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By Fiona Mehta


The Securities and Exchange Board of India (SEBI), a regulator, has a responsibility to act fairly when conducting proceedings or taking any action against the parties, the Supreme Court ruled in a decision issued on Friday, granting Reliance Industries Limited (RIL) access to certain documents that the SEBI had used as the basis for a criminal complaint against the company.

A bench led by the Chief Justice of India stated in the verdict that “it is expected that parties in such processes are transparent, especially for Regulators like SEBI, who are supposed to give all the papers, which are important for comprehending the issue” (Reliance Industries Ltd versus Securities and Exchange Board of India).


Facts of the case: In the case of Reliance Industries Ltd versus Securities and Exchange Board of India (2022), the matter dates back to a number of share transactions involving RIL in 1994, when the company’s proprietors and related firms received roughly 12 crore equity shares “fraudulently” distributed. The agency launched an investigation into the suspected violations in response to a complaint made by S Gurmurthy in 2002. Both Justice BN Srikrishna, a former Supreme Court justice, and YH Malegam, a chartered accountant, were consulted by the SEBI for their opinions.

The RIL asked for the release of these opinions and any associated internal paperwork. RIL filed a writ case with the Bombay High Court after SEBI rejected the proposal, but it was denied in February 2019.

In 2020, the SEBI filed a criminal charge against RIL before the Special Judge in Mumbai, citing violations of the SEBI Act and Regulations. The Court dismissed the complaint because it was over its deadline. Before the Bombay High Court, the regulator filed a revision appeal contesting the dismissal of the complaint. RIL submitted an interlocutory application in SEBI’s revision case asking for the documents to be made public. The High Court postponed RIL’s application on March 28, 2022, stating that it could only be taken into consideration in conjunction with the main revision petition. This prompted the Supreme Court to receive the extraordinary leave petition.


Supreme Court’s Judgement: The Supreme Court made the decision to thoroughly consider the question after noting that it touched upon “essential issues of criminal jurisprudence.” The bench, which included Chief Justice NV Ramana and Justices JK Maheshwari and Hima Kohli, emphasised the regulator’s need to act equally. The Securities and Exchange Board of India (SEBI) has been ordered by the Supreme Court to provide Reliance Industries Ltd. with access to the papers that the SEBI used to support its criminal complaint against RIL for suspected irregularities in a share transaction in 1994.

Regulators have a responsibility to conduct proceedings or take any other action against the parties fairly. As a regulator, SEBI has this responsibility. Being a quasi-judicial agency, SEBI is required by its charter to conduct itself honestly and in compliance with the laws and regulations. The responsibility of a regulator is to handle complaints and parties fairly, not to flout the law in order to secure convictions. The Regulators have a moral obligation to act fairly, which manifests itself in their treatment of the public with respect and cooperation.

Regulators should refrain from bringing pointless criminal charges against major firms. – The initiation of criminal proceedings in commercial transactions should be done with great caution, and the courts should serve as the doorkeepers for such proceedings. Frivolous criminal charges brought against major firms would have long-term negative economic effects for the nation. As a result, the Regulator must exercise caution when taking such action and carefully consider all relevant factors.

Principles of natural justice – SEBI’s obligation to behave fairly is closely linked to the principles of natural justice, which state that a party cannot be found guilty without having had a fair chance to present their case.

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