SC to Sebi: Let RIL entry papers on share purchase case

The Supreme Court on Friday directed the Securities and Exchange Board of India (Sebi) to offer Reliance Industries (RIL) sure paperwork the regulator had relied on in reference to a probe right into a case of acquisition of shares by the conglomerate.

A bench headed by Chief Justice of India NV Ramana agreed with RIL’s competition that Sebi’s determination to offer it with solely components of the probe papers amounted to cherry selecting.

“There is a dispute about the fact that certain excerpts of the opinion of Justice (Retd.) BN 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 bench, additionally comprising Justices JK Maheshwari and Hima Kohli, stated within the judgement.

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“In the case at hand, Sebi could not have claimed privilege over certain parts of the documents and at the same time, agreeing to disclose some part. Such selective disclosure cannot be countenanced in law as it clearly amounts to cherrypicking”, the Chief Justice writing for the bench stated.

The order added that “the approach of Sebi, in failing to disclose the documents, also raises 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 case has its origins in a grievance filed with Sebi in January 2002 by S Gurumurthy towards RIL, its affiliate corporations and its administrators. It alleged that they fraudulently allotted 12 crore fairness shares of the conglomerate to entities — that have been purportedly related with the promoters of Reliance Industries in addition to funded by RIL and different group corporations — in 1994.

Sebi initiated an investigation into the grievance and the investigating officer submitted a report on February 4, 2005.

RIL contended {that a} observe was ready by Sebi’s Legal Affairs Department on May 17, 2006, whereby it was famous that the report had not introduced out any particular violation of any authorized provision by the group.

However, the observe was stated to have noticed that there was a requirement of an opinion by an exterior professional on the opportunity of initiating applicable prison proceedings towards RIL. Accordingly, retired SC Judge Justice BN Srikrishna was approached.

Justice Srikrishna gave his opinion, which RIL contended was solely disclosed to it in components by Sebi.

On April 16, 2010, the markets watchdog despatched a letter to RIL alleging that the group had funded buy of its personal shares by 38 associated entities and thereby violated Section 77 (2) of the Companies Act, 1956 and, consequently, violated Regulations 3, 5 and 6 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices referring to Securities Market) Regulations, 1995.

In 2017-18, Sebi determined to reexamine the problem and sought recommendation of Justice Srikrishna for the second time, however he recommended that the regulator strategy strategy chartered accountant YH Malegam.

Malegam examined the data of RIL and numerous different corporations and submitted his report back to Sebi, primarily based on which the regulator sought a report from Justice Srikrishna once more.

RIL contended that Sebi rejected its request for the primary and second opinions of Justice Srikrishna in addition to the report by Malegam, citing litigation privilege.

The apex courtroom, nevertheless turned down Sebi’s objections and directed it to offer the studies to RIL.

The courtroom stated that “… 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, cannot be appreciated by this Court as it is in gross violation of the appellant’s right to natural justice”.
RIL had first approached the Bombay High Court towards the denial of the paperwork however did not get any reduction, following which it moved to the SC.