2022 Supreme(SC) 649

SUPREME COURT OF INDIA
N.V. RAMANA, CJI., J.K. MAHESHWARI, HIMA KOHLI, JJ.
Reliance Industries Limited – Appellant
VERSUS
Securities And Exchange Board Of India & Ors. – Respondents
Criminal Appeal No. 1167 of 2022 [@ Special Leave Petition (Crl) NO. 3417 of 2022]
Decided On : 05-08-2022

IMPORTANT POINTS
(1) Initiation of criminal action in commercial transactions, should take place with a lot of circumspection and 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 country in long run.
(2) Duty to act fairly by SEBI, is inextricably tied with principles of natural justice, wherein a party cannot be condemned without having been given an adequate opportunity to defend itself.
(3) Principles of fairness and transparency of adjudicatory proceedings are cornerstone of principles of open justice.

Headnote:

(A) Companies Act, 1956 – Section 77 – Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995 – Regulations 3, 5 and 6 – Criminal Procedure Code, 1973 – Section 473 – Complaint – Limitation – Extension of period of limitation – Initiation of criminal action in commercial transactions, should take place with a lot of circumspection and 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 country in long run – Regulator must be cautious in initiating such an action and carefully weigh each factor – High Court is bound to consider facts of present case concerning modus of initiation of case and other factors, before considering aspect of condonation of delay in terms of Section 473 of Cr.P.C. – Approach of High Court of adjourning adjudication of interim application seeking disclosure of documents cannot be appreciated – Ideally, High Court ought to have considered interim application before dealing with limitation aspect. (Paras 28, 29 and 30)

(B) Securities and Exchange Board of India (Settlement Proceedings) Regulations, 2018 – Regulations 13(2) and 29 – Settlement proceedings – Intention of Settlement proceedings is to facilitate Regulator to consider feasibility of settlement in certain cases, without allowing a roving and fishing expedition – It is expected that parties in such proceedings are transparent, more so for Regulators like SEBI, who are expected to share all documents, which are necessary for understanding the issue – It is a matter of record that subsequently, settlement proceedings were terminated by SEBI and thereafter SEBI has decided to initiate a criminal complaint against appellant – Objection of SEBI that issue of disclosure of documents is Respondent judicata as same was disallowed by High Court in earlier round of litigation, cannot be sustained in eyes of law. (Paras 34, 35 36 and 37)

© Companies Act, 1956 – Section 77 – Right of accused-appellant to seek document disclosure – SEBI is a regulator and has a duty to act fairly, while conducting proceedings or initiating any action against parties – There is a substantive duty on Regulators to show fairness, in the form of public cooperation and deference – Duty to act fairly by SEBI, is inextricably tied with principles of natural justice, wherein a party cannot be condemned without having been given an adequate opportunity to defend itself – SEBI’s action to initiate a criminal complaint without providing appellant an adequate opportunity to defend itself by releasing necessary reports and other documents, cannot be appreciated by Court as it is in gross violation of appellant’s right to natural justice – Opaqueness only propagates prejudice and partiality – Opaqueness is antithetical to transparency – It is of utmost importance that in a country grounded in Rule of Law, institutions ought to adopt procedures that further democratic principles of transparency and accountability – Principles of fairness and transparency of adjudicatory proceedings are cornerstone of principles of open justice. (Paras 42, 43, 45 and 46)

(D) Indian Evidence Act, 1872 – Section 129 – Litigation privilege – Legal advice privilege comprises of communications between a client and his legal adviser, and is available when proceedings are in existence or contemplated – Litigation privilege on other hand, covers a wider class of communications, such as those between legal adviser and potential witnesses. (Paras 49)

Facts of the case:

Present appeal is filed against the impugned order dated 28.03.2022, passed by the High Court of Judicature at Bombay in Criminal Interim Application No. 1945 of 2021 in Criminal Revision Application No. 209 of 2020. Questions arise for consideration:

i. Whether this appeal is maintainable?

ii. Whether SEBI is required to disclose documents in present set of proceedings?

Findings of Court:

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 cherry-picking.

Result : Appeal dismissed.