SC to Sebi: Let RIL access papers on share buy case

The Supreme Court on Friday directed the Securities and Exchange Board of India (SEBI) to provide Reliance Industries (RIL) certain documents relied upon by the regulator in connection with an investigation into the conglomerate’s share takeover case.

A judicial panel headed by Chief Justice of India NV Ramana agreed with RIL’s claim that Sebi’s decision to provide it with only parts of the investigation papers amounted to cherry picking.

“There is disagreement about the fact that some extracts from Justice (Retd.) BN Srikrishna’s opinion have been disclosed to the appellant here. The appellant’s claim is that while the parts disclosed vaguely refer to the appellant’s guilt, Sebi refuses to divulge the information that exonerates her. This Sippy cherry pick only detracts from the obligation to a fair trial,” said the court, which also includes Judges J.K. Maheshwari and Hema Kohli, in verdict.

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“In the case at hand, Sebi could not have claimed a lien on certain parts of the documents and at the same time, consented to the disclosure of a part of them. The Chief Justice said in writing to the arbitral tribunal that such selective disclosure could not be consented to in law because it is clear that It amounts to choice.

The order added that “Sebi’s approach to not disclosing documents raises concerns about transparency and fair trial. Ambiguity only serves to propagate bias and prejudice. Ambiguity contradicts transparency. It is critical that in a country based on the rule of law, institutions must adopt procedures It promotes democratic principles of transparency and accountability. Principles of justice and transparency in judicial procedures are the cornerstone of the principles of open justice.”

The case has its origins in a complaint filed by S Gurumurthy with Sebi in January 2002 against RIL, its associates and their directors. It alleged that they fraudulently allocated Rs 12 crore of conglomerate shares to entities – allegedly linked to promoters of Reliance Industries as well as with funding from RIL and other group companies – in 1994.

Al-Sabi began investigating the complaint and the investigation officer submitted a report on February 4, 2005.

RIL claimed that a memorandum prepared by Sibi Legal Affairs Department on 17 May 2006, in which it was noted that the report did not highlight any specific violation of any legal provision by the group.

However, the memorandum was said to note that there is a requirement to obtain an opinion by an outside expert on the possibility of initiating appropriate criminal proceedings against RIL. Accordingly, Retired High Court Justice PN Srikrishna has been contacted.

Judge Srikrishna gave his opinion, which RIL claimed was only revealed in parts by Sebi.

On April 16, 2010, the Market Watch sent a letter to RIL alleging that the group had financed the purchase of its shares by 38 related entities, and thus violated Section 77(2) of the Companies Act 1956, thus violating Regulations 3, 5 and 6 of the Securities Board Regulations. Finance and Exchanges of India (Prohibition of Fraudulent and Unfair Trading Practices Related to Stock Market), 1995.

In 2017 and 2018, Sippy decided to reconsider the issue and sought the advice of Judge Srekrishna for a second time, but suggested that the regulator’s approach is to approach chartered accountant YH Malegam.

Malegam examined the records of RIL and several other companies and submitted his report to Sebi, upon which the regulator again requested a report from Justice Srikrishna.

RIL claimed that Sebi denied her request for the first and second opinions of Judge Srikrishna as well as Malegam’s report, citing litigation privilege.

However, the Supreme Court rejected Sebie’s objections and directed her to report to the RIL.

The court said that “…Sebi’s action to file a criminal complaint without giving the appellant sufficient opportunity to defend himself by releasing the necessary reports and other documents, cannot be appreciated by this court as it constitutes a flagrant violation of the appellant’s right to natural justice.”
RIL first approached the Bombay High Court against the refusal of the documents but failed to obtain any compensation, after which it moved to the High Court.

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