A group of 21 news publishers, including companies owned by billionaires Mukesh Ambani and Gautam Adani, has challenged India's privacy law in court, arguing it would trample investigative work and let New Delhi identify journalists' sources, documents show.

Prime Minister Narendra Modi's government last year announced implementation of a privacy law to protect digital personal data of users, raising compliance requirements for platforms like Meta and Google. The publishers have said that since media outlets were not exempt, the law was an invasion of press freedom.

Media companies received assurances in an August meeting with the government that the law would protect press freedom, but not having a written carve-out for journalists like in the European Union, Singapore and Britain was alarming, India's Digital News Publishers Association (DNPA) said in a confidential filing at the Supreme Court, reviewed by Reuters.

The October 6 lawsuit, being reported for the first time and due to be heard on Tuesday, is the most high-profile challenge to Modi’s privacy law. Until now, only free speech activists and a group of smaller news outlets had challenged it.

It also marks an unusual challenge to the government from businesses headed by Ambani and Adani, who opposition parties allege are close to Modi and get favourable treatment - charges the businesses and the government vehemently deny.

DNPA and the media groups did not respond to requests for comment from Reuters, and neither did India's information technology ministry.

The publishers are demanding that most of the law's contentious provisions, which kick in from May 2027, should be quashed. They are arguing the law could force a journalist to get prior consent from a person they want to investigate and force publishers to erase stories. They also say powers granted by the law to demand information could expose reporters' sources.

The law would "render investigative journalism a benign and neutered recorder of events," the 698-page filing said. The provisions "constitute pre-censorship which is anathema to any democracy worth its name".

The lawsuit comes amid accusations of declining press freedom in India since Modi took office in 2014. Critics say many mainstream media outlets have not done enough to scrutinise Modi’s government.

India's ranking in Reporters Without Borders’ World Press Freedom Index fell to 157th out of 180 countries this year, from 140th in 2014 - but the government rejects the rankings.

Modi's government says it respects press freedom and says India, which has a "vibrant press and media ecosystem" of hundreds of newspapers and TV channels, does not need validation from foreign bodies.

DNPA's members include Ambani's Network18, which has seven digital news platforms, Adani's NDTV (NDTV.NS) and other marquee media groups including the Indian Express and Times Internet, which is part of the Times of India group, publisher of India's largest-selling English-language daily. A key concern in the law is the requirement of consent, the group's filing says.

A social media platform or online retailer can seek consent from users when they sign up, but the DNPA has argued that requiring a journalist to notify the subject of an investigation and seek consent "would allow that subject to destroy evidence, intimidate witnesses".

The law also lets people withdraw consent at any time and demand that their data be erased, without any public-interest safeguard, which DNPA says could force its members to unpublish or heavily redact a factual news report.

News publishers are concerned that a federal authority created under the law can impose fines for non-compliance, and grants powers to New Delhi to block access to any information in the "interests of the general public", which would curtail press freedom, DNPA said.

In an August letter to the government attached to the lawsuit, the group said India "has chosen to grant broad exemptions to the state, while failing to extend any corresponding protection to the press". No response was cited.

From next year, the law will also let New Delhi order any organization handling personal data “to furnish such information as it may call for”, putting newsrooms at risk of having to divulge sources, the filing said.

It can also deter whistleblowers from sharing information on corruption, corporate wrongdoing or electoral malpractice with reporters, the DNPA argued.

The “nakedly unguided” provision must be quashed, the DNPA said, adding that the power “can extend to privileged communications in possession of a reporter or the informant.”