“Regulator Has To Act Fairly” : Supreme Court Directs SEBI To Disclose To Reliance Documents Used For Filing Complaint
Case: Reliance Industries Ltd versus Securities and Exchange Board of India
Coram: CJI NV Ramana, Justices JK Maheshwari and Hima Kohli
Case No.: CRIMINAL APPEAL No. 1167 of 2022
Court Observation: “It is expected that parties in such proceedings are transparent, more so for Regulators like SEBI, who are expected to share all the documents, which are necessary for understanding the issue”
“SEBI is a regulator and has a duty to act fairly, while conducting proceedings or initiating any action against the parties. Being a quasijudicial 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”
“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 simple test in this case is whether SEBI has launched the prosecution on the basis of the investigation report alone. The answer seems to be ‘No’ by SEBI’s own admission in its reply where it states that the investigation report was inconclusive and hence further scrutiny of the transactions by experts was called for. That being the case, further Reports and opinions obtained, from whomsoever it may be, are only an extension of the investigation to help SEBI as a Regulator to ascertain the facts and reach conclusions for prosecution or otherwise”
“Initiation of criminal action in commercial transactions, should take place with a lot of circumspection and the 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. Therefore, the Regulator must be cautious in initiating such an action and carefully weigh each factor”
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