Information regarding the insider trading of shares of the Reliance Petroleum
The appellant filed four applications under the Right to Information (RTI) Act with the Securities and Exchange Board of India (SEBI) seeking a variety of information relating to the SEBI investigation into the allegations of insider trading and short sale of shares of the Reliance Petroleum in 2007 by the Reliance Industries Ltd. He also sought some information regarding the consent order cases filed by the Reliance Industries Ltd. and other entities for offence under the Prohibition of Fraudulent and Unfair Practices Regulations. The appellant further wanted the copies of the returns of the assets and liabilities filed by the Chairman of SEBI with the details of all the entities involved in the short sale of shares.
The PIO ruled against disclosure against (i) and (ii) below holding that being part of the quasi-judicial proceedings, the disclosure of such information would impede the process of investigation already underway. Besides, the disclosure of such information which is in the nature of commercial confidence could also affect the competitive position of the third party.
(i) The investigation report or the details of the consent order proceedings, and
(ii) The details about the identity of the entities involved in the short sale of the shares of the Reliance Petroleum in 2007,
(iii) Regarding the assets and liabilities of the current Chairman, SEBI and his monthly emoluments, the PIO claimed that the same are exempt under sections 8(1)(e) Notwithstanding anything contained in this Act, there shall be no obligation to give any citizen, information available to a person in his fiduciary relationship, unless the competent authority is satisfied that the larger public interest warrants the disclosure of such information; and (j) of the Right to Information (RTI) Act, being personal information held in a fiduciary capacity.
(iv) Regarding the question of the disclosure of the file noting and other relevant records resulting in the issue of a certain circular in 2007 laying down the guidelines for the consent order mechanism, the PIO provided part of the information and claimed exemption under sections 8(1)(g) Notwithstanding anything contained in this Act, there shall be no obligation to give any citizen, information, the disclosure of which would endanger the life or physical safety of any person or identify the source of information or assistance given in confidence for law enforcement or security purposes; and (j) of the RTI Act for the remaining.
During the hearing before the Central Information Commission (CIC), the appellant submitted that the insider trading by the Reliance Industries Ltd. had been widely reported in the press and it was believed that an illegal gain of more than Rs. 500 crore rupees had been made. He claimed that a greater public interest would warrant the disclosure of the desired information.
View of CIC
1. The CIC noted that:
- SEBI had ordered investigation into certain allegations regarding insider trading/ short sale of shares of the Reliance Petroleum in 2007 involving the Reliance Industries Ltd. and based on the investigation report, some proceedings had also been initiated.
- Simultaneously, on the request of the party concerned, consent order proceedings had been initiated.
- The matter has been lying for several years now pending a final decision in the matter.
- Several entities have been identified by the SEBI who were involved in the insider trading/ short sale of shares of the Reliance Petroleum in 2007 the details of which are still not in the public domain.
If the SEBI took cognizance of allegations of any breach of law by any entity for unlawful private gain, the information generated in the process of its investigation needs to be disclosed in the public domain. Such disclosure would keep the general public informed and educated about the risks in making investments in the market and would also prevent many entities from adopting shortcuts to make profit. The Commission held that the argument that at the end of the quasi-judicial proceedings, the charged entities may be found innocent cannot be an argument against disclosing the information. This becomes especially important as the SEBI has also initiated consent order mechanism on the request of party involved and the violations found in the investigation could be settled through a consent order thereby nullifying the likely penalty which would have visited the party involved at the end of the quasi-judicial proceedings. The CIC ruled that the disclosure of the information as sought in (i) and (ii) would serve a larger public interest.
2. The Commission held that the file noting and other related information relating to the issue of the circular in 2007 regarding the guidelines for the consent order mechanism cannot fall under any of the exemption provisions. The CIC observed that transparency demands that the entire process of deliberation leading to the formulation of important policies like in this case should be disclosed up front in the public domain so that the people can find out why and how such important decisions have been taken.
3. The CIC further ruled that the information regarding the assets and liabilities of the Chairman SEBI is clearly in the nature of personal information which is exempt under section 8(1)(j) Notwithstanding anything contained in this Act, there shall be no obligation to give any citizen, information which relates to personal information the disclosure of which has no relationship to any public activity or interest, or which would cause unwarranted invasion of the privacy of the individual unless the Central Public Information Officer or the State Public Information Officer or the appellate authority, as the case may be, is satisfied that the larger public interest justifies the disclosure of such information: Provided that the information which cannot be denied to the Parliament or a State Legislature shall not be denied to any person. of the RTI Act.
This order opens up the murky world of insider trading to the public. However, as reported in the latest byte below, this order has been challenged in the High Court.
Citation: Mr. Arun Kumar Agrawal v. Securities and Exchange Board of India in File No.CIC/SM/A/2012/000196, 1020, 1062 & 1127