Professional Documents
Culture Documents
Respondents
Date of Hearing
Date of decision
This case was heard on 2nd and 3rd July, 2014 in pursuance of the
directions dated 14.03.2014 of the Honble High Court of Delhi in W.P. (C) No.
4637/2013 Reliance Industries Limited vs CPIO, SEBI and Ors.
2.
As decided during the hearing in this matter on 30.04.2014, a notice was
also issued to the advocate (Shri Ritin Rai) representing 12 entities which were
alleged to be collaborating with the Reliance Industries Ltd. (RIL) in the short
sale of shares of Reliance Petroleum in November, 2007.
3.
The brief facts are that Shri Arun Kumar Agrawal, the appellant, submitted
an application dated 14.09.2011 to the CPIO of the Securities and Exchange
Board of India (SEBI) established under section 3 of the Securities and
Exchange Board of India Act, 1992 (the SEBI Act) seeking certain information
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under the Right to Information Act, 2005 (the Act). The points on which
information was sought are as follows:1.
Inspection report in respect of the entities involved with RIL in the
short sale of shares of Reliance Petroleum in November, 2007;
2.
3.
The various applications of consent order/terms offered by RIL and
the entities involved charged under Prohibition of Fraudulent and Unfair
Trade Practices Regulations;
4.
5.
Entire papers in the file and file notings relating to the declining of
the requests filed by RIL and other entities for the consent orders and for
considering request for composition of offences under the Prohibition of
Fraudulent and Unfair Trade Practices Regulations; and
6.
Entire papers in the file and file notings relating to the latest
pending requests filed by RIL and other entities for the consent orders
and for considering request for composition of offences under the
Prohibition of Fraudulent and Unfair Trade Practices Regulations.
4.
The CPIO vide his reply dated 7.10.2011 informed the appellant in
respect of points 1 and 4, that quasi-judicial proceedings were in progress and
there was no final order yet, and hence the information was exempt under
section 8(1)(h) and 8(1)(d) of the Act. About point no. 2, the CPIO informed that
the information sought was not available with SEBI. About point nos. 3, 5 and 6,
the information was denied, being exempt under section 8(1)(e) of the Act.
5.
The appellants first appeal dated 22.10.2011 was disposed of by an
order dated 22.11.2011. Regarding point nos. 1 and 4 of the RTI application the
appellate authority agreed with the CPIO that the disclosure of the documents is
exempt under section 8(1)(d) and 8(1)(h) of the Act. It was also observed that
the appellant had not brought up any public interest argument to the fore under
section 8(2) of the Act. As regards point no. 2, the matter was remanded to the
CPIO for de novo consideration. As regards point nos. 3 and 6, it was held that
the information requested for is exempt under section 8(1)(d) and 8(1)(e).
6.
In his second appeal dated 12.01.2012 the appellant submitted that the
same is in public interest and that the information requested for may be provided
in public interest under sub-section (2) of section 8 of the Act.
7.
(a)
(b)
(c)
the claim of RIL to be third party under section 19(4) of the Act is not
sustainable;
(d)
the SEBI has also investigated the price manipulations and price rigging
and the investigation was not confined to insider/fraudulent trading only
and that the investigations were also conducted for allegation of cheating
of investors on a large scale;
(e)
the investors need to be informed about the amount of profit made by the
12 entities who were alleged to be working for personal gains and acting
as agents of RIL. The disclosure of information would indicate that
Rs.2000 crores of money minus the amount to compensate the investors
will accrue to the public exchequer;
(f)
the CPIO has wrongly claimed exemption under section 8(1)(h) of the Act.
The proceedings are complete. Even if the investigation is pending, the
disclosure of information would not, in any way, impede the process of
the inquiry/investigation. He relied upon the judgement dated
30.11.
2009 of the High Court of Delhi in W.P.(C) No. 7930/2009 Addl.
Commissioner of Police (Crime) vs CIC and dated 03.06.2011 in W.P.(C)
No. 295/2011 B.S. Mathur vs PIO, Delhi High Court, respectively;
(g)
the CPIO has not properly examined the contents of the information
requested for. Once the investigation report is submitted, the subsequent
action or decision on that report is not exempt under section 8(1)(h) as
the action being taken cannot be considered as a process of
investigation. Even if some information is to be withheld, provisions of
section 10 of the Act should have been applied by the CPIO;
(h)
the clause 8(1)(d) is not attracted in the matter specially when insider
trading is involved. Clause 8(1)(e) also does not apply as there cannot
be fiduciary relationship between a violator of law and the regulator. SEBI
is expected to protect the investors and not to protect the interest of the
RIL.
(i)
the 12 entities are not investors. Illegal money has been used;
(j)
(k)
the Act being a special Act will apply to the exclusion of other Acts.
(l)
8.
(a)
(b)
(c)
during the process of investigation and the related proceedings under the
SEBI Act, a variety of information including information relating to
commercial and business interests, documents involving strategic
information, are submitted by the entities/persons against whom
investigation is conducted by the SEBI. Such information/documents
filed with the SEBI are fiduciary in nature. Disclosure of the investigation
report or other information/documents obtained during investigation may
hamper a level playing field for the entities and may cause irreparable
damage to the reputation of the entities/persons. Such disclosure may
further adversely affect the competitive position of the entities, the same
is, therefore, exempt u/s 8(1)(d) and 8(1)(e) of the Act;
(d)
(e)
(f)
the SEBI, with the approval of its Chairman, had issued guidelines for
consent orders and for considering request for composition of offences
vide circular dated 20.04.2007. As per the guidelines, all information
submitted and discussions in pursuance of the consent orders shall be in
a fiduciary capacity and may not be released to the public, as it would
prejudice the functioning of SEBI and the interest of the party. Therefore,
the information provided by any entity applying to certain proceedings
through consent means is exempt from disclosure under section 8(1)(e)
of the Act. In this regard, he relied on the orders of the Commission in (i)
case no. CIC/SM/A/2011/001497 - Kishan Lal Mittal vs SEBI, dated
09.07.2012 and (ii) case no. CIC/AT/A/2010/001052-SM - Mahendra
Singh vs CPIO, SEBI, dated 25.08.2011 in which it was held that the
background papers including the file noting leading to the consent orders
should not be disclosed in the public domain, not only because these
would contain information in the nature of commercial confidence but also
because SEBI receives such information in confidence and trust. The
provisions of both sub-sections (1) (d) and (1) (e) of section 8 of the Act
would apply to such information;
(g)
9.
(a)
the appellant wants information in the public interest under section 8(2) of
the Act as there has been alleged conspiracy between the RIL and the 12
entities. This allegation as well as the allegation about mala fide in
denying extension to the then Chairman, SEBI is baseless. He relied on
judgement dated 01.11.2013 of the Supreme Court in W.P.(C) no. 374 of
2012 filed by the appellant - Arun Kumar Agrawal vs Union of India & Ors.
reported in (2014) 2 SCC 609. The Honble Court had held that denial of
extension to the then Chairman, SEBI cannot be considered mala fide;
(b)
as the SEBI has issued a show cause notice to RIL, the matter is pending
adjudication. Therefore, inspection report is exempt under section 8(1)
(h) of the Act. He relied upon orders of the Commission in the matters of
K.S. Prasad and Shankar Sharma referred to above and order dated
15.10.2007 in case no. CIC/AT/A/2007/00822 Sanjeev Goyal vs M.D.
Singh, Commissioner of Customs and CPIO;
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(c)
the disclosure of the desired information will affect the efficient operation
of SEBI and the confidentiality of sensitive information will not be
preserved. He relied on the judgement dated 02.09.2011 of the Supreme
Court in C.A. no. 7571 of 2011 Institute of Chartered Accountants of
India vs Shaunak H. Satya & Ors. If the information is disclosed, it is
likely to impair governments ability to obtain necessary information in
future or to cause substantial harm to competitive position of person from
whom information is obtained. Reliance was placed on the order dated
23.3.2012 of the High Court of Delhi in LPA no. 900/2010 - Bharat
Sanchar Nigam Limited vs Shri Chander Sekhar. Therefore, exemption
under section 8(1)(d) and section 8(1)(e) of the Act applies to this case;
(d)
(e)
the Act may not be allowed to be used to intrude into the domain of
another quasi-judicial authority, the SEBI, in this case. He relied upon
order dated 13.03.2009 of this Commission in the matter of Sandeep K.
Vakharia case no. CIC/AT/A/2008/01373;
(f)
SEBI has not passed any order under the SEBI Act that the information in
question may be disclosed to any person;
(g)
as the appellant has failed to establish any case of public interest as per
section 8(2) of the Act, the appeal may be dismissed as without merit.
10.
(a)
he represents 11 entities (of the 12 entities) as one entity viz. M/s Tech
Software Pvt. Ltd. stands dissolved in terms of section 560 of the
Companies Act, 1956;
(b)
the orders of CPIO and the first appellate authority are reasoned and
correct and he supports the stand of the SEBI;
(c)
the show cause notice issued earlier to RIL has been withdrawn and a
fresh show cause notice has been issued by the SEBI. The allegations
are yet to be decided. The investigation is still in progress. Therefore,
the information requested for is exempt being covered by section 8(1)(h);
(d)
(e)
(f)
the appeal is without merit and liable to be dismissed. The appellant has
failed to disclose any public interest for disclosing the information
requested for.
Discussion:
11.
We have taken into account the submissions made by the parties during
the hearing and have gone through the contents of the appeal and the written
submissions of the parties.
12.
The issue for consideration in the matter is whether there is any
investigation being undertaken by SEBI involving RIL, which is to be taken into
consideration on the question of disclosing information that is sought by the
appellant. If the investigation is pending, then whether a case of public interest
is made out to supersede the protected interests.
13.
It will be useful to recognize that the SEBI, established under the SEBI
Act is the enquiring institution. It is the principal body to regulate the security
market. The object of the SEBI is to regulate the securities market and maintain
confidence in the investors. SEBI is the sole authority to decide what would be
best in the interest of the investors and the public at large in respect of the
securities market. Section 11C of the SEBI Act provides for passing
orders/directions to investigate the affairs of intermediaries or persons
associated with the securities market if the SEBI has reasonable grounds to
believe that the transaction in securities is being dealt with in a manner
detrimental to the investors or the securities market. After getting a report of the
inquiry, the SEBI is required to pass an appropriate speaking order. The
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(Manjula Prasher)
Information Commissioner
(Vijai Sharma)
Information Commissioner