do not by themselves trigger it.

Does section 3 of the PMLA apply to professionals who are not reporting entities? Yes. Section 3 applies to every person and is not limited to the notified activities. Reporting-entity status governs compliance obligations; section 3 governs criminal exposure. The two are independent.

What should a PMLA-ready engagement letter contain? An express boundary on what the firm will not do, a clause separating reliance from verification, client representations on beneficial ownership and source of funds, an acknowledgement of the section 12(2) prohibition on tipping off, and an unconditional right to withdraw.