ED issues circular restricting summons to advocates amid Care Health ESOP probe

Mumbai

In a key directive to ensure legal safeguards, the Directorate of Enforcement (ED) has issued a circular instructing all its field units not to issue summons to any advocate in violation of Section 132 of the Bhartiya Sakshya Adhiniyam, 2023. The circular further clarifies that if a summons must be issued under the exceptions outlined in the proviso to Section 132, it can only be done with the prior approval of the Director, ED.

The move comes in the backdrop of the ED’s ongoing money laundering investigation into Care Health Insurance Ltd (CHIL). The probe centers on allegations that CHIL issued Employee Stock Ownership Plans (ESOPs) at an undervalued price on May 1, 2022, despite the Insurance Regulatory and Development Authority of India (IRDAI) having rejected the plan. The issuance allegedly took place with the knowledge and discussions of the company’s board, raising concerns about regulatory non-compliance and possible financial irregularities.

As part of this investigation, the ED had summoned Shri Pratap Venugopal, an Independent Director of CHIL and a Senior Advocate in the Supreme Court, to understand the circumstances under which the ESOPs were approved and issued. However, in line with the new directive and considering Venugopal’s seniority in the legal fraternity, the summons has been withdrawn.

In its communication to Venugopal, the ED stated that if any documents are required from him in his role as an Independent Director, he would be asked to submit them via email.

Meanwhile, IRDAI has cracked down on CHIL for regulatory violations, directing the company to cancel or revoke any ESOPs not yet allotted and imposing a penalty of ₹1 crore for non-compliance with its directives.