Case Title: Reliance Industries Limited v. Securities And Exchange Board Of India & Ors.
Bench: CJI. N.V. Ramana and Justices J.K. Maheshwari and Hima Kohli
Citation: CRIMINAL APPEAL No. 1167 of 2022
The Supreme Court on Friday stated that, 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.
The bench of CJI. N.V. Ramana and Justices J.K. Maheshwari and Hima Kohli stated that “Initiation of criminal action in commercial transactions, should take place with a lot of circumspection and the Courts ought to act as gate keepers for the same.”
In this case, A complaint was filed by one Shri S. Gurumurthy, with the SEBI against Reliance Industries Ltd., its associate companies and its directors, alleging that they fraudulently allotted 12 crore equity shares of RIL to entities purportedly connected with the promoters of RIL, which were funded by RIL and other group companies in 1994. It was alleged that the company and its directors were in violation of Section 77 of the Companies Act, 1956.
Mr. Harish Salve, Counsel for the appellant submitted that, the challenge to the maintainability of the present appeal is misconceived. He stated that the interim application filed for seeking documents was argued at length before the High Court, which was ultimately not considered.
Mr. Arvind Datar, Counsel for the respondents submitted that, present appeal is not maintainable as there is no criminal complaint pending as on this date. The appellant cannot seek documents in a criminal revision against dismissal of the complaint on the ground of limitation.
The issue for consideration before the bench were:
1. Whether this appeal is maintainable?
2.Whether SEBI is required to disclose documents in the present set of proceedings?
While dealing with the first issue Supreme Court stated that “Initiation of criminal action in commercial transactions, should take place with a lot of circumspection and the 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 the country in the long run. Therefore, the Regulator must be cautious in initiating such an action and carefully weigh each factor.”
While dealing with the second issue Supreme Court opined that “It is a matter of record that subsequently, the settlement proceedings were terminated by SEBI and thereafter SEBI has decided to initiate a criminal complaint against the appellant herein. In this context, 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.”
Supreme Court found that 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.
In view of the above, The Supreme Court allowed the appeal.