NDLI: Reliance Industries Limited Vs. Securities and Exchange Board of India & Ors.

Content Provider	Supreme Court of India
e-ISSN	30484839
Language	English
Access Restriction	NDLI
Subject Keyword	Companies Act 1956 – s.77 – Non-disclosure of information by SEBI – SEBI directed to act fairly – Complaint was filed with SEBI against RIL & its associate companies and its directors alleging that they fraudulently allotted 12 crore equity shares of RIL to entities purportedly connected with RIL – Investigation Report was submitted by the Investigating Authority on 04.02.2005
Content Type	Text
Resource Type	Law Judgement
Jurisdiction	India
Case(s) Referred	Referred Case 0
Case Type	Appeal
Court	Supreme Court of India
Disposal Nature	Appeal Allowed
Headnote	Companies Act, 1956 – s. 77 – Non-disclosure of information by SEBI – SEBI directed to act fairly – Complaint was filed with SEBI against RIL & its associate companies and its directors alleging that they fraudulently allotted 12 crore equity shares of RIL to entities purportedly connected with RIL – Investigation Report was submitted by the Investigating Authority on 04.02.2005 – SEBI in its counter affidavit admitted that the aforesaid report was inconclusive and recommended further enquiry in this regard – SEBI approached a retired judge in the year 2009 to give his opinion on the possibility of initiating criminal proceedings against RIL – The Retired Judge gave his first opinion which formed the basis of initiating action against the appellant – SEBI sent a letter to RIL alleging that RIL had funded purchase of its own shares by 38 related entities and thereby violated s. 77(2) of the Act and consequently violated Regulations 3, 5 and 6 of the SEBI Regulations, 1995 – RIL addressed letters to SEBI requesting for copies of documents – SEBI refused to furnish copy of opinion of Retired Judge stating that it is privileged & confidential in nature – On 29.09.2011 RIL filed settlement application before SEBI – SEBI sought opinion of Retired Judge for the second time who wrote back to SEBI to consult Chartered Accountant – This culminated in second opinion of Retired Judge – Appellant sought further material in connection with settlement application – SEBI rejected request for disclosure of documents – Appellant filed writ petition before High Court that was dismissed – SEBI filed complaint in the court of Special Judge – Special Judge dismissed the complaint as being barred by limitation – SEBI filed Criminal Revision Application before High Court – In the aforesaid proceeding appellant filed interim application seeking documents – The High Court stated that the interim application will be heard along with main Revision Application – On appeal, held: SEBI’s action to initiate a criminal complaint without providing the appellant an adequate opportunity to defend itself by releasing necessary Reports and other documents is gross violation of the appellant’s right to natural justice – The objection of SEBI that the issue of disclosure of documents is res judicata as the same was disallowed by the High Court in the earlier round of litigation, cannot be sustained in the eyes of law – The first opinion of the Retired Judge is not covered by ‘legal privilege’ u/s. 129 of Evidence Act – The second opinion and the Report of Chartered Accountant are nothing but a continuation of the fact finding exercise undertaken by SEBI to determine culpability – SEBI’s attempt to cherrypick the documents, it proposes to disclose, derogates the commitment to a fair trial – The respondents were directed to furnish copy of the above referred documents to appellant – Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995 – Regulation 3, 5, 6 – Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 – Rule 4 – SEBI Takeover Regulations – Regulation 11(1) – Securities and Exchange Board of India (Settlement Proceedings) Regulations, 2018 – Regulation 13(2)(a), 29 – Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003.Role of Regulator – Duty to act fairly – SEBI is a regulator and has a duty to act fairly, while conducting proceedings or initiating any action against the parties – 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 duty to act fairly by SEBI, is inextricably tied with the principles of natural justice, wherein a party cannot be condemned without having been given an adequate opportunity to defend itself.Doctrines/Principles – Principles of Natural Justice – Discussed.Company Law – Criminal action – Initiation of criminal action in commercial transactions – It should take place with a lot of circumspection & Courts ought to act as gate keepers for the same – Initiating frivolous criminal actions against large corporations would give rise to adverse economic consequences for the country in the long run – Regulator must be cautious in initiating such an action and carefully weigh each factor.Trial – Transparency and fair trial – Opaqueness only propagates prejudice and partiality – Opaqueness is antithetical to transparency – 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.Evidence Act, 1872 – s.129 – Litigation Privilege – Legal privilege not applicable to legal opinion used by SEBI to initiate prosecution, as such opinion is part of investigation.Code of Criminal Procedure, 1973 – Condonation of delay – Sec. 473 is categorical in stating that any limitation prescribed u/s. 468 of CrPC can be overlooked if sufficient cause is made out in the facts and circumstances of the individual case in the interest of justice – The provision while trying to balance public interest in initiating criminal prosecutions, has been restricted to peculiarities of individual case while clothing the Court with discretionary power – Such a discretion vested in the Court ought to be a principled exercise, wherein the facts and circumstances portrayed justify such an exercise – The intention of the aforesaid provision is to make the inquiry a question of fact and not of untrammelled discretion as to whether in a particular case, the Court should condone the delay. Doctrines/Principles – Cherry picking principle – Selective disclosure is countenanced in law as it amounts to cherry-picking.Criminal Law – Difference between Legal advice privilege and litigation privilege – Discussed.
Judge	Honble Mr. Justice N.V. Ramana
Neutral Citation	2022 INSC 796
Petitioner	Reliance Industries Limited
Respondent	Securities And Exchange Board Of India & Ors.
SCR	[2022] 15 S.C.R. 730
Judgement Date	2022-08-05
Case Number	1167

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