Summary
In 2020 SEBI filed a criminal complaint against Reliance Industries over a 1994 allotment of shares to allegedly related entities, which the Special Court dismissed as time-barred. In SEBI's revision, RIL sought two opinions SEBI had obtained from a retired Supreme Court Judge and a chartered accountant's report. The Bombay High Court deferred the application to the final hearing. The Court held the appeal maintainable, as the material bore on condoning delay under Section 473 CrPC. As a regulator, SEBI must act fairly and, following T. Takano, disclose relevant material. Its investigation report was admittedly inconclusive, and its action rested on the expert opinions, which were a continuation of fact-finding and not protected by Section 129 of the Evidence Act. Having disclosed parts, SEBI could not cherry-pick, so all three documents were ordered disclosed.
Issues
- Whether an appeal lay against the High Court's order deferring an application for documents to the final hearing of SEBI's revision against dismissal of its complaint as time-barred.
- Whether SEBI must disclose to the accused the opinions of a retired Judge and a chartered accountant's report on which it based the prosecution, or whether they are privileged under Section 129 of the Evidence Act or premature before Section 207 CrPC.
Provisions considered
- Section 129, Indian Evidence Act, 1872SEBI's investigation report was inconclusive and it acted on the expert opinions and report. Those were an extension of the fact-finding exercise, not confidential legal advice, so Section 129 privilege did not apply. (¶¶ 48, 53, 54, 55)
- Sections 207 and 473, Code of Criminal Procedure, 1973Following S.P. Velumani, Section 207 does not bar disclosure where fairness requires it. The material bore on whether delay should be condoned under Section 473, so the High Court should have decided the application first. (¶¶ 27, 28, 47, 56)
- Regulations 13(2) and 29, SEBI (Settlement Proceedings) Regulations, 2018These govern settlement proceedings and protect an applicant's proposals. They do not limit SEBI's disclosure duties once it launches a criminal prosecution, so the earlier refusal during settlement was not res judicata. (¶¶ 34, 35, 37)
Held
- The appeal was maintainable. SEBI's revision sought issue of process and argued the merits, not merely limitation, and the circumstances of the complaint were relevant to condoning delay under Section 473. The High Court should have decided the disclosure application before the limitation question. Given the three decades of litigation, the Court decided the issue itself. (¶¶ 26, 27, 28, 30)
- Criminal action in commercial transactions must be initiated with circumspection, and courts should act as gatekeepers, since frivolous prosecutions of large corporations have adverse economic consequences. A regulator must weigh each factor carefully before prosecuting. (¶ 29)
- SEBI, as a quasi-judicial regulator, must act fairly and in accordance with natural justice. Following T. Takano, disclosure serves reliability, fair trial and transparency, so all relevant material should ordinarily be disclosed. Prosecuting after an inconclusive investigation and a Ministry finding of no violation, without disclosing the material relied on, offended natural justice. (¶¶ 42, 43, 44, 45, 46)
- SEBI launched the prosecution on the expert opinions and report, not on its inconclusive investigation report. Those documents were a continuation of its fact-finding to decide culpability, not legal advice protected by Section 129. Section 207 CrPC, and the settlement-stage refusal, did not justify withholding them. (¶¶ 34, 37, 53, 54, 55, 56)
- SEBI had disclosed parts of the first opinion pointing towards culpability while withholding the rest. A party cannot claim privilege over parts of a document while relying on others. Such cherry-picking undermines a fair trial and cannot be countenanced. (¶¶ 57, 58)
Result
Appeal allowed. SEBI is directed to furnish the appellant forthwith with both opinions of the retired Judge and the chartered accountant's report.