Moneylife: Pune: Wednesday, 03 May 2023.
Despite over 30 broker defaults at the National Stock Exchange (NSE) in the past few years and a massive scandal involving its colocation services (COLO), the capital market regulator is fighting tooth and nail to deny access to annual inspection reports (AIRs) of the NSE and the Bombay Stock Exchange (BSE) for FY12-13 to FY19-20. It has challenged an order of the central information commission (CIC) with regard to a Right to Information (RTI) query filed by New Delhi-based activist Subhash Chandra Agarwal.
Mr Agarwal had filed an RTI application seeking information about the role of the Securities and Exchange Board of India (SEBI) in appointing public interest directors at the NSE. After SEBI approached the high court, the NSE, BSE, Multi-Commodity Exchange of India Ltd (MCX) and Multi-Commodity Exchange Clearing Corporation Ltd (MCX Clearing) have also got involved in what is turning out to be important litigation. The Bombay High Court (HC) recently granted an extension of four weeks to all parties to file their respective affidavits in reply to SEBI’s writ petition challenging the CIC order, which had only partly granted Mr Agarwal’s request after a second appeal.
Initially, the regulator had refused to provide the information Mr Agarwal sought because it pertained to the internal functioning of the market ecosystem, and its disclosure may hamper the decision-making in its supervisory and regulatory roles. After Mr Agarwal had filed a second appeal, the CIC shot down SEBI’s argument for not providing the requested information. In its order on 27 December 2022, CIC directed the market regulator to provide concluding comments and final year-wise findings of the annual inspection reports of the NSE.
Citing violations of Sections 8(1)(d), 8(1)(e) and 8(1)(j) of the RTI Act, SEBI filed writ petitions in the Bombay High Court, challenging CIC’s order.
During a hearing last week, senior counsel Nikhil Sakhardande, representing Mr Agarwal and senior counsel JJ Bhatt, representing SEBI, mentioned the matter before the HC bench of justice Gautam S Patel and justice Dr Neela Kedar Gokhale. Advocate Ravi Chandra Hegde from RHP Partners is appearing for Mr Agarwal.
While scheduling the next hearing on 20 June 2023, the HC granted an extension of four weeks to file affidavits in reply. Till that time, orders issued by the HC will continue.
In March, the bench had granted a stay on order passed by the CIC in a second appeal under RTI filed by Mr Agarwal.
Mr Agarwal has separately filed writ petitions (WP (L) no. 7382 of 2023 and WP (L) no. 7383 of 2023), noting that the information sought is yet to be disclosed by SEBI as directed by CIC. He also challenged SEBI’s position on the impugned order as being “erroneous, illegal, bad in law” and suffering “from total non-application of the mind”; and that it “fails to set out any rationale, justification or explanation whatsoever, to arrive at a conclusion that full disclosure of the BSE and NSE inspection reports”.
The RTI activist laments that he based his application on the Supreme Court judgement, which had clearly considered inspection reports prepared by the Reserve Bank of India (RBI) of public and private banks as information under the RTI Act, as RBI is the regulatory body in respect of banks.
In the same vein, argues Mr Agrawal, “SEBI being a regulatory public authority in respect of NSE, it is bound to provide inspection reports in respect of NSE under provisions of RTI Act. I also requested for web-link, if any, which has uploaded such information and file notings regarding the movement of this RTI application.”
The central public information officer (CPIO) of SEBI, on 23 March 2022, replied to Mr Agarwal that “information sought includes commercial confidential information of other entities, the disclosure of which could harm their competitive position and, as such, the information sought is exempt under Section 8(1)(d) of RTI Act.”
After receiving a similar reply from the first appellate authority (FAA) of SEBI, Mr Agarwal then approached the CIC. In its order, the CIC had directed SEBI to provide Mr Agarwal with the list of selected and rejected candidates for the positions of PIDs on the boards of BSE, NSE, MCX and MCX Clearing after redacting personal and sensitive information by invoking the severability principle under Section 10 of the RTI act.
Last year in December, CIC directed SEBI to provide concluding comments and final year-wise findings of the annual inspection reports of the NSE. However, the market regulator had filed writ petitions before the Bombay HC, challenging the order passed by CIC under the RTI Act.
It may be recalled that the SC had ordered, in 2015, that it is mandatory for the RBI to release their annual inspection reports of private and public banks under provisions of the RTI Act. In April 2021, SC again rejected pleas by some banks, which had gone against the 2015 judgement, to recall the order. However, regular authorities and banks continue to flout the SC’s directives. (Read: Supreme Court Rejects Banks’ Appeal To Restrict RBI from Disclosing Defaulters’ List, Inspection Report under RTI)
Despite over 30 broker defaults at the National Stock Exchange (NSE) in the past few years and a massive scandal involving its colocation services (COLO), the capital market regulator is fighting tooth and nail to deny access to annual inspection reports (AIRs) of the NSE and the Bombay Stock Exchange (BSE) for FY12-13 to FY19-20. It has challenged an order of the central information commission (CIC) with regard to a Right to Information (RTI) query filed by New Delhi-based activist Subhash Chandra Agarwal.
Mr Agarwal had filed an RTI application seeking information about the role of the Securities and Exchange Board of India (SEBI) in appointing public interest directors at the NSE. After SEBI approached the high court, the NSE, BSE, Multi-Commodity Exchange of India Ltd (MCX) and Multi-Commodity Exchange Clearing Corporation Ltd (MCX Clearing) have also got involved in what is turning out to be important litigation. The Bombay High Court (HC) recently granted an extension of four weeks to all parties to file their respective affidavits in reply to SEBI’s writ petition challenging the CIC order, which had only partly granted Mr Agarwal’s request after a second appeal.
Initially, the regulator had refused to provide the information Mr Agarwal sought because it pertained to the internal functioning of the market ecosystem, and its disclosure may hamper the decision-making in its supervisory and regulatory roles. After Mr Agarwal had filed a second appeal, the CIC shot down SEBI’s argument for not providing the requested information. In its order on 27 December 2022, CIC directed the market regulator to provide concluding comments and final year-wise findings of the annual inspection reports of the NSE.
Citing violations of Sections 8(1)(d), 8(1)(e) and 8(1)(j) of the RTI Act, SEBI filed writ petitions in the Bombay High Court, challenging CIC’s order.
During a hearing last week, senior counsel Nikhil Sakhardande, representing Mr Agarwal and senior counsel JJ Bhatt, representing SEBI, mentioned the matter before the HC bench of justice Gautam S Patel and justice Dr Neela Kedar Gokhale. Advocate Ravi Chandra Hegde from RHP Partners is appearing for Mr Agarwal.
While scheduling the next hearing on 20 June 2023, the HC granted an extension of four weeks to file affidavits in reply. Till that time, orders issued by the HC will continue.
In March, the bench had granted a stay on order passed by the CIC in a second appeal under RTI filed by Mr Agarwal.
Mr Agarwal has separately filed writ petitions (WP (L) no. 7382 of 2023 and WP (L) no. 7383 of 2023), noting that the information sought is yet to be disclosed by SEBI as directed by CIC. He also challenged SEBI’s position on the impugned order as being “erroneous, illegal, bad in law” and suffering “from total non-application of the mind”; and that it “fails to set out any rationale, justification or explanation whatsoever, to arrive at a conclusion that full disclosure of the BSE and NSE inspection reports”.
The RTI activist laments that he based his application on the Supreme Court judgement, which had clearly considered inspection reports prepared by the Reserve Bank of India (RBI) of public and private banks as information under the RTI Act, as RBI is the regulatory body in respect of banks.
In the same vein, argues Mr Agrawal, “SEBI being a regulatory public authority in respect of NSE, it is bound to provide inspection reports in respect of NSE under provisions of RTI Act. I also requested for web-link, if any, which has uploaded such information and file notings regarding the movement of this RTI application.”
The central public information officer (CPIO) of SEBI, on 23 March 2022, replied to Mr Agarwal that “information sought includes commercial confidential information of other entities, the disclosure of which could harm their competitive position and, as such, the information sought is exempt under Section 8(1)(d) of RTI Act.”
After receiving a similar reply from the first appellate authority (FAA) of SEBI, Mr Agarwal then approached the CIC. In its order, the CIC had directed SEBI to provide Mr Agarwal with the list of selected and rejected candidates for the positions of PIDs on the boards of BSE, NSE, MCX and MCX Clearing after redacting personal and sensitive information by invoking the severability principle under Section 10 of the RTI act.
Last year in December, CIC directed SEBI to provide concluding comments and final year-wise findings of the annual inspection reports of the NSE. However, the market regulator had filed writ petitions before the Bombay HC, challenging the order passed by CIC under the RTI Act.
It may be recalled that the SC had ordered, in 2015, that it is mandatory for the RBI to release their annual inspection reports of private and public banks under provisions of the RTI Act. In April 2021, SC again rejected pleas by some banks, which had gone against the 2015 judgement, to recall the order. However, regular authorities and banks continue to flout the SC’s directives. (Read: Supreme Court Rejects Banks’ Appeal To Restrict RBI from Disclosing Defaulters’ List, Inspection Report under RTI)
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