Reliance Industries Limited v. SEBI and Ors - 05.08.2022

REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL No. 1167 of 2022
[@ SPECIAL LEAVE PETITION (CRL) NO. 3417/2022]
RELIANCE INDUSTRIES LIMITED … APPELLANT
VERSUS
SECURITIES AND EXCHANGE
BOARD OF INDIA & ORS. … RESPONDENTS
JUDGMENT
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 Interim Application No. 1945 of 2021 in
Signature Not Verified
Digitally signed by
VISHAL ANAND
Date: 2022.08.05
Criminal Revision Application No. 209 of 2020.
17:54:46 IST
Reason:
1
3. Brief facts necessary for disposal of this appeal are that a
complaint was filed on 21.01.2002 by one Shri S.
Gurumurthy, with the Securities and Exchange Board of India
[for short ‘the SEBI’] against Reliance Industries Ltd. [for short
‘RIL’], its associate companies and its directors, alleging that
they fraudulently allotted 12 crore equity shares of RIL to
entities purportedly connected with the promoters of RIL,
which were funded by RIL and other group companies in
1994. It was alleged that the company and its directors were
in violation of Section 77 of the Companies Act, 1956. Based
on the aforesaid complaint, the SEBI appointed an
investigating officer to inquire into the aforesaid complaint.
Accordingly, a report was submitted by the said investigating
officer on 04.02.2005.
4. It may be necessary to note that SEBI chose not to take any
action with respect to the aforesaid letter. The appellant
alleged that a note was prepared by the Legal Affairs
Department of the SEBI on 17.05.2006, wherein it was noted
that the report had not brought out any specific violation of
2
any legal provision by RIL. However, the note was said to have
observed that there was requirement of an opinion by an
external expert inter alia on the possibility of initiating
appropriate criminal proceedings against RIL. In this context,
a 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 to SEBI, which
was divulged by SEBI in parts, to the appellant herein.
5. On 16.04.2010, SEBI sent a letter to RIL alleging that RIL had
funded purchase of its own shares by 38 related entities and
thereby violated Section 77 (2) of the Companies Act, 1956 and
consequently, violated Regulations 3, 5 and 6 of the Securities
and Exchange Board of India (Prohibition of Fraudulent and
Unfair Trade Practices relating to Securities Market)
Regulations, 1995. RIL, in reply, addressed numerous letters
to SEBI requesting for copies of the documents and submitting
inter alia that the issue concerning violation of Section 77 of
the Companies Act, 1956 was examined by the Ministry of
3
Corporate Affairs which had concluded that the transaction
was compliant with the applicable law.
6. In any case, the Adjudicating Officer of SEBI issued a show
cause notice to the promoters of RIL under Rule 4 of the
Securities and Exchange Board of India (Procedure for Holding
Inquiry and Imposing Penalties by Adjudicating Officer) Rules,
1995 alleging violation of Regulation 11(1) of the SEBI
Takeover Regulations (as it then stood).
7. It is borne out from the records that an Office Memorandum
dated 18.7.2011 was issued by the Ministry of Corporate
Affairs wherein it 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 a
settlement application before SEBI, without prejudice to its
rights, in order to put a quietus to the aforesaid issue which
had taken place many years ago.
9. In any case, SEBI issued a letter dated 23.04.2014, answering
the request of documents sought by the appellant herein in
the following manner:
4
“With regard to the documents/information
sought in paragraphs 5(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 on June 11, 2009 from a retired judge of the
Hon’ble Supreme Court of India cannot be
provided since it is privileged and confidential in
nature.
2. Request 5(b): a copy of the case for opinion

provided by SEBI to the Hon’ble retired judge for
seeking the opinion is enclosed.
3. Request 5(c): A copy of the communication from
Ministry of Corporate Affairs dated February 7,
2012 and dated September 1, 2011 forwarding
letter dated July 18, 2011 is enclosed.
4. Request 5(d): A copy of the relevant opinion /

views dated April 6, 2006, June 11, 2009 and
August 25, 2010 of the legal department of SEBI
are enclosed.”
10. It is a matter of record that in the year 201718, the SEBI
decided to reexamine the issue and accordingly sought advice
of Justice (Retd.) B.N. Srikrishna for the second time. Justice
(Retd.) B.N. Srikrishna addressed a letter dated 26.07.2017 to
the SEBI in the following manner:
“Considering the importance of the matter I am of
the view that some very senior person should be
consulted in this matter.
5
I would suggest SEBI to approach Mr. Y.H.
Malegam, Chartered Accountant, who may be
consulted in this matter. He is a person of high
standing and great repute. In my opinion, he
would be the most appropriate person to advise us
as to whether the monies transferred to RUPL and
RPTL were towards project advances and other
charges or were merely round tripping.
You may depute one senior person to meet him and
discuss with him the facts. It would enable him to
take a view in the matter and make a report to you.
After the report of Mr. Malegam is received, you
may further discuss the matter with me.”
11. It is stated by the appellant that Mr. Y.H. Malegam, Chartered
Accountant examined the records of RIL and various other
companies and submitted his report to SEBI.
12. Based on the report of Mr. Y.H. Malegam, an opinion was
sought from the learned retired Judge for the second time.
13. On 21.01.2019, the appellant addressed a letter to SEBI
seeking further material in connection with the pending
settlement application in the following manner:
“Accordingly, we request SEBI to provide us

inspection and copies of the following in connection
with the subject settlement:
(a) All further material collected by SEBI;
(b) Further internal reports and noting;
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(c) Reports from external experts, including
report from Shri Y.H. Malegam, which was
confirmed by the Committee as having been
received;
(d) Any further case for opinion and opinion
obtained by SEBI.”
14. In reply, SEBI rejected the request for disclosure of the
documents in the following manner:
“With regard to your request for the said report, it
may be noted that no such report or other material
as asked is asked (sic) is made part of the pending
settlement proceedings. Further, your attention is
drawn to Regulation 13(2)(a) of the SEBI
(Settlement Proceedings) Regulations, 2018, which
reads as under:
“(a) Call for relevant information, documents etc.,
pertaining to the alleged default(s) in possession of
the applicant or obtainable by the applicant;
Explanation – Nothing in these regulations shall
confer a right upon the applicant to seek
information from the Board or require the Board to
seek information from any other person for the
purpose of relying upon it in the settlement
proceedings or request the Board to permit it to
present information not already disposed in the
applicant, [Illegible] the applicant our (sic) aware of
at the time of making the application or which
information upon diligent enquiry being made
could bare became known to the applicant.”
In view of the same, I am directed to inform you
that the request for the said report and other
material has not been acceded to.”
7
15. Aggrieved by the aforesaid communication of the SEBI, the
appellant challenged the same before the High Court of
Bombay in Writ Petition (Lodg.) No. 300 of 2019. The High
Court, vide order dated 04.02.2019, dismissed the aforesaid
petition. It may not be out of context to note that SEBI also
rejected the supplementary application filed by the appellant
herein.
16. On 16.07.2020, SEBI filed a complaint in the Court of SEBI
Special Judge, Mumbai praying therein as under:
“(a) That this Hon’ble Court may be pleased to

issue the process against the accused for the
continuing offences punishable under Section 24(1)
r/w Section 27 of the SEBI Act, 1992 as amended
in 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 accused in
accordance with the law.
(b) That this Hon’ble Court may be pleased to

issue the process against the accused for offences
punishable under Sections 77(2) and 77A r/w
Section 55A of the Companies Act, 1956.”
8
17. On 30.09.2020, the SEBI Special Court dismissed the
complaint filed by SEBI as being barred by limitation.
18. The aforesaid order has been challenged by SEBI in Criminal
Revision Application No. 209 of 2020 before the High Court of
Bombay. In the aforesaid proceedings, the appellant filed an
application being IA No. 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 for obtaining 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 on the
aforesaid application passed the impugned order on
28.03.2022 in the following manner:
“5. At this stage, the prayer sought for in the

Interim Application cannot be considered without
hearing the main Revision Application. It is pertinent
to note that the respondent No.1 – SEBI i.e. original
applicant in the Revision Application has filed the
aforesaid Revision Application seeking quashing and
setting aside of the impugned order dated 30th
September, 2020, passed by the learned SEBI Special
Judge, City Civil and Sessions Court, Greater
Bombay, in SEBI Misc. Application No. 686 of 2020,
9
by which the learned Judge dismissed the
Miscellaneous Application No. 686 of 2020
(complaint) only on the ground, that it was barred by
limitation. Therefore, the question that arises in the
Revision Application is whether the complaint filed by
SEBI was barred by limitation or not.
6. In view of what is stated hereinabove, the

Interim Application will have to be heard alongwith
the main Revision Application, on the next date. It is
made clear that all contentions of the parties in the
aforesaid Interim Application are kept open,
including the question of maintainability.”

20. Aggrieved by the aforesaid order, the appellantRIL has filed
the present appeal.
21. Mr. Harish Salve, learned Senior counsel appearing on behalf
of the appellant contends:
i. That the challenge to the maintainability of the

present appeal is misconceived. He stated that the
interim application filed for seeking documents was
argued at length before the High Court, which was
ultimately not considered.
ii. That the SEBI, being a regulator, has a duty to

disclose documents pursuant to Article 21. This
constitutional mandate has been accepted by this
Court and has been applied to SEBI in T. Takano
v. Securities and Exchange Board of India,
2022 SCC Online SC 210
iii. SEBI cannot claim litigation privilege as the

proceedings are not adversarial in nature.
10
iv. That the selective disclosure of excerpts of the
opinion by Justice (Retd.) B.N. Srikrishna,
amounted to cherry picking by SEBI which cannot
be allowed. The accused is entitled to the complete
document to ensure a fair trial.
v. That the action of SEBI of disclosing excerpts of the
report clearly amounts to waiver of litigation
privilege claimed by SEBI.
22. Mr. Arvind Datar, learned Senior Counsel appearing on behalf
of the respondents contends:
i. That the present appeal is not maintainable as there
is no criminal complaint pending as on this date.
The appellant cannot seek documents in a criminal
revision against dismissal of the complaint on the
ground of limitation.
ii. The issue before the High Court was limited to the
issue of limitation and the attempt of the accused to
expand the proceedings to seek documents cannot
be entertained.
iii. That the impugned order was a mere adjournment
order which has not affected any rights of the
accused. Therefore, the appeal is not maintainable
against such an adjournment order.
iv. The law laid down in T. Takano v. Securities and
Exchange Board of India, 2022 SCC Online SC
210, is not applicable to the present case as it was
rendered in the context of investigation under
different Regulations.
v. The documents are being sought at a premature

stage. If cognizance is taken by the trial Court, the
11
accused would be entitled for the documents in
terms of Section 207 of CrPC. Any attempt to seek
documents beyond the scope of Section 207 CrPC
cannot be accepted.
vi. The opinion of the Retd. Judge and the report of the
Chartered Accountant are clearly covered as part of
litigation privilege in terms of the Indian Evidence
Act. Such opinions cannot be a matter of production
by a 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 present set of proceedings?
ISSUE I
24. At the outset, Mr. Datar, learned Senior Counsel appearing on
behalf of the respondents has challenged the maintainability
of the present appeal on two grounds namely: (1) that the
impugned order is a mere adjournment order against which
this Court should not exercise its discretionary jurisdiction; (2)
that no criminal complaint exists, to seek document disclosure
as the trial Court had already dismissed SEBI’s complaint on
the ground of delay. On the contrary, Mr. Harish Salve,
12
learned Senior Counsel appearing on behalf of the appellant
has portrayed that the High Court was not justified in
adjourning a case after hearing the parties on more than two
occasions on the application.
25. The present dispute pertains to certain facts which took place
in 19921994, when the initial complaint was instituted before
SEBI in the year 2002, which is alleged to be closed by the
note of the Legal Affairs Department of SEBI dated
17.05.2006. Further, the letter of the Ministry of Corporate
Affairs dated 07.02.2012 also clarifies interalia, that no
violation of Section 77 of the Companies Act, 1956 was made
out, in the following manner:
4. It has further been reported by the ROC that
there was no violation of Section 81(1A) of the
Companies Act, 1956 in respect of preferential
allotment of shares. Also, there was no specific
guidelines for valuation or determination of
premium in respect of issue of convertible
debentures at the relevant time. The
determination of premium was within the
authority of the company subject to compliance
with Section 81(1A) which appears to have been
done.
5.MCA had conducted inspection of books of
accounts of M/s. Reliance Industries Ltd. in
13
2002 and for the various violations reported in
the inspection report, necessary penal action was
initiated 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 respect of funds invested by the
company in Somnath Syndicate, a partnership
firm in which company is a partner;
ii.) No funds was given by RIL to 34 entities to
which NCDs were allotted;
iii.) Ambanis were neither directors nor
shareholders of the entities to whom shares were
allotted;
iv.) Ambanis were not allotted any shares
pursuant to PPDIV issue.
7. In view of above, no action is required to be
taken on the part of Ministry of Corporate
Affairs.
(Emphasis supplied)
In this context, the reexamination of the complaint by SEBI
ought to happen only after providing adequate opportunity to
the accused to fully defend his case.
26. There is no doubt that the Special Court of SEBI in M.A. No.
686 of 2020 has dismissed the complaint of SEBI on the
ground of limitation. Against such an order, SEBI has filed a
Criminal Revision being Criminal Revision Application No. 209
of 2020 before the High Court which is pending. On perusal of
14
this Criminal Revision Petition it is clear that SEBI has made
the following prayer:
(a) This Hon’ble Court be pleased to quash and set
aside the impugned order dated 30th 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
the grounds of condonation of delay or inapplicability of
limitation as the offences alleged, are continuing in nature;
rather SEBI has pleaded the case on merits. This is apparent
from the following grounds advanced by SEBI on merits:
F. The Ld. Judge erred to appreciate that the

allotment including the allotment of bonus shares,
was fraudulent since it was issued without any
authority, and in violation of securities laws,
including the Companies Act. When the actual
issue and allotment of NCDs with detachable
warrants and subsequent conversion of warrants
into equity shares itself was undertaken without
any authority of the AGM, and the earmarking of
‘bonus’ issue of shares for the benefit of a
debentureholder i.e. a nonshareholder was done
and the total private placement of 12 crore shares
was carried out without any authority either of the
shares holders or in law resulting in cementing of
‘control’ and exercise thereof there was a clear
breach of the fiduciary duty of the accused
directors of the issuer company.
15
G. The Ld. Judge erred in failing to appreciate that
the fraud was consummate and involved a complex
subterfuge, spread over a long period of time. The
accused Directors sat in subcommittees that
negotiated and earmarked without any share
holder authority, the NCDs with warrants
convertible of shares with a sizeable free allotment
of bonus shares to allottees of the NCDs which
were essentially paper companies and related
companies of the accused and later on joined them
as person acting in concert (PACs) when the
warrants attached to the NCDs were converted into
shares in 2000. When the directors negotiated the
placement of NCDs with warrants with the Unit
Trust of India (UTI) whose allotment is made as per
Resolution 13 as disclosed on the stock exchange,
no such ‘free’ bonus was given to UTI. However, all
this was not considered by the Ld. Judge who
erred in failing to appreciate that the directors also
granted a conversion price to the accused allottees
which was much less than the conversion price
given to UTI.
…
…
P. The Ld. Judge erred in failing to appreciate

the ratio laid down by the Hon’ble Supreme Court
in the matter of Fiona Shrikhande Versus State of
Maharashtra and another, (2013) 14 Supreme
Court Cases 44 wherein, the Hon’ble Supreme
Court has held that at the complaint stage, the
Magistrate is merely concerned with the allegations
made out in the complaint and has only to prima
facie satisfy whether there are sufficient grounds to
proceed against the accused. In the facts of the
present case there were more than sufficient
grounds for the Ld. Judge to primafacie be
16
satisfied of the offence and issue process in the
matter.
…
…
W. The Ld. Judge failed to note that it was vitally
necessary to take cognizance of the offences in the
interest of justice under Section 473, keeping in
mind the devious method of involving 38
companies and routing of funds in a preplanned
and preordained sequence of transactions. If no
cognizance is taken of such egregious offences, it
would seriously harm the interest of the investors
in the securities market. It is in the interests of
justice that large conglomerates having lakhs of
shareholders are not permitted to flagrantly violate
the law and seek to escape prosecution.
27. Coming to the point of delay, inter alia the contention of SEBI
is that the Court should have considered Section 473 of CrPC
to condone delay having considered the facts and
circumstances in proper perspective. At this juncture, it is
relevant to quote Section 473 of CrPC which reads as under:
“473. Extension of period of limitation in

certain cases. Notwithstanding anything
contained in the foregoing provisions of this
Chapter, any Court may take cognizance of an
offence after the expiry of the period of limitation,
if it is satisfied on the facts and in the
17
circumstances of the case that the delay has been
properly explained or that it is necessary so to do
in the interests of justice.”
The aforesaid provision is categorical in stating that any
limitation prescribed under Section 468 of CrPC can be
overlooked if sufficient cause is made out in the facts and
circumstances of the individual case in the interest of justice.
The said provision, while trying to balance public interest in
initiating criminal prosecutions, has been restricted to
peculiarities of individual case while clothing the Court with
discretionary power. Such a discretion vested in the Court
ought to be a principled exercise, wherein the facts and
circumstances portrayed justify such an exercise. The
intention of the aforesaid provision is to make the inquiry a
question of fact and not of untrammelled discretion as to
whether in a particular case, the Court should condone the
delay.
28. It is in this context that the High Court is bound to consider
the facts of the present case concerning the modus of
initiation of the case and other factors, before considering the
18
aspect of condonation of delay in terms of Section 473 of
CrPC. The approach of the High Court of adjourning
adjudication of the interim application seeking disclosure of
documents cannot be appreciated. Ideally, the High Court
ought to have considered the interim application before
dealing with the limitation aspect.
29. Initiation of criminal action in commercial transactions,
should take place with a lot of circumspection and the Courts
ought to act as gate keepers for the same. Initiating frivolous
criminal actions against large corporations, would give rise to
adverse economic consequences for the country in the long
run. Therefore, the Regulator must be cautious in initiating
such an action and carefully weigh each factor.
30. In ordinary course, this Court would have remanded the
matter for adjudication by the High Court on the interim
application moved by the appellant seeking such disclosure.
However, arguments have been extensively advanced before
this Court touching upon important aspects of criminal
19
jurisprudence which require consideration. Moreover, the facts
stated above, clearly indicate that the acts which are sought to
be prosecuted go back to the year 19921994, and over three
decades have passed without there being any end to the
litigation. In this regard, the Court intends to examine this
important issue and pass appropriate orders to ensure that
the adjudication is not delayed unnecessarily, ad infinitum.
ISSUE II
31. This brings us to the issue as to whether the interim
application seeking documents, filed by the appellant herein
deserves to be allowed in the instant case. The respondents
have raised objections for such disclosure on two counts:
i. That such a request was already rejected by the High
Court in an earlier writ petition filed by the appellant
herein, when the settlement proceedings were on going;
ii. That the respondents claim legal privilege, as against
both the opinions of Justice (Retd.) B. N. Srikrishna and
20
the Report of the Chartered Accountant, viz. Sh. Y.H.
Malegam.
32. Coming to the first objection, there is no gainsaying the fact
that the respondent (regulator) had issued a letter dated
16.04.2010, conveying the findings of the investigation. In
furtherance thereto, the appellant had sought to settle the
issue considering the fact that substantial time 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 to have submitted a Report to SEBI.
During the settlement proceedings, the appellant submitted an
application dated 21.01.2019, wherein it sought the aforesaid
documents. In response SEBI, vide letter dated 28.01.2019,
rejected the request by relying on the provisions of Section
13(2) of the Securities and Exchange Board of India
21
(Settlement Proceedings) Regulations, 2018 [hereinafter
‘Settlement Regulations’].
34. The aforesaid letter dated 28.01.2019, was impugned by the
appellant 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. During the proceedings, an
application came to be filed by the petitioner
seeking copies of certain documents including
copy of the report submitted by Mr. Malegam.
The provisions of Regulation 13(2)(a) are clear.
These regulations do not confer any right on
the Petitioner to ask for a copy of the said
report. In that view of the matter, the issue of
principles of fairness does not arise at this
stage, considering the purpose of the
proceedings before the internal Committee
and powers of the High Power Committee and
the Regulations framed in this regard. There is
no right conferred under the Regulations on the
Petitioner to ask for such a copy. In the facts, we
are not convinced to exercise our writ
jurisdiction.
As and when the adjudicatory proceedings
takes place, the Petitioner may ask for copies
of such documents in accordance with the
22
procedure established to conduct the
proceedings.”
(emphasis supplied)
We may only note that the High Court was dealing with
specific requests that were made during the Settlement
proceedings under Regulation 13(2) of the Settlement
Regulations. From a reading of the Explanation appended to
Regulation 13(2)(a) of the Settlement Regulations, it is clear
that the intention of Settlement proceedings is to facilitate the
Regulator to consider the feasibility of settlement in certain
cases, without allowing a roving and fishing expedition.
However, the findings of the High Court in the aforesaid case
are of no avail to the SEBI, as we are at a stage when SEBI
has invoked the provisions under the criminal law to
prosecute the appellant herein.
35. At this juncture, SEBI relies on Regulation 29 of Securities
and Exchange Board of India (Settlement Proceedings)
Regulations 2018, which notes as under :
CONFIDENTIALITY OF INFORMATION .
29. (1) All information submitted and
discussions held in pursuance of the
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settlement proceedings under these regulations
shall be deemed to have been received or
made in a fiduciary capacity and the same may
not be released to the public, if the same
prejudices the Board and/or the applicant.
2) Where an application is rejected or withdrawn,
the applicant and the Board shall not rely upon
or introduce as evidence before any court or
Tribunal, any proposals made or information
submitted or representation made by the
applicant under these regulations:
Provided that this subregulation shall not
apply where the settlement order is revoked
or withdrawn under these regulations.
Explanation. – When any fact is discovered in
consequence of information received from a
person in pursuance of an application, so much
of such information, whether it amounts to an
admission or not, as relates distinctly to the fact
thereby discovered, may be proved.
Reliance on the above provision is misconceived, as both the
clauses must be interpreted to deter usage of the applicant’s
proposals/representations and allied information before
Courts/Tribunals, in the event the settlement fails. It does not
deal with the disclosure obligations cast on SEBI. In any case,
the purpose of settlement is to ensure that parties come to an
understanding having assessed their relative merits. It is
expected that parties in such proceedings are transparent,
24
more so for Regulators like SEBI, who are expected to share all
the documents, which are necessary for understanding the
issue.
36. It is a matter of record that subsequently, the settlement
proceedings were terminated by SEBI and thereafter SEBI has
decided to initiate a criminal complaint against the appellant
herein.
37. In this context, the objection of SEBI that the issue of
disclosure of documents is res judicata as the same was
disallowed by the High Court in the earlier round of litigation,
cannot be sustained in the eyes of law.
38. This brings us to the right of the accusedappellant to seek
document disclosure in the present case. In this case, the
appellant has been pursuing SEBI for these documents as
they believe that an attempt is being made by SEBI to
suppress the Opinions and Reports as they are adverse to the
cause of SEBI.
25
39. A cursory glance at the background of the matter would reveal
that initially, a complaint was submitted to SEBI on
21.01.2002, wherein the appellant and its directors were
purportedly involved in irregularities in allotment of Non
Convertible Debentures in the year 1994. Accordingly, an
Investigation Report was submitted by the Investigating
Authority on 04.02.2005. SEBI in its counteraffidavit has
admitted that the aforesaid Report was inconclusive and
recommended further enquiry in 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. It is SEBI’s case that during the
Settlement proceedings, the appellant had disclosed numerous
documents, which mandated SEBI to reexamine its stand.
Accordingly, the matter was referred to Justice (Retd.) B. N.
Srikrishna for a second time.
26
41. Thereafter, Justice (Retd.) B. N. Srikrishna wrote back to SEBI
asking them to consult Sh. Y. H. Malegam, a renowned
Chartered Accountant to determine the culpability of the
appellant and various directors. It is reported that this
exercise had culminated in the Second opinion of Justice
(Retd.) B. N. Srikrishna.
42. SEBI is a regulator and has a duty to act fairly, while
conducting proceedings or initiating any action against the
parties. Being a quasijudicial body, the constitutional
mandate of SEBI is to act fairly, in accordance with the rules
prescribed by law. The role of a Regulator is to deal with
complaints and parties in a fair manner, and not to
circumvent the rule of law for getting successful convictions.
There is a substantive duty on the Regulators to show
fairness, in the form of public cooperation and deference.
43. The duty to act fairly by SEBI, is inextricably tied with the
principles of natural justice, wherein a party cannot be
condemned without having been given an adequate

27
opportunity to defend itself. In State Bank of Patiala v. SK
Sharma, (1996) 3 SCC 364, this Court while dealing 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 and fast formulae. As said
in Russell v. Duke of Norfolk [(1949) 1 All ER
109 : 65 TLR 225] way back in 1949, these
principles cannot be put in a straitjacket. Their
applicability depends upon the context and the
facts and circumstances of each case.
(See Mohinder Singh Gill v. Chief Election
Commr. [(1978) 1 SCC 405 : (1978) 2 SCR 272] )
The objective is to ensure a fair hearing, a fair
deal, to the person whose rights are going to be
affected. (See A.K. Roy v. Union of India [(1982) 1
SCC 271 : 1982 SCC (Cri) 152] and Swadeshi
Cotton Mills v. Union of India[(1981) 1 SCC 664] .)
As pointed out by this Court in A.K.
Kraipak v. Union of India [(1969) 2 SCC 262] , the
dividing line between quasijudicial function and
administrative function (affecting the rights of a
party) has become quite thin and almost
indistinguishable — a fact also emphasised by
House of Lords in Council of Civil Service
Unions v. Minister for the Civil Service [(1984) 3
All ER 935 : (1984) 3 WLR 1174 : 1985 AC 374,
HL] where the principles of natural justice and a
fair hearing were treated as synonymous. …”
44. At this juncture, the appellant has pressed into service the
ratio laid down by this Court in Takano case (supra), to seek
28
document disclosure. On the other hand, the respondents
have tried to distinguish the present case by stating that the
present case is not one of disclosure which is being sought
during investigation by SEBI under the Securities and
Exchange Board of India (Prohibition of Fraudulent and Unfair
Trade Practices Relating to Securities Market) Regulations,
2003. Although we agree with the respondents that the
Takano Case (supra) was rendered under the aforesaid
Regulations, however, we are of the opinion that the reasoning
of this Court alludes to a general obligation of disclosure on
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 accurately only if both parties have access
to information and possess opportunity to address arguments
and counter arguments; (ii) fair trial, i.e., this will enable the
parties to effectively participate in the proceedings; and (iii)
transparency and accountability, i.e., the investigative
agencies are held accountable through transparency and not
29
opaqueness. Keeping a party abreast of the information that
influenced the decision promotes transparency of the judicial
process which was discussed in the aforesaid case in the
following manner:
“24. While the respondents have submitted that
only materials that have been relied on by the
Board need to be disclosed, the appellant has
contended that all relevant materials need to be
disclosed. While trying to answer this issue, we
are faced with a multitude of other equally
important issues. These issues, all paramount in
shaping the jurisprudence surrounding the
principles of access to justice and transparency,
range from identifying the purpose and extent of
disclosure required, to balancing the conflicting
claims of access to justice and grounds of public
interest such as privacy, confidentiality and
market interest. An identification of
the purpose of disclosure would lead us closer to
identifying the extent of required disclosure.
There are three key purposes that disclosure of
information serves:
(i) Reliability: The possession of information by
both the parties can aid the courts in
determining the truth of the contentions. The
role of the court is not restricted to interpreting
the provisions of law but also determining the
veracity and truth of the allegations made before
it. The court would be able to perform this
function accurately only if both parties have
access to information and possess the
opportunity to address arguments and counter
arguments related to the information;
30
(ii) Fair Trial: Since a verdict of the Court has far
reaching repercussions on the life and liberty of
an individual, it is only fair that there is a
legitimate expectation that the parties are
provided all the aid in order for them to
effectively participate in the proceedings;
(iii) Transparency and accountability: The
investigative agencies and the judicial institution
are held accountable through transparency and
not opaqueness of proceedings. Opaqueness
furthers a culture of prejudice, bias, and
impunity principles that are antithetical to
transparency. It is of utmost importance that in a
country grounded in the Rule of Law, the
institutions adopt those procedures that further
the democratic principles of transparency and
accountability. The principles of fairness and
transparency of adjudicatory proceedings are the
cornerstones of the principle of open justice. This
is the reason why an adjudicatory authority is
required to record its reasons for every
judgement or order it passes. However, the duty
to be transparent in the adjudicatory process
does not begin and end at providing a reasoned
order. Keeping a party bereft of the information
that influenced the decision of an authority
undertaking an adjudicatory function also
undermines the transparency of the judicial
process. It denies the concerned party and the
public at large the ability to effectively scrutinise
the decisions of the authority since it creates an
information asymmetry.
25. The purpose of disclosure of information is
not merely individualistic, that is to prevent
errors in the verdict but is also towards fulfilling
the larger institutional purpose of fair trial and
transparency. Since the purpose of disclosure of
31
information targets both the outcome (reliability)
and the process (fair trial and transparency), it
would be insufficient if only the material relied
on is disclosed. Such a rule of disclosure only
holds nexus to the outcome and not the process.
Therefore, as a default rule, all relevant material
must be disclosed.”
45. There is no doubt that the set of facts portrayed herein are
unique. The impugned action of the appellant hails back to the
year 1994, and almost three decades have gone by without
there being any light at the end of the tunnel. The
investigation report by SEBI in 2005 was inconclusive about
the alleged offence. There is even a communique by the
Minister of Corporate Affairs, Union of India recommending
closure of the case as they found nothing to further the
prosecution under Section 77 of the Companies Act, 1956. In
this light, SEBI’s action to initiate a criminal complaint
without providing the appellant an adequate opportunity to
defend itself by releasing necessary Reports and other
documents, cannot be appreciated by this Court as it is in
gross violation of the appellant’s right to natural justice.
Recently, in S. P. Velumani v. Arappor Iyakkam, 2022 SCC
32
Online SC 663, while dealing with the necessity of document
disclosure in cases where prosecuting authorities blow hot
and cold, this Court has held as under:
“22…The principles of natural justice demanded
that the appellant be afforded an opportunity to
defend his case based on the material that had
exonerated him initially, which was originally
accepted by the State.”
46. The approach of SEBI, in failing to disclose the documents
also raises concerns of transparency and fair trial.
Opaqueness only propagates prejudice and partiality.
Opaqueness is antithetical to transparency. It is of utmost
importance that in a country grounded in the Rule of Law,
institutions ought to adopt procedures that further the
democratic principles of transparency and accountability.
Principles of fairness and transparency of adjudicatory
proceedings are the cornerstone of the principles of open
justice.
47. Even for adjudication of condonation of delay under Section
473, CrPC, the modus of initiation of criminal complaint and
33
the conclusions reached therein are relevant in the facts and
circumstance of the case.
48. Viewed from a different angle, the respondents have
vehemently relied on litigation privilege under Section 129 of
the Evidence Act, 1872 to claim exemption from document
disclosure. Section 129 of the Evidence Act reads as under:
129. Confidential communications with

legal advisers.—No one shall be compelled
to disclose to the Court any confidential
communication which has taken place
between him and his legal professional
adviser, unless he offers himself as a
witness, in which case he may be compelled
to disclose any such communications as may
appear to the Court necessary to be known
in order to explain any evidence which he
has given, but no others.
49. The rationale of such a provision has been well known to
common law since ages. Sir George Mackenzie's Observations
upon the 18th Act of the 23rd Parliament of King James the
Sixth against Dispositions made in Defraud of Creditors
34
etc (1675), in Sir George Mackenzie's Works Vol 2 (1755), p1
are significant. He said this, at p 44:
"An Advocate is by the Nature of his

employment tied to the same Faithfulness that
any Depositor is: For his Client has depositate
in his Breast his greatest Secrets; and it is the
Interest of the Commonwealth, to have that
Freedom allowed and secured without which
Men cannot manage their Affairs and private
Business: And who would use that Freedom if
they might be ensnared by it? This were to
beget a Diffidence betwixt such who should, of
all others, have the greatest mutual Confidence
with one another; and this will make Men so
jealous of their Advocates that they will lose
their private Business, or succumb in their
just Defence, rather than Hazard the opening
of their Secrets to those who can give them no
Advice when the case is Half concealed, or may
be forced to discover them when revealed."
In England, the Legal professional privilege is often classified
under two subheadings: legal advice privilege and litigation
privilege. Legal advice privilege comprises of communications
between a client and his legal adviser, and is available when
proceedings are in existence or contemplated. Litigation
privilege on the other hand, covers a wider class of
35
communications, such as those between the legal adviser and
potential witnesses.
50. Coming to legal advice privilege in England, the House of
Lords through Justice Carswell in Three Rivers District
Council and others (Respondents) v. Governor and
Company of the Bank of England (Appellants), [2004]
UKHL 48, has summarized the law as under:
“The conclusion to be drawn from the trilogy
of 19th century cases to which I have referred
and the qualifications expressed in the
modern caselaw is that communications
between parties or their solicitors and third
parties for the purpose of obtaining
information or advice in connection with
existing or contemplated litigation are
privileged, but only when the following
conditions are satisfied:
(a) litigation must be in progress or in

contemplation;
(b) the communications must have been made
for the sole or dominant purpose of
conducting that litigation;
(c) the litigation must be adversarial, not
investigative or inquisitorial.”
51. The distinction in application of this privilege qua adversarial
and investigative litigation/inquisitorial litigation is reasoned
36
by English Courts in In Re K (Infants), [1965] AC 201 as
under:
“Where the judge is not sitting purely, or even
primarily, as an arbiter but is charged with
the paramount duty of protecting the interests
of one outside the conflict, a rule that is
designed for just arbitrament cannot in all
circumstances prevail.”
52. Further, In Re E (S.A.) (a Minor) (Wardship: Court’s Duty),
[1984] 1 WLR 156, while pointing out that a court in wardship
proceedings was not exercising an adversarial jurisdiction and
that:
“Its duty is not limited to the dispute between
the parties: on the contrary, its duty is to act
in the way best suited in its judgment to serve
the true interest and welfare of the ward. In
exercising wardship jurisdiction, the Court is
a true family court. Its paramount concern is
the welfare of the ward. It will, therefore,
sometimes be the duty of the court to look
beyond the submissions of the parties in the
endeavor to do what it judges to be necessary”
53. Indian position seems to be different from England. Section
126 to 129 of the Evidence Act do not draw any distinction
between adversarial and investigative litigation as such, and
privilege is applicable all through. This aspect is crucial, as it
37
touches on the foundations of the legal profession at large in
India. This Court does not want to express any opinion in this
regard as the case at hand is different and such an issue does
not arise, for the following reasons:
i. The investigation report was inconclusive, as admitted by
SEBI itself.
ii. Instead of SEBI referring the issue to an expert, it could
have undertaken the exercise of further investigation by
itself, which was not done.
iii. SEBI ultimately took further steps, only because of the
first opinion of Justice (retd.) B. N. Srikrishna.
iv. The first opinion of Justice (retd.) B. N. Srikrishna is a
part and parcel of the investigation and documents
connected therewith.
v. Moreover, certain documents have already been disclosed
to the appellant herein.
54. The simple test in this case is whether SEBI has launched the
prosecution on the basis of the investigation report alone. The
answer seems to be ‘No’ by SEBI’s own admission in its reply
38
where it states that the investigation report was inconclusive
and hence further scrutiny of the transactions by experts was
called for. That being the case, further Reports and opinions
obtained, from whomsoever it may be, are only an extension of
the investigation to help SEBI as a Regulator to ascertain the
facts and reach conclusions for prosecution or otherwise.
55. For the above reasons, we do not agree with the contention of
the learned Senior Counsel for SEBI that the first opinion of
Justice (Retd.) B. N. Srikrishna is covered by ‘legal privilege’
under Section 129 of the Evidence Act. Same is the case with
the second opinion of Justice (Retd.) B. N. Srikrishna and the
Report of Sh. Y. H. Malegam, which are nothing but a
continuation of the factfinding exercise undertaken by SEBI
to determine culpability.
56. Moreover, learned Senior counsel, Mr. Arvind Datar, appearing
for SEBI has pointed out that the present set of proceedings
have emanated before Criminal Court, wherein the procedures
must be strictly in accordance with the provisions of CrPC. He
states that the stage of document production under the CrPC
39
is provided under Section 207 and 208, which takes place
after cognizance is taken by the Magistrate. This Court, in S.
P. Velumani (supra), while rejecting a similar contention, held
as under:
“26. We may note that the contention of the

State may be appropriate under normal
circumstances wherein the accused is entitled to
all the documents relied upon by the prosecution
after the Magistrate takes cognizance in terms of
Section 207 of CrPC. However, this case is easily
distinguishable on its facts. Initiation of the FIR
in the present case stems from the writ
proceedings before the High Court, wherein the
State has opted to reexamine the issue in
contradiction of their own affidavit and the
preliminary report submitted earlier before the
High Court stating that commission of cognizable
offence had not been made out. It is in this
background we hold that the mandate of Section
207 of CrPC cannot be read as a provision etched
in stone to cause serious violation of the rights of
the appellantaccused as well as to the principles
of natural justice.”
Observing the facts and circumstances of this case, which
have been adumbrated above, we are of the firm opinion that
the defence taken by SEBI that they need not disclose any
documents at this stage as such a request is premature in
terms of the CrPC, cannot be sustained.
40
57. Before we part with the present appeal, another disconcerting
aspect of this case that comes to the fore is SEBI’s attempt to
cherrypick the documents it proposes to disclose. There is a
dispute about the fact that certain excerpts of the opinion of
Justice (Retd.) B. N. Srikrishna, were disclosed to the
appellant herein. It is the allegation of the appellant that while
the parts which were disclosed, vaguely point to the culpability
of the appellant, SEBI is refusing to divulge the information
which exonerate it. Such cherrypicking by SEBI only
derogates the commitment to a fair trial. In Nea Karteria
Maritime Co Ltd v. Atlantic and Great Lakes Steamship
Corporation, [1981] Com LR 138 at 139, Mustill J. held as
under:
‘I believe that the principle underlying the rule of
practice exemplified in Burnell v British Transport
Commission [1956] 1 QB 187 is that where a
party is deploying in court material which would
otherwise be privileged, the opposite party and
the court must have an opportunity of satisfying
themselves that what the party has chosen to
release from privilege represents the whole of the
material relevant to the issue in question. To
allow an individual item to be plucked out of
context would be to risk injustice through its real
weight or meaning being misunderstood.’
41
The aforesaid principle is often referred to as the ‘Cherry
picking’ principle.
58. In the case at hand, SEBI could not have claimed privilege
over certain parts of the documents and at the same time,
agreeing to disclose some part. Such selective disclosure
cannot be countenanced in law as it clearly amounts to
cherrypicking.
59. In view of the aforesaid discussion, we allow the present
appeal and direct the respondents to furnish a copy of the
following documents to 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
...........................CJI.
(N.V. RAMANA)

…...........................J.
(J.K. MAHESHWARI)
…...........................J.
(HIMA KOHLI)
NEW DELHI;
AUGUST 05, 2022.
42
43

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REPORTABLE

2. This appeal is filed against the impugned order dated

28.03.2022, passed by the High Court of Judicature at

complaint was filed on 21.01.2002 by one Shri S.

they fraudulently allotted 12 crore equity shares of RIL to

entities purportedly connected with the promoters of RIL,

which were funded by RIL and other group companies in

on the aforesaid complaint, the SEBI appointed an

investigating officer to inquire into the aforesaid complaint.

action with respect to the aforesaid letter. The appellant

alleged that a note was prepared by the Legal Affairs

observed that there was requirement of an opinion by an

external expert inter alia on the possibility of initiating

was approached by SEBI for the same. The learned retired

Unfair Trade Practices relating to Securities Market)

the Companies Act, 1956 was examined by the Ministry of

cause notice to the promoters of RIL under Rule 4 of the

1995 alleging violation of Regulation 11(1) of the SEBI

dated 18.7.2011 was issued by the Ministry of Corporate

8. When the matter stood thus, on 29.09.2011, RIL filed a

settlement application before SEBI, without prejudice to its

the request of documents sought by the appellant herein in

2. Request 5(b): a copy of the case for opinion

4. Request 5(d): A copy of the relevant opinion /

10. It is a matter of record that in the year 2017­18, the SEBI

Accountant examined the records of RIL and various other

12. Based on the report of Mr. Y.H. Malegam, an opinion was

13. On 21.01.2019, the appellant addressed a letter to SEBI

seeking further material in connection with the pending

“Accordingly, we request SEBI to provide us

14. In reply, SEBI rejected the request for disclosure of the

appellant challenged the same before the High Court of

Bombay in Writ Petition (Lodg.) No. 300 of 2019. The High

Court, vide order dated 04.02.2019, dismissed the aforesaid

“(a) That this Hon’ble Court may be pleased to

(b) That this Hon’ble Court may be pleased to

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

aforesaid application passed the impugned order on

“5. At this stage, the prayer sought for in the

6. In view of what is stated hereinabove, the

i. That the challenge to the maintainability of the

ii. That the SEBI, being a regulator, has a duty to

iii. SEBI cannot claim litigation privilege as the

v. The documents are being sought at a pre­mature

of the present appeal on two grounds namely: (1) that the

impugned order is a mere adjournment order against which

the ground of delay. On the contrary, Mr. Harish Salve,

has portrayed that the High Court was not justified in

note of the Legal Affairs Department of SEBI dated

17.05.2006. Further, the letter of the Ministry of Corporate

Affairs dated 07.02.2012 also clarifies inter­alia, that no

686 of 2020 has dismissed the complaint of SEBI on the

the grounds of condonation of delay or inapplicability of

limitation as the offences alleged, are continuing in nature;

F. The Ld. Judge erred to appreciate that the

P. The Ld. Judge erred in failing to appreciate

to condone delay having considered the facts and

circumstances in proper perspective. At this juncture, it is

“473. Extension of period of limitation in

The aforesaid provision is categorical in stating that any

10. It is a matter of record that in the year 201718, the SEBI

v. The documents are being sought at a premature

Affairs dated 07.02.2012 also clarifies interalia, that no

38. This brings us to the right of the accusedappellant to seek

purportedly involved in irregularities in allotment of Non

Authority on 04.02.2005. SEBI in its counteraffidavit has

documents, which mandated SEBI to reexamine its stand.