From Our Bureau
NEW DELHI: The Supreme Court has pulled up the Securities and Exchange Board of India (SEBI) in a judgment on Friday for “cherry-picking” certain excerpts of the opinion of Justice (Retd) B N Srikrishna while refusing to divulge the information which exonerates the Reliance Industries Limited (RIL)
The case relates to a complaint filed by noted chartered accountant S Gurumurthy in January 2002 in a fraud in allotment of 12 crore equity shares in 1994 to entities purportedly connected with the promoters of RIL, funded by RIL and other group companies.
A Bench of Chief Justice N V Ramana and judges J K Maheshwari and Hima Kohli held that SEBI cannot claim provilege to disclose some parts as such selective disclosure cannot be countenanced in law as it clearly amounts to cherry-picking.
It directed SEBI to provide in full to RIL the first and second opinions of Justice Srikrishna as also report of the chartered accountant Y H Malegam appointed at the instance of the retired judge.
RIL had come in appeal against the Bombay High Court’s ruling on March 28. Justice (retd) Srikrishna gave his first opinion to SEBI, but the latter opted to divulge it in parts to RIL amd sent notice to RIL in April 2010 that it had funded purchse of its own shares by 38 related entities, violating Section 77(2) of the Companies Act, 1956 amounting to violation of SEBI (Prohibition of fraudulent and unfair trade practices relating to Securities Market) Regulations, 1995.
RIL denied the charge and sought copies of the documents for its allegation as the issue concerning violation of Section 77 of the Companies Act, 1956 was examined by the Ministry of Corporate Affairs, concluding that it transactions were compliant with the applicable law.
SEBI refused to provide Justice Srikrishna’s opinion, claiming it to be a privileged and confidential document. In 2017-18, SEBI decided to re-examine the issue and sought advice of Justice Retd) B N Srikrishna for the second time. The judge suggested to appoint chartered accountant Y H Malegam as a person of high standing and great repute to suggest whether the monies transferred by two Reliance forms were towards project advances and other charges or were merely round tripping.
RIL, in the meanwhile, moved for settlement and asked SEBI on January 21, 2019 about its pending settlement application. Instead, SEBI moves SEBI Special Judge, Mumbai on 16.07.2020 to issue process against RIL for violating its regulations. The judge dismissed it as being barred by limitation. SEBI followed suit with a criminal revision application same year in Bombay High Court. On 28.03.2022, the High Court decided to hear it only with main revision application.
RIL appealed against this order and its senior counsel Harish Salve asserted that SEBI, being a regulator, has a duty to disclose documents pursuant to Article 21 and cited a Supreme Court ruling in support, saying SEBI cannot claim litigation provilege as the proceedings are not adversarial in nature.
Senior advocate Arvind Datar challenged the appeal as not maintainable since no criminal complaint is pending and the appellant cannot seek documents in a criminal revision against dismissal of the complaint on the ground of limitation.
