RELIANCE INDUSTRIES LIMITED versus SECURITIES AND EXCHANGE BOARD OF INDIA & ORS.

Citation: [2022] 15 S.C.R. 730 · Decided: 05-08-2022 · Supreme Court of India · Bench: N.V. RAMANA · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2022] 15 S.C.R.
RELIANCE INDUSTRIES LIMITED
v.
SECURITIES AND EXCHANGE BOARD OF INDIA & ORS.
(Criminal Appeal No. 1167 of 2022)
AUGUST 05, 2022
[N. V. RAMANA, CJI, J. K. MAHESHWARI AND
HIMA KOHLI, JJ.]
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 :
[2022] 15 S.C.R. 730
730
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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 bee

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