Supreme Court allows Reliance plea against SEBI for access to documents; says market regulator has to be fair, not circumvent rule of law

The Supreme Court on Friday allowed a plea by Reliance Industries Limited (RIL) seeking access to certain documents that were relied upon by the Securities and Exchange Board of India (SEBI) in a probe by the market regulator into a share acquisition matter. (RIL vs SEBI)

A bench of Chief Justice of India NV Ramana and Justices JK Maheshwari and Hima Kohli held that SEBI has a duty to act in a fair manner and refrain from circumventing rule of law.

"Being a quasi-judicial body, the constitutional mandate of SEBI is to act fairly, in accordance with the rules prescribed by law. The role of a Regulator is to deal with complaints and parties in a fair manner, and not to circumvent the rule of law for getting successful convictions. There is a substantive duty on the Regulators to show fairness, in the form of public cooperation and deference," the Court held.

RIL had moved the top court after after the Bombay High Court had rejected its plea to access certain documents that it believed would clear the air on all allegations against the company.

SEBI had alleged irregularities when RIL acquired its own shares between 1994-2000.

The three-judge bench led by CJI NV Ramana noted that it SEBI’s attempt amounted to cherry picking the documents it proposed to disclose.

"There is a dispute about the fact that certain excerpts of the opinion of Justice (Retd.) B. N. Srikrishna, were disclosed to the appellant herein. It is the allegation of the appellant that while the parts which were disclosed, vaguely point to the culpability of the appellant, SEBI is refusing to divulge the information which exonerate it. Such cherry picking by SEBI only derogates the commitment to a fair trial," the judgment said.

Further, the apex court ruled that SEBI could not have claimed privilege over certain parts of the documents and at the same time, agreeed to disclose other parts.

Such selective disclosure cannot be countenanced in law as it clearly amounts to cherrypicking, the Court underlined

While directing SEBI to disclose the documents, the court noted that the approach of SEBI, in failing to disclose the documents also raised concerns of transparency and fair trial.

"Opaqueness only propagates prejudice and partiality. Opaqueness is antithetical to transparency. It is of utmost importance that in a country grounded in the Rule of Law, institutions ought to adopt procedures that further the democratic principles of transparency and accountability. Principles of fairness and transparency of adjudicatory proceedings are the cornerstone of the principles of open justice," the top court stated.

SEBI, the court said, is a regulator and has a duty to act fairly, while conducting proceedings or initiating any action against the parties.

The case stemmed from a complaint by S Gurumurthy with the SEBI in 2002 alleging irregularities.

SEBI had moved City Civil and Sessions Court in 2020 seeking prosecution of RIL. The court had, however, rejected the plea citing delay in acting on the 2002 complaint.

Plea against that order was filed before the Bombay High Court when RIL also approached the Bombay High Court seeking three documents relied upon by SEBI.

That plea was rejected leading to the present appeal before the top court.

[Read Judgment]