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I am trying to upload a password protected PDF file in a document library which is IRM enabled and while uploading the file I am getting below error.

The PDF document you tried to upload was not encrypted in SharePoint therefore it cannot be uploaded to this library.

Is there any link which says that password protected documents are not allowed in IRM enabled document library.

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The issue is that IRM cannot be applied to the document when the document has been password protected (SharePoint essentially needs to open the document on upload). This is the best documentation I was able to find that closely resembles the above statement, where a new stream is created when attempting to protect the document.

I_IrmProtector.HrProtectRMS Method

This method takes a stream of data that represents an unprotected file of a type that the IRM protector can understand, and then generates a corresponding data stream that represents a protected version of that file.

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