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Reliance Industries Limited vs Securities and Exchange Board of India & Ors.

Criminal Appeal · 2022 INSC 796Decided 5 Aug 2022
Criminal Appeal No. 1167 of 2022

Background

In 2002, a complaint alleged that Reliance Industries Limited (RIL) and its promoters had fraudulently allotted crores of equity shares to entities connected with promoters, funded by RIL itself, back in 1994. SEBI's own 2005 investigation report was inconclusive, and the Ministry of Corporate Affairs separately found no violation. SEBI nonetheless twice sought outside opinions from a retired Supreme Court judge (Justice B.N. Srikrishna) and a chartered accountant (Y.H. Malegam), eventually filing a criminal complaint in 2020, which the Special Court dismissed as time-barred. When SEBI challenged that dismissal in a revision before the Bombay High Court, RIL sought disclosure of the underlying expert opinions and reports, but the High Court merely adjourned RIL's disclosure application to be heard along with the main revision, prompting this appeal.

Decision Breakdown

The Supreme Court held the appeal maintainable, criticizing the High Court's approach of repeatedly adjourning the disclosure application without deciding it, especially given the case's already three-decade-old facts. On the substantive issue, the Court held that SEBI, as a regulator with a duty to act fairly and in accordance with natural justice, could not selectively disclose only unfavourable excerpts of the Srikrishna opinions while withholding the rest ("cherry-picking"), and that Section 129 of the Evidence Act's litigation privilege did not apply because the expert opinions were part of SEBI's own fact-finding/investigative exercise rather than genuine legal advice for adversarial litigation. Relying on its earlier ruling in T. Takano v. SEBI, the Court reasoned that disclosure serves reliability, fair trial, and transparency/accountability purposes, and that SEBI's obligation to disclose was not restricted to the formal CrPC stage of cognizance. The appeal was allowed, and SEBI was directed to furnish RIL with the first and second opinions of Justice B.N. Srikrishna and the Y.H. Malegam report.

Lesson Learnt

Regulators like SEBI cannot selectively disclose only the parts of expert opinions or investigation material that support prosecution while withholding exonerating material: a party facing regulatory/criminal action is entitled to full disclosure of the material that influenced the decision to prosecute, as part of the constitutional guarantee of a fair hearing.

Official source (sci.gov.in)View Judgment (PDF)

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