Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले

CRIMINAL APPEAL No. 1167 of 2022
    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
Criminal Revision Application No. 209 of 2020.  
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
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
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:
“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
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.
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;
(c) Reports   from   external   experts,   including
report from Shri Y.H. Malegam, which was
confirmed by the Committee as having been
(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.”
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
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.” 
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
(i) Report   of   Sh.   Y.H.   Malegam,   Chartered
(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,
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.
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
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?
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,
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
5.MCA   had   conducted   inspection   of   books   of
accounts   of   M/s.   Reliance   Industries   Ltd.   in
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
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
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
(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
this Criminal Revision Petition it is clear that SEBI has made
the following prayer: 
(a) This Hon’ble Court be pleased to quash and setaside 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. 
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
satisfied of the offence and issue process in the
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
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
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
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
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.
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
the Report of the Chartered Accountant, viz. Sh. Y.H.
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
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
(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
As   and   when   the   adjudicatory   proceedings
takes place, the Petitioner may ask for copies
of   such   documents   in   accordance   with   the
procedure   established   to   conduct   the
(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 :
29.   (1)     All     information     submitted     and
discussions     held     in     pursuance     of     the
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,
more so for Regulators like SEBI, who are expected to share all
the documents, which are necessary for understanding the
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
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.
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   NonConvertible   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. 
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
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
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
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 counterarguments related to the information;
(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
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
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
47. Even for adjudication of condonation of delay under Section
473, CrPC, the modus of initiation of criminal complaint and
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
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
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
(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
by English Courts in  In  Re   K   (Infants),  [1965] AC 201 as
“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
“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
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
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
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.  
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
‘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.’ 
The aforesaid principle is often referred to as the ‘Cherrypicking’ 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
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
AUGUST 05, 2022.


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