RELIANCE INDUSTRIES LIMITED versus SECURITIES AND EXCHANGE BOARD OF INDIA & ORS.

[2022] 15 S.C.R.

ARELIANCE INDUSTRIES LIMITED

SECURITIES AND EXCHANGE BOARD OF INDIA & ORS.

(Criminal Appeal No. 1167 of 2022)

BAUGUST 05, 2022

[N. V. RAMANA, CJI, J. K. MAHESHWARI ANDHIMA KOHLI, JJ.]

Companies Act, 1956 – s.77 – Non-disclosure of informationby SEBI – SEBI directed to act fairly – Complaint was filed withCSEBI against RIL & its associate companies and its directors allegingthat they fraudulently allotted 12 crore equity shares of RIL to entitiespurportedly connected with RIL – Investigation Report was submittedby the Investigating Authority on 04.02.2005 – SEBI in its counteraffidavit admitted that the aforesaid report was inconclusive andDrecommended further enquiry in this regard – SEBI approached aretired judge in the year 2009 to give his opinion on the possibilityof initiating criminal proceedings against RIL – The Retired Judgegave his first opinion which formed the basis of initiating actionagainst the appellant – SEBI sent letter to RIL alleging that RILhad funded purchase of its own shares by 38 related entities andEthereby violated s.77 (2) of the Act and consequently violatedRegulations 3, 5 and 6 of the SEBI Regulations,1995 – RILaddressed letters to SEBI requesting for copies of documents – SEBIrefused to furnish copy of opinion of Retired Judge stating that it isprivileged & confidential in nature – On 29.09.2011 RIL filedFsettlement application before SEBI – SEBI sought opinion of RetiredJudge for the second time who wrote back to SEBI to consultChartered Accountant – This culminated in second opinion of RetiredJudge – Appellant sought further material in connection withsettlement application – SEBI rejected request for disclosure ofdocuments – Appellant filed writ petition before High Court thatGwas dismissed – SEBI filed complaint in the court of Special Judge– Special Judge dismissed the complaint as being barred by limitation– SEBI filed Criminal Revision Application before High Court – Inthe aforesaid proceeding appellant filed interim application seekingdocuments – The High Court stated that the interim application willHbe heard along with main Revision Application – On appeal, held :

SEBI’s action to initiate criminal complaint without providing theappellant an adequate opportunity to defend itself by releasingnecessary Reports and other documents is gross violation of theappellant’s right to natural justice – The objection of SEBI that theissue of disclosure of documents is res judicata as the same wasdisallowed by the High Court in the earlier round of litigation,cannot be sustained in the eyes of law – The first opinion of theRetired Judge is not covered by ‘legal privilege’ u/s.129 of EvidenceAct – The second opinion and the Report of Chartered Accountantare nothing but continuation of the fact finding exerciseundertaken by SEBI to determine culpability – SEBI’s attempt tocherrypick the documents, it proposes to disclose, derogates thecommitment to fair trial – The respondents were directed to furnishcopy of the above referred documents to appellant – Securities andExchange Board of India (Prohibition of Fraudulent and UnfairTrade Practices relating to Securities Market) Regulations, 1995 –Regulation 3,5,6 – Securities and Exchange Board of India(Procedure for Holding Inquiry and Imposing Penalties byAdjudicating Officer) Rules, 1995 – Rule 4 – SEBI TakeoverRegulations – Regulation 11(1) – Securities and Exchange Boardof India (Settlement Proceedings) Regulations, 2018 – Regulation13(2)(a),29 – Securities and Exchange Board of India (Prohibitionof Fraudulent and Unfair Trade Practices Relating to SecuritiesMarket) Regulations, 2003.Role of Regulator – Duty to act fairly – SEBI is regulatorand has duty to act fairly, while conducting proceedings orinitiating any action against the parties – Being quasi-judicialbody, the constitutional mandate of SEBI is to act fairly, inaccordance with the rules prescribed by law – The role of Regulatoris to deal with complaints and parties in fair manner, and not tocircumvent the rule of law for getting successful convictions – Thereis substantive duty on the Regulators to show fairness, in the formof public cooperation and deference – The duty to act fairly bySEBI, is inextricably tied with the principles of natural justice,wherein party cannot be condemned without having been givenan adequate opportunity to defend itself.

Doctrines/Principles – Principles of Natural Justice –Discussed.

ACompany Law – Criminal action – Initiation of criminal actionin commercial transactions – It should take place with lot ofcircumspection & Courts ought to act as gate keepers for the same– Initiating frivolous criminal actions against large corporationswould give rise to adverse economic consequences for the countryin the long run – Regulator must be cautious in initiating such anBaction and carefully weigh each factor.

Trial – Transparency and fair trial – Opaqueness onlypropagates prejudice and partiality – Opaqueness is antithetical totransparency – In country grounded in the Rule of Law, institutionsCought to adopt procedures that further the democratic principles oftransparency and accountability – Principles of fairness andtransparency of adjudicatory proceedings are the cornerstone ofthe principles of open justice.

Evidence Act, 1872 – s.129 – Litigation Privilege – LegalDprivilege not applicable to legal opinion used by SEBI to initiateprosecution, as such opinion is part of investigation.

Code of Criminal Procedure, 1973 – Condonation of delay –Sec 473 is categorical in stating that any limitation prescribed u/s.on 468 of CrPC can be overlooked if sufficient cause is made outEin the facts and circumstances of the individual case in the interestof justice – The provision while trying to balance public interest ininitiating criminal prosecutions, has been restricted to peculiaritiesof individual case while clothing the Court with discretionary power– Such discretion vested in the Court ought to be principledexercise, wherein the facts and circumstances portrayed justify suchFan exercise – The intention of the aforesaid provision is to make theinquiry question of fact and not of untrammelled discretion as towhether in particular case, the Court should condone the delay.

Doctrines/Principles – Cherry picking principle – Selectivedisclosure is countenanced in law as it amounts to cherry-picking.G

Criminal Law – Difference between Legal advice privilegeand litigation privilege – Discussed.

Allowing the appeal, the Court

HELD: 1.1 SEBI is regulator and has duty to act fairly,while conducting proceedings or initiating any action against theparties. Being quasi-judicial body, the constitutional mandateof SEBI is to act fairly, in accordance with the rules prescribed bylaw. The role of Regulator is to deal with complaints and partiesin fair manner, and not to circumvent the rule of law for gettingsuccessful convictions. There is substantive duty on theRegulators to show fairness, in the form of public co-operationand deference. [Para 42][751-C-D]

1.2 The duty to act fairly by SEBI, is inextricably tied withthe principles of natural justice, wherein party cannot becondemned without having been given an adequate opportunityto defend itself. [Para 43][751-D-E]

2. The appellant has pressed into service the ratio laid downby this Court in Takano case,to seek document disclosure. Onthe other hand, the respondents have tried to distinguish thepresent case by stating that the present case is not one ofdisclosure which is being sought during investigation by SEBIunder the Securities and Exchange Board of India (Prohibition ofFraudulent and Unfair Trade Practices Relating to SecuritiesMarket) Regulations, 2003. Although the Court agree with therespondents that the Takano Case was rendered under theaforesaid Regulations, however, the Court was of the opinion thatthe reasoning of this Court alludes to general obligation ofdisclosure on the part of SEBI. This Court has held in the TakanoCase that three fundamental purposes of disclosure of informationare (i) reliability, i.e., the Court will be able to perform its functionaccurately only if both parties have access to information andpossess opportunity to address arguments and counterarguments; (ii) fair trial, i.e., this will enable the parties toeffectively participate in the proceedings; and (iii) transparencyand accountability, i.e., the investigative agencies are heldaccountable through transparency and not opaqueness. [Para44][752-B-E]

3. The impugned action of the appellant hails back to theyear 1994, and almost three decades have gone by without there

Abeing any light at the end of the tunnel. The investigation reportby SEBI in 2005 was inconclusive about the alleged offence.There is even communique by the Minister of Corporate Affairs,Union of India recommending closure of the case as they foundnothing to further the prosecution under Section 77 of theCompanies Act, 1956. In this light, SEBI’s action to initiate aBcriminal complaint without providing the appellant an adequateopportunity to defend itself by releasing necessary Reports andother documents, cannot be appreciated by this Court as it is ingross violation of the appellant’s right to natural justice. [Para45][764-B-D]C

4. Indian position seems to be different from England.Section 126 to 129 of the Evidence Act do not draw any distinctionbetween adversarial and investigative litigation as such, andprivilege is applicable all through. This aspect is crucial, as ittouches on the foundations of the legal profession at large in India.

DThis Court does not want to express any opinion in this regardas the case at hand is different and such an issue does not arise,for the following reasons:

i. The investigation report was inconclusive, as admittedby SEBI itself.

Eii. Instead of SEBI referring the issue to an expert, it couldhave undertaken the exercise of further investigation by itself,which was not done.

iii. SEBI ultimately took further steps, only because of thefirst opinion of retired judge.F

iv. The first opinion of retired judge is part and parcel ofthe investigation and documents connected therewith.

v. Moreover, certain documents have already beendisclosed to the appellant herein. [Para 53][757-A-E]G5. The simple test in this case is whether SEBI has launched

5. The simple test in this case is whether SEBI has launchedthe prosecution on the basis of the investigation report alone.The answer seems to be ‘No’ by SEBI’s own admission in itsreply where it states that the investigation report was inconclusiveand hence further scrutiny of the transactions by experts was

called for. That being the case, further Reports and opinionsobtained, from whomsoever it may be, are only an extension ofthe investigation to help SEBI as Regulator to ascertain thefacts and reach conclusions for prosecution or otherwise. [Para54][757-E-F]

6. This Court does not agree with the contention of theSenior Counsel for SEBI that the first opinion of retired judge iscovered by ‘legal privilege’ under Section 129 of the EvidenceAct. Same is the case with the second opinion of retired judgeand the Report of Chartered Accountant, which are nothing but acontinuation of the fact- finding exercise undertaken by SEBI todetermine culpability. [Para 55][757-F-H]

7. The Senior counsel appearing for SEBI has pointed outthat the present set of proceedings have emanated before CriminalCourt, wherein the procedures must be strictly in accordancewith the provisions of CrPC. He states that the stage of documentproduction under the CrPC is provided under Section 207 and208, which takes place after cognizance is taken by theMagistrate. Observing the facts and circumstances of this case,which have been adumbrated above, the Court was of the firmopinion that the defence taken by SEBI that they need not discloseany documents at this stage as such request is pre-mature interms of the CrPC, cannot be sustained. [Para 56][757-H; 758-E]

8. Another disconcerting aspect of this case that comes tothe fore is SEBI’s attempt to cherry-pick the documents itproposes to disclose. There is dispute about the fact that certainexcerpts of the opinion of retired judge, were disclosed to theappellant. It is the allegation of the appellant that while the partswhich were disclosed, vaguely point to the culpability of theappellant, SEBI is refusing to divulge the information whichexonerate it. Such cherry-picking by SEBI only derogates thecommitment to fair trial. In the case at hand, SEBI could nothave claimed privilege over certain parts of the documents andat the same time, agreeing to disclose some part. Such selectivedisclosure cannot be countenanced in law as it clearly amountsto cherry-picking. [Paras 57 & 58][758-F-G; 759-C]

A9.The Court allows the present appeal and direct therespondents to furnish copy of the following documents to theappellant forthwith:-

(i) First opinion of the retired Judge

(ii) Report of Chartered AccountantB

(iii) Second opinion of retired judge. [Para 59][759-D]

State Bank of Patiala v. SK Sharma (1996) 3 SCC 364: [1996] 3 SCR 972; T. Takano v. Securities andExchange Board of India 2022 SCC Online SC 2022C(3) SCALE 585; S. P. Velumani v. Arappor Iyakkam2022 SCC Online SC 663 – relied on.

Three Rivers District Council and Others (Respondents)v. Governor and Company of the Bank of England(Appellants) [2004] UKHL 48; In Re K (Infants) [1965]DAC; In Re (S.A.) (a Minor) (Wardship: Court’s Duty)[1984] 1 WLR 156; Nea arteria Maritime Co Ltd v.Atlantic and Great Lakes Steamship Corporation [1981]Com LR 138 at 139 – referred to.

Case Law Reference

E[1996] 3 SCR 972relied onPara 43

2022 (3) SCALE 585

relied on Para 21

CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.1167 of 2022.

From the Judgment and Order dated 28.03.2022 of the High Courtof Judicature at Bombay in Criminal Interim Application No. 1945 of2021 in Criminal Revision Application No. 209 of 2020.

Harish N. Salve, K.V. Vishwanathan, Amit Desai, Sr. Advs., K.R. Sasiprabhu, Rohan Shah, Raghav Shankar, Amey Nabar,GGopalakrishna Shenoy, Ms. Drishti R. Vishnu Sharma A. S.,Venkataraman, Advs. for the Appellant.

Arvind P. Datar, Sr. Adv., Suraj Chaudhary, Dhaval Mehrotra,Sudhanshu Sikka for M/s K Ashar & Co., Advs. for the Respondents.

The Judgment of the Court was delivered by

N. V. RAMANA, CJI

1. Leave granted.

2. This appeal is filed against the impugned order dated 28.03.2022,passed by the High Court of Judicature at Bombay in Criminal InterimApplication No. 1945 of 2021 in Criminal Revision Application No. 209of 2020.

3. Brief facts necessary for disposal of this appeal are that acomplaint was filed on 21.01.2002 by one Shri S. Gurumurthy, with theSecurities and Exchange Board of India [for short ‘the SEBI’] againstReliance Industries Ltd. [for short ‘RIL’], its associate companies andits directors, alleging that they fraudulently allotted 12 crore equity sharesof RIL to entities purportedly connected with the promoters of RIL,which were funded by RIL and other group companies in 1994. It wasalleged that the company and its directors were in violation of Section 77of the Companies Act, 1956. Based on the aforesaid complaint, the SEBIappointed an investigating officer to inquire into the aforesaid complaint.Accordingly, report was submitted by the said investigating officer on04.02.2005.

4. It may be necessary to note that SEBI chose not to take anyaction with respect to the aforesaid letter. The appellant alleged that anote was prepared by the Legal Affairs Department of the SEBI on17.05.2006, wherein it was noted that the report had not brought out anyspecific violation of any legal provision by RIL. However, the note wassaid to have observed that there was requirement of an opinion by anexternal expert inter alia on the possibility of initiating appropriate criminalproceedings against RIL. In this context, retired Judge of this Court,Justice (Retd.) B.N. Srikrishna was approached by SEBI for the same.The learned retired Judge is stated to have given his first opinion toSEBI, which was divulged by SEBI in parts, to the appellant herein.

5. On 16.04.2010, SEBI sent letter to RIL alleging that RIL hadfunded purchase of its own shares by 38 related entities and therebyviolated Section 77 (2) of the Companies Act, 1956 and consequently,violated Regulations 3, 5 and 6 of the Securities and Exchange Board ofIndia (Prohibition of Fraudulent and Unfair Trade Practices relating toSecurities Market) Regulations, 1995. RIL, in reply, addressed numerousletters to SEBI requesting for copies of the documents and submitting

Ainter alia that the issue concerning violation of Section 77 of theCompanies Act, 1956 was examined by the Ministry of Corporate Affairswhich had concluded that the transaction was compliant with theapplicable law.

6. In any case, the Adjudicating Officer of SEBI issued showBcause notice to the promoters of RIL under Rule 4 of the Securities andExchange Board of India (Procedure for Holding Inquiry and ImposingPenalties by Adjudicating Officer) Rules, 1995 alleging violation ofRegulation 11(1) of the SEBI Takeover Regulations (as it then stood).

7. It is borne out from the records that an Office MemorandumCdated 18.7.2011 was issued by the Ministry of Corporate Affairs whereinit was noted that provisions under Section 77 of the Companies Act,1956 was not attracted.

8. When the matter stood thus, on 29.09.2011, RIL filed asettlement application before SEBI, without prejudice to its rights, inDorder to put quietus to the aforesaid issue which had taken place manyyears ago.

9. In any case, SEBI issued letter dated 23.04.2014, answeringthe request of documents sought by the appellant herein in the followingmanner:E“With regard to the documents/information sought in paragraphs5(a) to (d) of the said letter, SEBI’s response is as under:

1. Request 5(a): The copy of the opinion received by SEBI onJune 11, 2009 from retired judge of the Hon’ble SupremeCourt of India cannot be provided since it is privileged andFconfidential in nature.

2. Request 5(b): copy of the case for opinion provided by SEBIto the Hon’ble retired judge for seeking the opinion is enclosed.

3. Request 5(c): copy of the communication from Ministry ofCorporate Affairs dated February 7, 2012 and dated SeptemberG1, 2011 forwarding letter dated July 18, 2011 is enclosed.

4. Request 5(d): copy of the relevant opinion/views dated April6, 2006, June 11, 2009 and August 25, 2010 of the legaldepartment of SEBI are enclosed.”

10. It is matter of record that in the year 2017-18, the SEBIdecided to re-examine the issue and accordingly sought advice of Justice(Retd.) B.N. Srikrishna for the second time. Justice (Retd.) B.N.Srikrishna addressed letter dated 26.07.2017 to the SEBI in the followingmanner:

“Considering the importance of the matter I am of the view thatsome very senior person should be consulted in this matter.

I would suggest SEBI to approach Mr. Y.H. Malegam, CharteredAccountant, who may be consulted in this matter. He is personof high standing and great repute. In my opinion, he would be themost appropriate person to advise us as to whether the moniestransferred to RUPL and RPTL were towards project advancesand other charges or were merely round tripping.

You may depute one senior person to meet him and discuss withhim the facts. It would enable him to take view in the matterand make report to you. After the report of Mr. Malegam isreceived, you may further discuss the matter with me.”

11. It is stated by the appellant that Mr. Y.H. Malegam, CharteredAccountant examined the records of RIL and various other companiesand submitted his report to SEBI.

12. Based on the report of Mr. Y.H. Malegam, an opinion wassought from the learned retired Judge for the second time.

13. On 21.01.2019, the appellant addressed letter to SEBI seekingfurther material in connection with the pending settlement application inthe following manner:

“Accordingly, we request SEBI to provide us inspection and copiesof the following in connection with the subject settlement:

(a) All further material collected by SEBI;

(b) Further internal reports and noting;

(c) Reports from external experts, including report from Shri Y.H.Malegam, which was confirmed by the Committee as havingbeen received;

(d) Any further case for opinion and opinion obtained by SEBI.”

A14. In reply, SEBI rejected the request for disclosure of thedocuments in the following manner:

“With regard to your request for the said report, it may be notedthat no such report or other material as asked is asked (sic) ismade part of the pending settlement proceedings. Further, yourBattention is drawn to Regulation 13(2)(a) of the SEBI (SettlementProceedings) Regulations, 2018, which reads as under:

“(a) Call for relevant information, documents etc., pertaining tothe alleged default(s) in possession of the applicant or obtainableby the applicant;

Explanation – Nothing in these regulations shall confer rightupon the applicant to seek information from the Board or requirethe Board to seek information from any other person for thepurpose of relying upon it in the settlement proceedings or requestthe Board to permit it to present information not already disposedDin the applicant, [Illegible] the applicant our (sic) aware of at thetime of making the application or which information upon diligentenquiry being made could bare became known to the applicant.”

In view of the same, I am directed to inform you that the requestfor the said report and other material has not been acceded to.”

E15. Aggrieved by the aforesaid communication of the SEBI, theappellant challenged the same before the High Court of Bombay in WritPetition (Lodg.) No. 300 of 2019. The High Court, vide order dated04.02.2019, dismissed the aforesaid petition. It may not be out of contextto note that SEBI also rejected the supplementary application filed byFthe appellant herein.16. On 16.07.2020, SEBI filed complaint in the Court of SEBISpecial Judge, Mumbai praying therein as under:

“(a) That this Hon’ble Court may be pleased to issue the processagainst the accused for the continuing offences punishable underGSection 24(1) r/w Section 27 of the SEBI Act, 1992 as amendedin 2002, for having violated Regulations 3,5 and 6 of the SEBI(PFUTP) Regulations 1995, Regulation 11 of the SEBI (SAST)Regulations, 1997 and be further pleased to deal with the accusedin accordance with the law.

(b) That this Hon’ble Court may be pleased to issue the processagainst the accused for offences punishable under Sections 77(2)and 77A r/w Section 55A of the Companies Act, 1956.”

17. On 30.09.2020, the SEBI Special Court dismissed the complaintfiled by SEBI as being barred by limitation.

18. The aforesaid order has been challenged by SEBI in CriminalRevision Application No. 209 of 2020 before the High Court of Bombay.In the aforesaid proceedings, the appellant filed an application being IANo. 1945 of 2021, seeking the following documents:

(i)Report of Sh. Y.H. Malegam, Chartered Accountant.

(ii)Brief for opinion / Case for opinion prepared by SEBI forobtaining further written opinion of Hon’ble Mr. Justice (Retd.)B.N. Srikrishna.

(iii) Revised written opinion issued by Hon’ble Mr. Justice (Retd.)B.N. Srikrishna.

19. The High Court after extensively hearing the arguments onthe aforesaid application passed the impugned order on 28.03.2022 inthe following manner:

“5. At this stage, the prayer sought for in the Interim Applicationcannot be considered without hearing the main RevisionApplication. It is pertinent to note that the respondent No.1 –SEBI i.e. original applicant in the Revision Application has filedthe aforesaid Revision Application seeking quashing and settingaside of the impugned order dated 30[th] September, 2020, passedby the learned SEBI Special Judge, City Civil and Sessions Court,Greater Bombay, in SEBI Misc. Application No. 686 of 2020, bywhich the learned Judge dismissed the Miscellaneous ApplicationNo. 686 of 2020 (complaint) only on the ground, that it was barredby limitation. Therefore, the question that arises in the RevisionApplication is whether the complaint filed by SEBI was barred bylimitation or not.

6. In view of what is stated hereinabove, the Interim Applicationwill have to be heard alongwith the main Revision Application, onthe next date. It is made clear that all contentions of the parties inthe aforesaid Interim Application are kept open, including thequestion of maintainability.”

[2022] 15 S.C.R.

A20. Aggrieved by the aforesaid order, the appellant-RIL has filedthe present appeal.

21. Mr. Harish Salve, learned Senior counsel appearing on behalfof the appellant contends:

i.That the challenge to the maintainability of the present appealBis misconceived. He stated that the interim application filedfor seeking documents was argued at length before the HighCourt, which was ultimately not considered.

ii.That the SEBI, being regulator, has duty to disclosedocuments pursuant to Article 21. This constitutional mandateChas been accepted by this Court and has been applied toSEBI in T. Takano v. Securities and Exchange Board ofIndia, 2022 SCC Online SC 210

iii.SEBI cannot claim litigation privilege as the proceedingsare not adversarial in nature.D

iv.That the selective disclosure of excerpts of the opinion byJustice (Retd.) B.N. Srikrishna, amounted to cherry pickingby SEBI which cannot be allowed. The accused is entitledto the complete document to ensure fair trial.

v.That the action of SEBI of disclosing excerpts of the reportEclearly amounts to waiver of litigation privilege claimed bySEBI.

22. Mr. Arvind Datar, learned Senior Counsel appearing on behalfof the respondents contends:Fi.That the present appeal is not maintainable as there is nocriminal complaint pending as on this date. The appellantcannot seek documents in criminal revision againstdismissal of the complaint on the ground of limitation.

ii.The issue before the High Court was limited to the issue ofGlimitation and the attempt of the accused to expand theproceedings to seek documents cannot be entertained.

iii.That the impugned order was mere adjournment orderwhich has not affected any rights of the accused. Therefore,the appeal is not maintainable against such an adjournmentorder.H

iv.The law laid down in T. Takano v. Securities andExchange Board of India, 2022 SCC Online SC 210, isnot applicable to the present case as it was rendered in thecontext of investigation under different Regulations.

v.The documents are being sought at pre-mature stage. Ifcognizance is taken by the trial Court, the accused wouldbe entitled for the documents in terms of Section 207 ofCrPC. Any attempt to seek documents beyond the scopeof Section 207 CrPC cannot be accepted.

vi.The opinion of the Retd. Judge and the report of theChartered Accountant are clearly covered as part oflitigation privilege in terms of the Indian Evidence Act. Suchopinions cannot be matter of production by party.

23. Having heard the parties at length and perusing the records,the following questions arise for consideration:

i.Whether this appeal is maintainable?

ii. Whether SEBI is required to disclose documents in the presentset of proceedings?

ISSUE I

24. At the outset, Mr. Datar, learned Senior Counsel appearing onbehalf of the respondents has challenged the maintainability of the presentappeal on two grounds namely: (1) that the impugned order is mereadjournment order against which this Court should not exercise itsdiscretionary jurisdiction; (2) that no criminal complaint exists, to seekdocument disclosure as the trial Court had already dismissed SEBI’scomplaint on the ground of delay. On the contrary, Mr. Harish Salve,learned Senior Counsel appearing on behalf of the appellant has portrayedthat the High Court was not justified in adjourning case after hearingthe parties on more than two occasions on the application.

25. The present dispute pertains to certain facts which took placein 1992-1994, when the initial complaint was instituted before SEBI inthe year 2002, which is alleged to be closed by the note of the LegalAffairs Department of SEBI dated 17.05.2006. Further, the letter of theMinistry of Corporate Affairs dated 07.02.2012 also clarifies inter-alia,that no violation of Section 77 of the Companies Act, 1956 was madeout, in the following manner:

A4. It has further been reported by the ROC that there was noviolation of Section 81(1A) of the Companies Act, 1956 in respectof preferential allotment of shares. Also, there was no specificguidelines for valuation or determination of premium in respect ofissue of convertible debentures at the relevant time. Thedetermination of premium was within the authority of the companyBsubject to compliance with Section 81(1A) which appears to havebeen done.

5.MCA had conducted inspection of books of accounts of M/s.Reliance Industries Ltd. in 2002 and for the various violationsreported in the inspection report, necessary penal action wasCinitiated as stated in para 2 and 3 above.

6. The inspection report of 2002 also revealed as follows:-

i.) Provision of Section 77 of the Act were not attracted in respectof funds invested by the company in Somnath Syndicate, aDpartnership firm in which company is partner;ii.) No funds was given by RIL to 34 entities to which NCDswere allotted;

iii.) Ambanis were neither directors nor shareholders of the entitiesto whom shares were allotted;

Eiv.) Ambanis were not allotted any shares pursuant to PPD-IVissue.

7. In view of above, no action is required to be taken on thepart of Ministry of Corporate Affairs.

(Emphasis supplied)

In this context, the re-examination of the complaint by SEBIought to happen only after providing adequate opportunity to theaccused to fully defend his case.

26. There is no doubt that the Special Court of SEBI in M.A. No.G686 of 2020 has dismissed the complaint of SEBI on the ground oflimitation. Against such an order, SEBI has filed Criminal Revisionbeing Criminal Revision Application No. 209 of 2020 before the HighCourt which is pending. On perusal of this Criminal Revision Petition itis clear that SEBI has made the following prayer:

(a) This Hon’ble Court be pleased to quash and set-aside theimpugned order dated 30[th] September, 2020 and direct the Ld.Special Court Judge to issue process against the Accused.

(emphasis supplied)

Interestingly, SEBI has not restricted the revision petition to thegrounds of condonation of delay or inapplicability of limitation asthe offences alleged, are continuing in nature; rather SEBI haspleaded the case on merits. This is apparent from the followinggrounds advanced by SEBI on merits:

F. The Ld. Judge erred to appreciate that the allotment includingthe allotment of bonus shares, was fraudulent since it was issuedwithout any authority, and in violation of securities laws,including the Companies Act. When the actual issue andallotment of NCDs with detachable warrants and subsequentconversion of warrants into equity shares itself was undertakenwithout any authority of the AGM, and the earmarking of‘bonus’ issue of shares for the benefit of debenture-holderi.e. non-share-holder was done and the total private placementof 12 crore shares was carried out without any authority eitherof the shares holders or in law resulting in cementing of ‘control’and exercise thereof there was clear breach of the fiduciaryduty of the accused directors of the issuer company.

G. The Ld. Judge erred in failing to appreciate that the fraudwas consummate and involved complex subterfuge, spreadover long period of time. The accused Directors sat in sub-committees that negotiated and earmarked without any shareholder authority, the NCDs with warrants convertible of shareswith sizeable free allotment of bonus shares to allottees ofthe NCDs which were essentially paper companies and relatedcompanies of the accused and later on joined them as personacting in concert (PACs) when the warrants attached to theNCDs were converted into shares in 2000. When the directorsnegotiated the placement of NCDs with warrants with the UnitTrust of India (UTI) whose allotment is made as per Resolution13 as disclosed on the stock exchange, no such ‘free’ bonuswas given to UTI. However, all this was not considered by theLd. Judge who erred in failing to appreciate that the directors

also granted conversion price to the accused allottees whichwas much less than the conversion price given to UTI.

P. The Ld. Judge erred in failing to appreciate the ratio laid downby the Hon’ble Supreme Court in the matter of Fiona ShrikhandeVersus State of Maharashtra and another, (2013) 14 SupremeCourt Cases 44 wherein, the Hon’ble Supreme Court has heldthat at the complaint stage, the Magistrate is merely concernedwith the allegations made out in the complaint and has only toprima facie satisfy whether there are sufficient grounds to proceedagainst the accused. In the facts of the present case there weremore than sufficient grounds for the Ld. Judge to prima-facie besatisfied of the offence and issue process in the matter.

W. The Ld. Judge failed to note that it was vitally necessary totake cognizance of the offences in the interest of justice underSection 473, keeping in mind the devious method of involving 38companies and routing of funds in preplanned and preordainedEsequence of transactions. If no cognizance is taken of suchegregious offences, it would seriously harm the interest of theinvestors in the securities market. It is in the interests of justicethat large conglomerates having lakhs of shareholders are notpermitted to flagrantly violate the law and seek to escapeFprosecution.

27. Coming to the point of delay, inter alia the contention of SEBIis that the Court should have considered Section 473 of CrPC to condonedelay having considered the facts and circumstances in properperspective. At this juncture, it is relevant to quote Section 473 of CrPCGwhich reads as under:

“473. Extension of period of limitation in certain cases. -Notwithstanding anything contained in the foregoing provisions ofthis Chapter, any Court may take cognizance of an offence afterthe expiry of the period of limitation, if it is satisfied on the facts

and in the circumstances of the case that the delay has beenproperly explained or that it is necessary so to do in the interestsof justice.”

The aforesaid provision is categorical in stating that any limitationprescribed under Section 468 of CrPC can be overlooked if sufficientcause is made out in the facts and circumstances of the individual casein the interest of justice. The said provision, while trying to balance publicinterest in initiating criminal prosecutions, has been restricted topeculiarities of individual case while clothing the Court with discretionarypower. Such discretion vested in the Court ought to be principledexercise, wherein the facts and circumstances portrayed justify such anexercise. The intention of the aforesaid provision is to make the inquirya question of fact and not of untrammelled discretion as to whether in aparticular case, the Court should condone the delay.

28. It is in this context that the High Court is bound to consider thefacts of the present case concerning the modus of initiation of the caseand other factors, before considering the aspect of condonation of delayin terms of Section 473 of CrPC. The approach of the High Court ofadjourning adjudication of the interim application seeking disclosure ofdocuments cannot be appreciated. Ideally, the High Court ought to haveconsidered the interim application before dealing with the limitation aspect.

29. Initiation of criminal action in commercial transactions, shouldtake place with lot of circumspection and the Courts ought to act asgate keepers for the same. Initiating frivolous criminal actions againstlarge corporations, would give rise to adverse economic consequencesfor the country in the long run. Therefore, the Regulator must be cautiousin initiating such an action and carefully weigh each factor.

30. In ordinary course, this Court would have remanded the matterfor adjudication by the High Court on the interim application moved bythe appellant seeking such disclosure. However, arguments have beenextensively advanced before this Court touching upon important aspectsof criminal jurisprudence which require consideration. Moreover, thefacts stated above, clearly indicate that the acts which are sought to beprosecuted go back to the year 1992-1994, and over three decades havepassed without there being any end to the litigation. In this regard, theCourt intends to examine this important issue and pass appropriate ordersto ensure that the adjudication is not delayed unnecessarily, ad infinitum.

AISSUE II

31. This brings us to the issue as to whether the interim applicationseeking documents, filed by the appellant herein deserves to be allowedin the instant case. The respondents have raised objections for suchdisclosure on two counts:B

i.That such request was already rejected by the High Court inan earlier writ petition filed by the appellant herein, when thesettlement proceedings were on going;

ii. That the respondents claim legal privilege, as against both theopinions of Justice (Retd.) B. N. Srikrishna and the Report ofCthe Chartered Accountant, viz. Sh. Y.H. Malegam.

32. Coming to the first objection, there is no gainsaying the factthat the respondent (regulator) had issued letter dated 16.04.2010,conveying the findings of the investigation. In furtherance thereto, theappellant had sought to settle the issue considering the fact that substantialDtime had already elapsed.

33. During the settlement proceedings, SEBI had appointed Sh.Y. H. Malegam, Chartered Accountant on the advice of Justice (Retd.)B. N. Srikrishna. Accordingly, the Chartered Accountant is supposed tohave submitted Report to SEBI. During the settlement proceedings,Ethe appellant submitted an application dated 21.01.2019, wherein it soughtthe aforesaid documents. In response SEBI, vide letter dated 28.01.2019,rejected the request by relying on the provisions of Section 13(2) of theSecurities and Exchange Board of India (Settlement Proceedings)Regulations, 2018 [hereinafter ‘Settlement Regulations’].F34. The aforesaid letter dated 28.01.2019, was impugned by the

34. The aforesaid letter dated 28.01.2019, was impugned by theappellant before the High Court of Judicature at Bombay in W.P. (Lodg.)No. 300 of 2019. The High Court, by final Order dated 04.02.2019,while dismissing the aforesaid writ petition held as under:

“10. The internal Committee of the SEBI is seized of the matter.GDuring the proceedings, an application came to be filed by thepetitioner seeking copies of certain documents including copy ofthe report submitted by Mr. Malegam. The provisions of Regulation13(2)(a) are clear. These regulations do not confer any righton the Petitioner to ask for copy of the said report. Inthat view of the matter, the issue of principles of fairnessH

RELIANCE INDUSTRIES LIMITED v. SECURITIES ANDEXCHANGE BOARD OF INDIA [N. V. RAMANA, CJI]

does not arise at this stage, considering the purpose of theproceedings before the internal Committee and powers ofthe High Power Committee and the Regulations framed inthis regard. There is no right conferred under the Regulations onthe Petitioner to ask for such copy. In the facts, we are notconvinced to exercise our writ jurisdiction.

As and when the adjudicatory proceedings takes place, thePetitioner may ask for copies of such documents inaccordance with the procedure established to conduct the”proceedings.

(emphasis supplied)

We may only note that the High Court was dealing with specificrequests that were made during the Settlement proceedings underRegulation 13(2) of the Settlement Regulations. From reading of theExplanation appended to Regulation 13(2)(a) of the SettlementRegulations, it is clear that the intention of Settlement proceedings is tofacilitate the Regulator to consider the feasibility of settlement in certaincases, without allowing roving and fishing expedition. However, thefindings of the High Court in the aforesaid case are of no avail to theSEBI, as we are at stage when SEBI has invoked the provisions underthe criminal law to prosecute the appellant herein.

35. At this juncture, SEBI relies on Regulation 29 of Securitiesand Exchange Board of India (Settlement Proceedings) Regulations 2018,which notes as under :

CONFIDENTIALITY OF INFORMATION.

29. (1) All information submitted and discussions held in pursuanceof the settlement proceedings under these regulations shall bedeemed to have been received or made in fiduciary capacityand the same may not be released to the public, if the sameprejudices the Board and/or the applicant.

2) Where an application is rejected or withdrawn, the applicantand the Board shall not rely upon or introduce as evidence beforeany court or Tribunal, any proposals made or information submittedor representation made by the applicant under these regulations:

Provided that this sub-regulation shall not apply where the settlementorder is revoked or withdrawn under these regulations.

AExplanation. – When any fact is discovered in consequence ofinformation received from person in pursuance of an application,so much of such information, whether it amounts to an admissionor not, as relates distinctly to the fact thereby discovered, may beproved.

BReliance on the above provision is misconceived, as both the clausesmust be interpreted to deter usage of the applicant’s proposals/representations and allied information before Courts/Tribunals, in theevent the settlement fails. It does not deal with the disclosure obligationscast on SEBI. In any case, the purpose of settlement is to ensure thatparties come to an understanding having assessed their relative merits.CIt is expected that parties in such proceedings are transparent, more sofor Regulators like SEBI, who are expected to share all the documents,which are necessary for understanding the issue.

36. It is matter of record that subsequently, the settlementproceedings were terminated by SEBI and thereafter SEBI has decidedDto initiate criminal complaint against the appellant herein.

37. In this context, the objection of SEBI that the issue of disclosureof documents is res judicata as the same was disallowed by the HighCourt in the earlier round of litigation, cannot be sustained in the eyes oflaw.E

38. This brings us to the right of the accused-appellant to seekdocument disclosure in the present case. In this case, the appellant hasbeen pursuing SEBI for these documents as they believe that an attemptis being made by SEBI to suppress the Opinions and Reports as they areadverse to the cause of SEBI.F

39. cursory glance at the background of the matter would revealthat initially, complaint was submitted to SEBI on 21.01.2002, whereinthe appellant and its directors were purportedly involved in irregularitiesin allotment of Non-Convertible Debentures in the year 1994.Accordingly, an Investigation Report was submitted by the InvestigatingGAuthority on 04.02.2005. SEBI in its counter-affidavit has admitted thatthe aforesaid Report was inconclusive and recommended further enquiryin this regard.

40. In pursuance thereof, SEBI approached Justice (Retd.) B. N.Srikrishna in the year 2009. He is supposed to have given his first Opinion,

which formed the basis of initiating action against the appellant herein. Itis SEBI’s case that during the Settlement proceedings, the appellant haddisclosed numerous documents, which mandated SEBI to re-examineits stand. Accordingly, the matter was referred to Justice (Retd.) B. N.Srikrishna for second time.

41. Thereafter, Justice (Retd.) B. N. Srikrishna wrote back toSEBI asking them to consult Sh. Y. H. Malegam, renowned CharteredAccountant to determine the culpability of the appellant and variousdirectors. It is reported that this exercise had culminated in the Secondopinion of Justice (Retd.) B. N. Srikrishna.

42. SEBI is regulator and has duty to act fairly, while conductingproceedings or initiating any action against the parties. Being quasi-judicial body, the constitutional mandate of SEBI is to act fairly, inaccordance with the rules prescribed by law. The role of Regulator isto deal with complaints and parties in fair manner, and not to circumventthe rule of law for getting successful convictions. There is substantiveduty on the Regulators to show fairness, in the form of public co-operationand deference.

43. The duty to act fairly by SEBI, is inextricably tied with theprinciples of natural justice, wherein party cannot be condemned withouthaving been given an adequate opportunity to defend itself. In StateBank of Patiala v. SK Sharma, (1996) 3 SCC 364, this Court whiledealing with document disclosure and natural justice held as under:

“28. The decisions cited above make one thing clear, viz.,principles of natural justice cannot be reduced to any hard andfast formulae. As said in Russell v. Duke of Norfolk [(1949) 1All ER 109 : 65 TLR 225] way back in 1949, these principlescannot be put in strait-jacket. Their applicability depends uponthe context and the facts and circumstances of each case.(See Mohinder Singh Gill v. Chief Election Commr. [(1978) 1SCC 405 : (1978) 2 SCR 272] ) The objective is to ensure fairhearing, fair deal, to the person whose rights are going to beaffected. (See A.K. Roy v. Union of India [(1982) 1 SCC 271 :1982 SCC (Cri) 152] and Swadeshi Cotton Mills v. Union ofIndia[(1981) 1 SCC 664] .) As pointed out by this Court in A.K.Kraipak v. Union of India [(1969) 2 SCC 262] , the dividingline between quasi-judicial function and administrative function

(affecting the rights of party) has become quite thin and almostindistinguishable — fact also emphasised by House of Lordsin Council of Civil Service Unions v. Minister for the CivilService [(1984) 3 All ER 935 : (1984) 3 WLR 1174 : 1985 AC374, HL] where the principles of natural justice and fair hearingwere treated as synonymous. …”

44. At this juncture, the appellant has pressed into service theratio laid down by this Court in Takano case (supra), to seek documentdisclosure. On the other hand, the respondents have tried to distinguishthe present case by stating that the present case is not one of disclosurewhich is being sought during investigation by SEBI under the SecuritiesCand Exchange Board of India (Prohibition of Fraudulent and Unfair TradePractices Relating to Securities Market) Regulations, 2003. Althoughwe agree with the respondents that the Takano Case (supra) wasrendered under the aforesaid Regulations, however, we are of the opinionthat the reasoning of this Court alludes to general obligation of disclosureDon the part of SEBI. This Court has held in the Takano Case (supra)that three fundamental purposes of disclosure of information are (i)reliability, i.e., the Court will be able to perform its function accuratelyonly if both parties have access to information and possess opportunityto address arguments and counter arguments; (ii) fair trial, i.e., this willenable the parties to effectively participate in the proceedings; and (iii)Etransparency and accountability, i.e., the investigative agencies are heldaccountable through transparency and not opaqueness. Keeping partyabreast of the information that influenced the decision promotestransparency of the judicial process which was discussed in the aforesaidcase in the following manner:F“

“24. While the respondents have submitted that only materialsthat have been relied on by the Board need to be disclosed, theappellant has contended that all relevant materials need to bedisclosed. While trying to answer this issue, we are faced with amultitude of other equally important issues. These issues, allGparamount in shaping the jurisprudence surrounding the principlesof access to justice and transparency, range from identifying thepurpose and extent of disclosure required, to balancing theconflicting claims of access to justice and grounds of public interestsuch as privacy, confidentiality and market interest. Anidentification of the purpose of disclosure would lead us closer

to identifying the extent of required disclosure. There are threekey purposes that disclosure of information serves:

(i) Reliability: The possession of information by both the partiescan aid the courts in determining the truth of the contentions. Therole of the court is not restricted to interpreting the provisions oflaw but also determining the veracity and truth of the allegationsmade before it. The court would be able to perform this functionaccurately only if both parties have access to information andpossess the opportunity to address arguments and counter-arguments related to the information;

(ii) Fair Trial: Since verdict of the Court has far reachingrepercussions on the life and liberty of an individual, it is only fairthat there is legitimate expectation that the parties are providedall the aid in order for them to effectively participate in theproceedings;

(iii) Transparency and accountability:The investigative agenciesand the judicial institution are held accountable throughtransparency and not opaqueness of proceedings. Opaquenessfurthers culture of prejudice, bias, and impunity - principles thatare antithetical to transparency. It is of utmost importance that ina country grounded in the Rule of Law, the institutions adopt thoseprocedures that further the democratic principles of transparencyand accountability. The principles of fairness and transparency ofadjudicatory proceedings are the cornerstones of the principle ofopen justice. This is the reason why an adjudicatory authority isrequired to record its reasons for every judgement or order itpasses. However, the duty to be transparent in the adjudicatoryprocess does not begin and end at providing reasoned order.Keeping party bereft of the information that influenced thedecision of an authority undertaking an adjudicatory function alsoundermines the transparency of the judicial process. It denies theconcerned party and the public at large the ability to effectivelyscrutinise the decisions of the authority since it creates aninformation asymmetry.

25. The purpose of disclosure of information is not merelyindividualistic, that is to prevent errors in the verdict but is alsotowards fulfilling the larger institutional purpose of fair trial and

Atransparency. Since the purpose of disclosure of information targetsboth the outcome (reliability) and the process (fair trial andtransparency), it would be insufficient if only the material reliedon is disclosed. Such rule of disclosure only holds nexus to theoutcome and not the process. Therefore, as default rule, allrelevant material must be disclosed.”B

45. There is no doubt that the set of facts portrayed herein areunique. The impugned action of the appellant hails back to the year1994, and almost three decades have gone by without there being anylight at the end of the tunnel. The investigation report by SEBI in 2005was inconclusive about the alleged offence. There is even communiqueCby the Minister of Corporate Affairs, Union of India recommendingclosure of the case as they found nothing to further the prosecutionunder Section 77 of the Companies Act, 1956. In this light, SEBI’s actionto initiate criminal complaint without providing the appellant an adequateopportunity to defend itself by releasing necessary Reports and otherDdocuments, cannot be appreciated by this Court as it is in gross violationof the appellant’s right to natural justice. Recently, in S. P. Velumani v.Arappor Iyakkam, 2022 SCC Online SC 663, while dealing with thenecessity of document disclosure in cases where prosecuting authoritiesblow hot and cold, this Court has held as under:

E“22…The principles of natural justice demanded that the appellantbe afforded an opportunity to defend his case based on the materialthat had exonerated him initially, which was originally acceptedby the State.”

46. The approach of SEBI, in failing to disclose the documentsFalso raises concerns of transparency and fair trial. Opaqueness onlypropagates prejudice and partiality. Opaqueness is antithetical totransparency. It is of utmost importance that in country grounded inthe Rule of Law, institutions ought to adopt procedures that further thedemocratic principles of transparency and accountability. Principles offairness and transparency of adjudicatory proceedings are the cornerstoneGof the principles of open justice.

47. Even for adjudication of condonation of delay under Section473, CrPC, the modus of initiation of criminal complaint and theconclusions reached therein are relevant in the facts and circumstanceof the case.H

RELIANCE INDUSTRIES LIMITED v. SECURITIES ANDEXCHANGE BOARD OF INDIA [N. V. RAMANA, CJI]

48. Viewed from different angle, the respondents havevehemently relied on litigation privilege under Section 129 of the EvidenceAct, 1872 to claim exemption from document disclosure. Section 129 ofthe Evidence Act reads as under:

129. Confidential communications with legal advisers.—Noone shall be compelled to disclose to the Court any confidentialcommunication which has taken place between him and his legalprofessional adviser, unless he offers himself as witness, in whichcase he may be compelled to disclose any such communicationsas may appear to the Court necessary to be known in order toexplain any evidence which he has given, but no others.

49. The rationale of such provision has been well known tocommon law since ages. Sir George Mackenzie’s Observations uponthe 18th Act of the 23rd Parliament of King James the Sixth againstDispositions made in Defraud of Creditors etc (1675), in Sir GeorgeMackenzie’s Works Vol 2 (1755), p1 are significant. He said this, at p44:

“An Advocate is by the Nature of his employment tied to thesame Faithfulness that any Depositor is: For his Client hasdepositate in his Breast his greatest Secrets; and it is the Interestof the Common-wealth, to have that Freedom allowed and securedwithout which Men cannot manage their Affairs and privateBusiness: And who would use that Freedom if they might beensnared by it? This were to beget Diffidence betwixt suchwho should, of all others, have the greatest mutual Confidencewith one another; and this will make Men so jealous of theirAdvocates that they will lose their private Business, or succumbin their just Defence, rather than Hazard the opening of theirSecrets to those who can give them no Advice when the case isHalf concealed, or may be forced to discover them whenrevealed.”

In England, the Legal professional privilege is often classified undertwo sub-headings: legal advice privilege and litigation privilege. Legaladvice privilege comprises of communications between client and hislegal adviser, and is available when proceedings are in existence orcontemplated. Litigation privilege on the other hand, covers wider classof communications, such as those between the legal adviser and potentialwitnesses.

A50. Coming to legal advice privilege in England, the House ofLords through Justice Carswell in Three Rivers District Council andothers (Respondents) v. Governor and Company of the Bank ofEngland (Appellants), [2004] UKHL 48, has summarized the law asunder:

B“The conclusion to be drawn from the trilogy of 19th centurycases to which I have referred and the qualifications expressed inthe modern case-law is that communications between parties ortheir solicitors and third parties for the purpose of obtaininginformation or advice in connection with existing or contemplatedlitigation are privileged, but only when the following conditionsCare satisfied:

(a) litigation must be in progress or in contemplation;

(b) the communications must have been made for the sole ordominant purpose of conducting that litigation;

D(c) the litigation must be adversarial, not investigative orinquisitorial.”

51. The distinction in application of this privilege qua adversarialand investigative litigation/inquisitorial litigation is reasoned by EnglishCourts in In Re K (Infants), [1965] AC 201 as under:E

“Where the judge is not sitting purely, or even primarily, as anarbiter but is charged with the paramount duty of protecting theinterests of one outside the conflict, rule that is designed for justarbitrament cannot in all circumstances prevail.”

52. Further, In Re (S.A.) (a Minor) (Wardship: Court’s Duty),F[1984] 1 WLR 156, while pointing out that court in wardship proceedingswas not exercising an adversarial jurisdiction and that:

“Its duty is not limited to the dispute between the parties: on thecontrary, its duty is to act in the way best suited in its judgment toserve the true interest and welfare of the ward. In exercisingGwardship jurisdiction, the Court is true family court. Its paramountconcern is the welfare of the ward. It will, therefore, sometimesbe the duty of the court to look beyond the submissions of theparties in the endeavor to do what it judges to be necessary”

53. Indian position seems to be different from England. Section126 to 129 of the Evidence Act do not draw any distinction betweenadversarial and investigative litigation as such, and privilege is applicableall through. This aspect is crucial, as it touches on the foundations of thelegal profession at large in India. This Court does not want to expressany opinion in this regard as the case at hand is different and such anissue does not arise, for the following reasons:

i.The investigation report was inconclusive, as admitted by SEBIitself.

ii.Instead of SEBI referring the issue to an expert, it could haveundertaken the exercise of further investigation by itself, whichCwas not done.

iii. SEBI ultimately took further steps, only because of the firstopinion of Justice (retd.) B. N. Srikrishna.

iv. The first opinion of Justice (retd.) B. N. Srikrishna is partand parcel of the investigation and documents connectedDtherewith.

v.Moreover, certain documents have already been disclosed tothe appellant herein.

54. The simple test in this case is whether SEBI has launched theprosecution on the basis of the investigation report alone. The answerseems to be ‘No’ by SEBI’s own admission in its reply where it statesthat the investigation report was inconclusive and hence further scrutinyof the transactions by experts was called for. That being the case, furtherReports and opinions obtained, from whomsoever it may be, are only anextension of the investigation to help SEBI as Regulator to ascertainthe facts and reach conclusions for prosecution or otherwise.

55. For the above reasons, we do not agree with the contention ofthe learned Senior Counsel for SEBI that the first opinion of Justice(Retd.) B. N. Srikrishna is covered by ‘legal privilege’ under Section129 of the Evidence Act. Same is the case with the second opinion ofJustice (Retd.) B. N. Srikrishna and the Report of Sh. Y. H. Malegam,which are nothing but continuation of the fact-finding exerciseundertaken by SEBI to determine culpability.

56. Moreover, learned Senior counsel, Mr. Arvind Datar, appearingfor SEBI has pointed out that the present set of proceedings have

Aemanated before Criminal Court, wherein the procedures must be strictlyin accordance with the provisions of CrPC. He states that the stage ofdocument production under the CrPC is provided under Section 207 and208, which takes place after cognizance is taken by the Magistrate. ThisCourt, in S. P. Velumani (supra), while rejecting similar contention,held as under:B

“26. We may note that the contention of the State may beappropriate under normal circumstances wherein the accused isentitled to all the documents relied upon by the prosecution afterthe Magistrate takes cognizance in terms of Section 207 of CrPC.However, this case is easily distinguishable on its facts. InitiationCof the FIR in the present case stems from the writ proceedingsbefore the High Court, wherein the State has opted to re--examinethe issue in contradiction of their own affidavit and the preliminaryreport submitted earlier before the High Court stating thatcommission of cognizable offence had not been made out. It is inDthis background we hold that the mandate of Section 207 of CrPCcannot be read as provision etched in stone to cause seriousviolation of the rights of the appellant-accused as well as to theprinciples of natural justice.”

Observing the facts and circumstances of this case, which haveEbeen adumbrated above, we are of the firm opinion that the defencetaken by SEBI that they need not disclose any documents at this stageas such request is pre-mature in terms of the CrPC, cannot be sustained.

57. Before we part with the present appeal, another disconcertingaspect of this case that comes to the fore is SEBI’s attempt to cherry-Fpick the documents it proposes to disclose. There is dispute about thefact that certain excerpts of the opinion of Justice (Retd.) B. N. Srikrishna,were disclosed to the appellant herein. It is the allegation of the appellantthat while the parts which were disclosed, vaguely point to the culpabilityof the appellant, SEBI is refusing to divulge the information whichexonerate it. Such cherry-picking by SEBI only derogates the commitmentGto fair trial. In Nea Karteria Maritime Co Ltd v. Atlantic and GreatLakes Steamship Corporation, [1981] Com LR 138 at 139, Mustill J.held as under:

‘I believe that the principle underlying the rule of practiceexemplified in Burnell v British Transport Commission [1956]

1 QB 187 is that where party is deploying in court materialwhich would otherwise be privileged, the opposite party and thecourt must have an opportunity of satisfying themselves that whatthe party has chosen to release from privilege represents the wholeof the material relevant to the issue in question. To allow anindividual item to be plucked out of context would be to risk injusticethrough its real weight or meaning being misunderstood.’

The aforesaid principle is often referred to as the ‘Cherry-picking’principle.

58. In the case at hand, SEBI could not have claimed privilegeover certain parts of the documents and at the same time, agreeing todisclose some part. Such selective disclosure cannot be countenancedin law as it clearly amounts to cherry-picking.

59. In view of the aforesaid discussion, we allow the present appealand direct the respondents to furnish copy of the following documentsto the appellant forthwith:-

(i) First opinion of Justice (Retired) B.N. Srikrishna

(ii) Report of Y.H. Malegam

(iii) Second opinion of Justice (Retired) B.N. Srikrishna

Ankit Gyan

Appeal allowed.

(Assisted by : Neha Sharma, LCRA)