A bench of Justice Dipankar Datta and Justice Sheel Nagu was hearing a Special Leave Petition (SLP) filed against the Delhi High Court judgment that held that advocate-client privilege cannot operate as an absolute bar against investigating a lawyer's own conduct where the authorities place prima facie material suggesting that the lawyer may have acted beyond the role of a legal adviser and become involved in the affairs under investigation.

A Division Bench of Justice Anil Khetarpal and Justice Shail Jain had dismissed Batra's petition, holding that the search was conducted pursuant to a valid authorisation under Section 67(2) of the Central Goods and Services Tax, 2017 (CGST Act).

Aggrieved by the Delhi High Court's ruling, Batra (petitioner) filed an SLP before the Supreme Court.

Opening up the case, Senior Advocate Balbir Singh, for the petitioner, submitted that his case concerns advocate-client privilege. On this, Justice Datta traced the timeline of the facts of the case, noting that the search took place on 25 July and the writ petition was filed two days later.

“Search and seizure is on 25th July. So, they take away the computer. You file the writ on 27th. So 48 hours intervene in between. Do you think that they have not yet retrieved whatever? They have done it on every first instance because they have access to the computer. They are investigating authorities. Once they are after you, they have everything.”

On this, Additional Solicitor General (ASG) SV Raju responded that there was no advocate-client relationship in the case. “There is a fraud of 1,306 crores. They are all Chinese,” ASG adds.

The petitioner submitted that his primary contention is regarding the legality of the search and seizure. It was submitted that he had been summoned several times, had joined the proceedings, and had given the material to the GST Department. It was also added that he would provide further material, if required. Perusing the framework of the Central Goods and Services Tax Act, 2017 (CGST Act), it was submitted that the Act itself has a separate provision for third-party assessment; "You don't go and search the premises of a third person who is not concerned with the tax evasion. You call them.”

“They have no power of a seizure to go to a third party under GST law on the basis of reason to believe which has been formed in the name of tax person. That's the scheme of the Act,” he submitted. Otherwise, he said, it would be an “unbridled power” in indirect tax cases.

Stressing on the requirement of “reason to believe” under Section 67, it was submitted that under Section 67(1), the proper officer, not below the rank of Joint Commissioner, must have reason to believe that a taxable person has suppressed transactions, claimed excess input tax credit, or contravened to evade tax under the Act. The other category is a transporter or a warehouse owner or operator. Reference was also made to Section 67(2) to submit that a fresh reason to believe is needed that goods liable to confiscation, or documents, books or things useful, or relevant to proceedings under the Act, are secreted in “any place”. It was said that this power is linked to a search under Section 67(1). If material of the person searched is found at another place, “then the fresh reason to believe at that stage” must be applied. Section 67(11) was also perused to submit that for “any person” who is not a taxable person, the officer may only seize accounts, registers, or documents produced by him, for reasons recorded in writing. He added that the GST Department can summon such a person, and if the person does not appear, other provisions allow action against him.

Objecting to the GST Department's refusal to disclose its reasons to believe, he questioned, “the whole judgment talks of reason to believe, reason to believe, reason to believe, reason to believe what?” It was submitted that the only material connecting Batra to the case appeared to be a statement of one Suraj Kumar, and that its two versions on record differ. He said that the statement of 24 July, as reproduced in the GST Department's “reason to believe”, named several persons who would receive a cut or commission, and that version did not include Batra or any 0.7% share as his compensation. He submitted another statement on 29 July, of the same Suraj Kumar records differently. On this, Senior Advocate N Hariharan, also for the petitioner, pointed out that Suraj Kumar had been detained for four days on a Look Out Circular (LOC) when the statement was recorded, calling it “illegal detention.”

Justice Datta then asked the ASG about the discrepancy, questioning where the GST Department got Batra's name from when he was not named in the 24 July statement, and that the passage had been put within quotation marks. The ASG handed over a copy to the bench, adding that the investigation was ongoing. “During investigation, many times the persons, witnesses, accused, mislead the investigating officer,” he added. Looking at the copy, the bench said, “Once you are putting it into quotes, in the remand application, you have to faithfully reproduce from there.” The ASG replied that the questionnaire was the source, but that “some portion we have missed” and “we did not put the entire thing.”

The petitioner then took the bench through the High Court's judgment. He argued that para 30, which says the reasons recorded disclose “a sufficient basis for authorizing the search of the premises of the Bass Legal”, still does not say what the reason to believe was for. He said Section 67(2) applies to a 'place' and not to a 'person'. Bass Legal, he explained, is a separate firm whose premises include his cabin, and it was earlier his family partnership firm in which he was a partner. He argued that two satisfactions were required here, namely evasion of tax by the person searched, and material relating to that person lying at Bass Legal.

On para 36, where the High Court noted the respondents had specifically alleged, on the basis of material collected during investigation, that the petitioner was himself involved in one entity M/s Matkarma Technology Pvt. Ltd's (MTPL) affairs, he argued that reason to believe “should exist on that day when you are forming opinion”. Material collected later cannot be used to justify it, he said. The petitioner also drew attention to the High Court's statement that the subsequently placed material was considered “only for a limited purpose” and not to establish guilt or liability.

Relying on para 47, he pointed out that the High Court itself recorded that he had been issued summons on several occasions and had appeared and furnished a statement. He argued that the GST Department could then have invoked Section 67(11) and seized what he produced, and that there was no non-cooperation.

The petitioner also objected to the High Court's reliance on material produced in a sealed cover. He referred to para 40 of the judgment, where the High Court recorded that the material comprised material collected during the ongoing investigation, including statements of persons examined. The High Court said it was placed before it “to enable the court to examine the basis of the investigation and the role attributed to the petitioner” and not as a basis for final adjudication of liability.

The ASG interjected that the reasons to believe were not required to be given to the petitioner. He said they were in the file and had been shown to the High Court. He argued that even at the stage of arrest under Section 69 of the CGST Act, the reasons were not required to be furnished. Disclosing them at this stage, he said, would jeopardise the investigation because they contain statements and sensitive data.

“In that case, if the satisfaction is reached on the basis of irrelevant material, the person affected has no remedy,” the bench responded. The ASG replied that the reasons were produced before the High Court. “Do you have it with you?,” Justice Datta asked for a copy, and the ASG handed over the copy to the bench.

Referring to para 57 of the High Court's judgment, the petitioner submitted that the search was upheld as valid and the privilege was held not to be “an absolute bar against the investigation into the conduct of the advocate himself.” The High Court had said it was not called upon to return a final finding on the petitioner's role. The petitioner argued this was “completely a wrong test.” The correct test, he said, is the formation of an opinion on reason to believe under Section 67(1), 67 (2) or 67 (11), whether applied to a place, a taxable person or any other person.

Harihran relied on Section 67(10) of the CGST Act, saying that it applies the Code of Criminal Procedure's (CrPC, now the Bharatiya Nagarik Suraksha Sanhita, 2023/BNSS) provisions on search and seizure to searches under Section 67, with 'Commissioner' substituted for 'Magistrate' in Section 165(5) of the CrPC (now Section 185(5) of BNSS). Reading Section 165 of the CrPC, he argued that the officer must record in writing the grounds of belief, and that the owner or occupier of the place searched can obtain a copy of that record on application. He submitted that the reasons to believe therefore have to be furnished to the person searched.

Hariharan also criticised para 63 of the High Court judgment, which he called “the most disturbing” part. It directs the GST Department to use the cloned copy of the data and confine its examination to material relevant to the investigation, without opening the data of other clients. He argued that this would “straight away” breach privilege in relation to all other clients since the entire data had already gone to the GST Department.

Replying to this, the ASG referred to Section 102 of CrPC (now Section 106 of the BNSS) and Section 165 of CrPC, submitted that the authorisation was shown to the petitioner and the signature of the person in-charge of the place was taken. He said the reasons to believe refer to the statement of 24 July, and that “a large number of statements” implicating the petitioner existed before the search. “It's not that we created it as any statement or evidence after this search,” he submitted.

When the bench asked why the power under Section 67(11) was not used, the ASG said the powers are independent. He said Section 67(2) uses the words “or otherwise”, making it independent of Section 67(1). He added that the search was at a nascent stage when evidence was being collected.

The bench then asked how confidential or privileged material would be segregated. The ASG said the GST Department could redact it. Justice Datta remarked that the Department could not itself be the one deciding this. The ASG replied that the petitioner could approach the court for the same.

Issuing notice, the bench granted three weeks' time to the respondent to file a response. The petitioner sought notice and a stay of the High Court judgment, arguing that the GST Department already held the data it wanted.

In the light of aforesaid, the bench stayed the High Court's order. It also recorded that, since summonses were pending (to appear today), the petitioner may appear on Wednesday at 12 noon.

Case: Puneet Batra v Union of India (Diary No. 59119/2026)

Appearance:

For Petitioner: Mr Balbir Singh, Sr Adv.; Mr N Hariharan, Sr. Adv.; Mr Nikhil Jain, AOR

For Respondents: Mr SV Raju, Additional Solicitor General