Supreme Court allows RIL access to papers on own shares’ acquisition

Stating that Securities and Exchange Board of India (SEBI) must act fairly, and not circumvent the rule of law, the Supreme Court on Friday told the market regulator to grant Mukesh Ambani’s Reliance Industries Limited (RIL) access to certain documents related to the alleged irregularities in acquisition of its own shares between 1994 and 2000.

The RIL claimed the documents were necessary to exonerate itself, and its 107 promoters, from criminal prosecution.

A bench, presided by Chief Justice N V Ramana, said that SEBI should show fairness and furnish the documents sought by RIL.

“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,” the Chief Justice of India wrote in the 43-page judgment on behalf of the bench.

The bench, also comprising justices J K Maheshwari and Hima Kohli, said that initiating criminal action in commercial transactions should take place with a lot of circumspection, and the courts should act as gatekeepers 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,” the bench said.

In its plea, the RIL sought records from the SEBI, as well as three other documents—two legal opinions by former Supreme Court judge B N Srikrishna, and a report by the former president of Institute of Chartered Accountants of India Y H Malegam, which examined the irregularities on the SEBI’s request.

The RIL sought the documents saying they would negate the allegations of wrongdoing in the share acquisition, and would have a vital bearing on the criminal case being filed by SEBI.

The market regulator in January 2019 had denied RIL access to the documents, and claimed the only object of the company was “to frustrate the process of the law” by pursuing frivolous litigation and causing unnecessary delay in the criminal proceedings.

Chartered accountant S Gurumurthy had filed a complaint with SEBI in 2002, alleging fraud and irregularities by RIL, its associate companies and their directors/ promoters, including Mukesh Ambani and his wife, Nita; Anil Ambani and his wife, Tina; and 98 others in the issue of two preferential placement of non-convertible debentures in 1994.

On March 28, the Bombay High Court had refused to grant any relief or production of material gathered by the regulator.