Disclosure Of SEBI's Inspection Reports & PID Candidate Lists Mandates Third-Party Notice Under S.11 RTI Act: Bombay High Court - 2025-07-11

SEBI Must Follow Third-Party Notice Procedure for Disclosing Inspection Reports, PID Candidate Info: Bombay HC

Mumbai: The Bombay High Court, in a significant ruling on the Right to Information (RTI) Act, has held that the Securities and Exchange Board of India (SEBI) cannot be compelled to disclose its annual inspection reports of stock exchanges or lists of rejected candidates for Public-Interest-Directors (PIDs) without following the mandatory procedure for third-party information under Section 11 of the RTI Act.

A division bench of Justice M.S. Sonak and Justice Jitendra Jain set aside the Central Information Commission's (CIC) order that had directed partial disclosure. The court remanded the matter back to SEBI's Central Public Information Officer (CPIO) for a fresh decision, emphasizing that the concerned third parties—the stock exchanges and the PID candidates—must be notified and given an opportunity to object to the disclosure.

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Case Background

The ruling came in a batch of petitions filed by SEBI, RTI activist Mr. Subhash Chandra Agarwal , and various stock exchanges, all challenging a CIC order from December 2022. Mr. Agarwal had filed an RTI application seeking a wide range of information from SEBI, including:

File notings on the policy for appointing PIDs on the boards of Market Infrastructure Institutions (MIIs) like BSE, NSE, and MCX.

Documents related to SEBI's approval of PID appointments between 2019 and 2021.

Annual inspection reports of BSE and NSE for specific years.

The CPIO and the first appellate authority had denied most of the information, citing exemptions under Section 8(1) of the RTI Act, particularly relating to fiduciary capacity, commercial confidence, and personal information. The CIC, however, partially allowed Mr. Agarwal 's appeal, directing SEBI to provide lists of selected and rejected PID candidates (with personal data redacted) and the concluding comments from its inspection reports.

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Key Arguments

SEBI's Stance: Represented by Senior Advocate Mr. J.J. Bhatt, SEBI argued that the requested information was held in a fiduciary capacity. Disclosing it would compromise sensitive economic data, invade the privacy of individuals who applied for PID positions, and impose a disproportionate burden. SEBI and the stock exchanges (represented by Senior Advocates Mr. Sunip Sen and Mr. Pesi Modi) contended that the CIC's order was passed without adhering to the mandatory third-party notice procedure under Section 11 of the RTI Act.

RTI Applicant's Position: Mr. Ashish Venugopal , appearing for Mr. Agarwal , argued that SEBI, as a public regulator, could not claim fiduciary privilege to deny information about its public functions, such as appointing PIDs and inspecting stock exchanges. He heavily relied on the Supreme Court's landmark judgment in Reserve Bank of India vs. Jayantilal N. Mistry , which mandated disclosure of RBI's inspection reports of banks, arguing that a similar principle of public interest and transparency applied to SEBI.

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Court's Analysis: The Primacy of Section 11

The High Court meticulously analyzed the interplay between the exemptions under Section 8 and the procedural requirements of Section 11 of the RTI Act, citing the Supreme Court's Constitution Bench judgment in CPIO, Supreme Court of India vs. Subhash Chandra Agarwal .

The bench underscored that Section 11 is not merely a procedural formality but a substantive protection embodying the principles of natural justice. It provides a crucial check and balance, allowing a third party whose information is sought to contest its disclosure.

On Appointment of Public-Interest-Directors (Query 3): The court observed that disclosing the names of rejected candidates could cause an "unwarranted invasion of the privacy of such persons." It reasoned that these appointments are qualitatively different from selections via competitive exams.

"Those not selected or appointed may not necessarily be disqualified or less meritorious than those selected... They may not want these matters to be made public. Their privacy concerns cannot be disregarded without giving them an opportunity to oppose such disclosures... The provisions in Section 11, which are mandatory, cannot be avoided or bypassed in such situations."

On Annual Inspection Reports (Queries 4 & 5): While acknowledging Mr. Agarwal 's reliance on the Jayantilal N. Mistry case, the court noted the prima facie observations made by the Supreme Court in a subsequent matter ( HDFC Bank Ltd Vs Union of India ) regarding the need to balance the right to information with the right to privacy. More critically, the court held that inspection reports, which contain information supplied by stock exchanges, squarely fall under the definition of "third party information."

The bench concluded that ordering even limited disclosure without hearing the stock exchanges was legally untenable.

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Final Verdict

The High Court disposed of the petitions with the following directions:

Upheld Denial of Information: The court did not interfere with the CIC's decision to deny information on policy-framing file notings (Query 2) and other vague queries (Queries 6-9).

Remanded for Fresh Consideration: The CIC's order concerning the list of PID candidates (Query 3) and annual inspection reports (Queries 4 & 5) was set aside.

Mandatory Compliance with Section 11: The matter was remanded to the CPIO of SEBI to reconsider the requests afresh, but only after strictly following the third-party notice procedure prescribed under Section 11 of the RTI Act.

This judgment reinforces the procedural safeguards for third-party information under the RTI Act and clarifies that even for powerful regulators like SEBI, the principles of natural justice must be followed before disclosing information that relates to other entities or individuals.