Bombay HC questions Sebi in CIC-RIL case

Last Updated: Wed, Dec 05, 2012 03:52 hrs

The high court here adjourned the Securities and Exchange Board of India (Sebi)-Central Information Commission (CIC) case to December 19, while directing that Reliance Industries Ltd (RIL) be made a party.

Sebi is appealing against an order of the central information commissioner, Satyananda Mishra (appellate authority under the national Right to Information Act), last month, asking it to disclose information in the 2007 RIL insider trading case. The CIC had passed this directive on an appeal filed by a Bangalore-based lawyer and RTI activist, Arun Agrawal, who had asked Sebi to disclose details of the consent order proceedings in the case and the identity of the entities involved in the alleged insider trading.

The bench of judges D Y Chandrachud and A A Sayed on Tuesday said RIL should be given a chance to present its version, as the disclosures in question pertain to the company. “We may accept their case or reject it. Everybody has to be given a chance,” said Chandrachud on Tuesday, while posting the matter to December 19.

  • 2007: RIL allegedly indulges in insider trading in Reliance Petroleum shares
  • 2008: Sebi begins probe in the matter 
  • 2010: Sebi initiates quasi-judicial proceedings against RIL
  • Nov 6, 2012: CIC’s Mishra asks Sebi to disclose details of the case following RTI appeal by Agrawal
  • Nov 24, 2012: Sebi appeals in Bombay HC against CIC's order
  • Dec 4, 2012: Bombay HC says make RIL party to the case; Adjourns case to December 19

Arun Agrawal, appearing in person, argued there was no need to hear RIL. “If it is a bank, income tax department or lawyer, there is a fiduciary relationship. But there cannot be a fiduciary relationship between a regulator and a violator,” he said.

The court on Tuesday asked the Sebi counsel why the regulator should have any problem in disclosing the information on the basis of which it had come out with a consent circular.

“He (Arun Agrawal) wants disclosure on the underlying process. What is the harm in disclosing the file notings? Ultimately, you have issued that circular. It is not something that is confidential. You have a file relating to that circular. Give him that file,” said Chandrachud. The court directed the counsel to take instructions from the regulator on whether it could disclose the file notings and the underlying process of the consent route circular.

The counsel, Jamshed Cama, argued that information regarding a commercial confidence or trade secrets cannot be given unless the CIC proved it would be in the public interest to do so.

“Prima facie, CIC could be satisfied that this is in the public interest. But the question is, is it merely enough to say that? He should demonstrate in his order as to how it is in the public interest,” said Cama.

In reply, Agrawal said such disclosures would keep the general public informed and educated about the risks they confront while investing in the market. “Even with the most hardened criminal, his face is covered but his name is made public,” he said.

Agrawal questioned Sebi’s rationale behind settling a Rs 500-crore insider trading case with a consent order of just Rs 10 crore. “If a Rs 500-crore case is settled for Rs 10 crore, then every party who violates rules will ask why should I not be given the privilege of giving 10 per cent of the loot and get exonerated,” he argued.

When Chandrachud asked the status of the case, the Sebi counsel said the investigation report was complete and it had to be considered by a Sebi wholetime member. “The next step would be prosecution or penalty,” said Cama.

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