Case BriefsSupreme Court

Supreme Court: In a case where the Court was dealing with the violation of the provisions of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations 2003 [PFUTP Regulations], the bench of Dr. DY Chandrachud* and Sanjiv Khanna, JJ has held that as a general rule, SEBI is duty bound to disclose all the relevant material, including the Investigation Report, in order to give reasonable opportunity to be heard to the notice. However, as an exception, it can redact information that impinges on the privacy of third parties.

Regulatory Framework of PFUTP Regulations

Regulation 9 envisages that the investigating authority must submit a report to the appointing authority upon the completion of its investigation in the course of which all relevant facts have to be taken into account. The investigating authority may even submit an interim report, if necessary, in the interest of investors and the securities market or, if directed by the appointing authority.

Regulation 10 empowers the Board to either issue a direction or take action as is specified in Regulations 11 and 12. The words of Regulation 10 indicate that the Board “after consideration of the report referred to in regulation 9, if satisfied that there is a violation of these regulations and after giving a reasonable opportunity of hearing to the persons concerned”, takes action under Regulations 11 and 12. As a result of the mandate of Regulation 10, the Board has to consider the investigation report as an intrinsic element in arriving at its satisfaction on whether there has been a violation of the regulations.

Duty to Disclose Investigative Material

After going through a number of judgments, the Court summarized the following principles:

  1. A quasi-judicial authority has a duty to disclose the material that has been relied upon at the stage of adjudication; and
  2. An ipse dixit of the authority that it has not relied on certain material would not exempt it of its liability to disclose such material if it is relevant to and has a nexus to the action that is taken by the authority.

In all reasonable probability, such material would have influenced the decision reached by the authority. Thus, the actual test is whether the material that is required to be disclosed is relevant for purpose of adjudication. If it is, then the principles of natural justice require its due disclosure.

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.

It would be fundamentally contrary to the principles of natural justice if the relevant part of the investigation report which pertains to the noticee is not disclosed. The noticee has to be given a reasonable opportunity of hearing. The requirement of a reasonable opportunity would postulate that such material which has been and has to be taken into account under Regulation 10 must be disclosed to the noticee. If the report of the investigation authority under Regulation 9 has to be considered by the Board before satisfaction is arrived at on a possible violation of the regulations, the principles of natural justice require due disclosure of the report.

“Merely because the investigating authority has denied placing reliance on the report would not mean that such material cannot be disclosed to the noticee. The court may look into the relevance of the material to the proposed action and its nexus to the stage of adjudication. Simply put, this entails evaluating whether the material in all reasonable probability would influence the decision of the authority.”

However, it was held that the right to disclosure is not absolute. It needs to be determined if the non-disclosure of the investigative report is protected by any of the exceptions to the rule.

Exceptions to the Duty to Disclose

The Court noticed that there could be a wide range of sensitive information that the investigation report submitted under Regulation 9 may cover, ranging from information on financial transactions and on other entities in the securities market, which might affect third-party rights. The report may contain market sensitive information which may impinge upon the interest of investors and the stability of the securities market. Hence,

“The requirement of compliance with the principles of natural justice cannot therefore be read to encompass the right to a roving disclosure on matters unconnected or as regards the dealings of third parties. The investigating authority may acquire information of sensitive nature bearing upon the orderly functioning of the securities market. The right of the noticee to disclosure must be balanced with a need to preserve any other thirdparty rights that may be affected.”

However, merely because a few portions of the enquiry report involve information on third-parties or confidential information on the securities market, the SEBI does not have a right to withhold the disclosure of the relevant portions of the report. SEBI can only claim non-disclosure of those sections of the report which deal with third party personal information and strategic information on the functioning of the securities mark.

Therefore, SEBI should determine such parts of the investigation report under Regulation 9 which have a bearing on the action which is proposed to be taken against the person to whom the notice to show cause is issued and disclose the same. It can redact information that impinges on the privacy of third parties. It cannot exercise unfettered discretion in redacting information. On the other hand, such parts of the report which are necessary for the noticee to defend his case against the action proposed to be taken against him need to be disclosed. It is needless to say that the investigating authority is duty-bound to disclose such parts of the report to the noticee in good faith. If the investigating authority attempts to circumvent its duty by revealing minimal information, to the prejudice of the noticee, it will be in violation of the principles of natural justice. The court/appellate forum in an appropriate case will be empowered to call for the investigation report and determine if the duty to disclose has been effectively complied with.

[T. Takano v. SEBI, 2022 SCC OnLine SC 210, decided on 18.02.2022]


*Judgment by: Justice Dr. DY Chandrachud


Counsels

For appellant: Advocate Ashim Sood

For SEBI: Senior Advocate CU Singh

Case BriefsHigh Courts

Delhi High Court: A Division Bench of D.N. Patel, CJ and Prateek Jalan, J. addressed the grievance of international athletes who challenged Article 7.3.1 (f) of NADA Anti-Doping Rules and their suspension.

Petitioner has challenged Article 7.3.1 (f) of the NADA Rules, 2015 (National Anti Doping Rules) as ultra vires of the World Anti Doping Code (WADA), 2015 and Article 14, Article 21 and Article 265 of the Constitution of India, 1950.

Article 7.3.1(f) of NADA Rules, 2015:

Notification After Review Regarding Adverse Analytical Findings

the  Athlete’s right to request copies of the A and B Sample laboratory documentation package which includes information as required by the International Standard for Laboratories.  Upon request by the  Athlete, the laboratory  documentation  package  may   be   provided  on payment  of  the applicable fee/charges which shall have to be paid by the concerned Athlete

Further, the petitioner has challenged that he was wrongfully suspended on the basis of a wrongfully decided ADR, 2015 violation by a notice dated 05-03-2019 by respondent 1.

Manifest Arbitrariness

Petitioner stated that Article 7.3.1 (f) of the ADR suffers from “Manifest Arbitrariness” as athletes such as the Petitioner are denied access to the LDP as they are unable to pay the fees for procuring the same.

For the stated contention, the petitioner relied on the decision of the Supreme Court in Shayra Bano v. Union of India, (2017) 9 SCC 1.

The suspension of the petitioner deprived him of competing in any tournament for a period of 1 year which resulted in the violation of his fundamental rights.

Article 7.3.1 (f) of the ADR, 2015 required the Petitioner to pay a fee for procuring the LDP which forms the basis of the charge of doping levied against him. By charging a fee for procuring the LDP, the impugned provision has in effect charged the accused of securing access to justice and impinges on his right to secure a fair trial.

As per Article 9.3.4 and Article 9.3.5 of theInternational Standard for Testing and Investigations, 2017(ISTI, 2017), the Doping Control Officer is obligated to send all the relevant documentation and samples to the Sample Collection Authority “as soon as practicable” after the completion of the sample collection session.

Lastly, Article 5.2.6.5 of the International Standard for Laboratories, 2016 (ISL, 2016) requires the requisite laboratory to report the Sample results of an athlete within 10 working days of the sample. However, as a matter of record, the A sample test was conducted after a period of 4 months.

Financial Burden |Violation of Right to a fair trial

Respondents having imposed a restriction on the Petitioner from participating in activities by making an allegation of doping, were duty-bound to provide a reasonable and efficacious means by which he can defend himself against the said allegation, but instead foisted upon him an exorbitant and extortionate financial burden.

Infringement of Article 19(1)(g) of the Constitution of India

Petitioner contended that even though eventually, the suspension was withdrawn, yet the suspension prevented the petitioner from participating in the sport anywhere in the world from 05-03-2019 to 06-03-2020, resulting in the infringement of Article 19(1)(g) of the Constitution of India.

Petitioner was unable to participate in any athletics discus throwing tournament for 1 year due to the respondent’s lapses in procedure and standards.

In view of the above, the petitioner challenged the constitutionality of Rule 7.3.1(f) of the ADR, 2015.

Court issued notice to the respondent and the matter has been listed for hearing on 12-10-2020.[Dharam Raj Yadav v. National Anti-Doping Agency, WP(C) No. 7397 of 2020, decided on 05-10-2020]


Counsel for petitioners: Advocate Shivam Singh with Jaideep Khanna and Saurabh Mishra.

Counsel for NDA: Advocate Shreya Sinha, ASG Chetan Sharma with CGSC Rajesh Gogna; Advocates Akshya, Karan Chibber, Vedansh Anand for Union of India.

Case BriefsTribunals/Commissions/Regulatory Bodies

The Commission takes suo-motu cognizance of the matter and directs the issuance of notice to the Director-General of Police, Uttar Pradesh calling for a detailed report in the matter within 4 weeks including the status of the investigation of the cases registered in connection with both the cases of murder.

The Commission also directs to issue a notice to the Chief Secretary to the Government of Uttar Pradesh calling for a report on whether any relief has been granted to the NOK of the deceased as the state has failed to secure the right to a fair trial of the victim. He is also expected to inform the status of any disciplinary action initiated against the delinquent officers/officials.

According to the police, the deceased man was from Gorakhpur and had come to the village, looking for a teacher named, Sudhir Kumar Singh. As soon as he saw Singh, he took out his father’s gun and killed the teacher, according to the police. After shooting the teacher, the man tried to escape but on spotting a crowd outside the house, he climbed the terrace, waved the gun and fired to keep the villagers at bay. A police team followed him to the terrace but the man escaped and was caught by a crowd, which set upon him. The videos relating to the incident emerged later, showed the man in police custody before the mob grabbed and attacked him.

According to the media reports, several policemen were present on the spot when the incident occurred. Some of the policemen were seen trying to control the crowd but the blows did not stop even when the man lay motionless. The police station in-charge of the area has been suspended for negligence. The victim’s head appeared to have been bashed in as the ground was splattered with blood.

The Commission has perused the contents that cruel high handedness by the villagers, taking law in their hands that too in the presence of police force, cannot be denied. A well-equipped police team was present on the spot when the victim was brutally attacked with sticks and stones.

The police personnel present at the time of the fateful incident and their in-charge definitely failed to do their lawful duty. Human life has been lost due to the apparent negligence of the public authority. This is a serious violation of human rights.


NHRC

Press Release dt. 08-09-2020

Case BriefsInternational Courts

European Court of Human Rights: The Seven-Judge Bench comprising of Yonko Grozev (President), Angelika Nußberger, André Potocki, Síofra O’Leary, M?rti?š Mits, Gabriele Kucsko-Stadlmayer, and Lado Chanturia held that there was no violation of Article 10 and 6 of European Convention on Human Rights as claimed by the complainant in the facts of the case presented before them.  

On 28-01-2010, the day after Holocaust Remembrance Day, Mr Pastörs, then a member of the Land Parliament of Mecklenburg-Western Pomerania, made a speech stating that “the so-called Holocaust is being used for political and commercial purposes”. In August 2012 he was convicted by a district court for violating the memory of the dead and for intentional defamation of the Jewish people. In March 2013 the regional court dismissed his appeal against the conviction as ill-founded. After reviewing the speech in full, the court found that Mr Pastörs had used terms which amounted to “denying the systematic, racially motivated, mass extermination of the Jews carried out at Auschwitz during the Third Reich”. The court stated he could not rely on his free speech rights in respect to Holocaust denial. He lodged an application with the European Court of Human Rights on 3-07-2014 relying on Article 10 (freedom of expression) and Article 6 § 1 (right to a fair trial). He alleged that the proceedings against him were unfair because one of the judges on the Court of Appeal panel was married to the judge who had convicted him at first instance and could therefore not be impartial.

Freedom of Expression:

The ECHR examined his complaint under both Article 10 and Article 17 (prohibition of abuse of rights). It reiterated that Article 17 was only applicable on an exceptional basis and was to be resorted to in cases concerning freedom of speech if it was clear that the statements in question had aimed to use that provision’s protection for ends that were clearly contrary to the Convention. The ECHR noted that the domestic courts had looked at the speech in full and had found that the applicant had planned his speech in advance, deliberately choosing his words and resorting to obfuscation to get his message across, which was a qualified Holocaust denial showing disdain to its victims. ECHR held that Mr Pastörs had intentionally stated untruths in order to defame the Jews and the persecution that they had suffered. The interference with his rights also had to be examined in the context of the special moral responsibility of States which had experienced Nazi horrors to distance themselves from the mass atrocities. His conviction was therefore proportionate to his actions. They found that there was no violation of Article 10 and rejected the complaint as manifestly ill-founded.

Right to a fair trial:

The ECHR held that the involvement in the case of two judges who were married, even at levels of jurisdiction which were not consecutive, might have raised doubts about one of the judge’s lacking impartiality. It was also difficult to understand how the applicant’s complaint of bias could have been deemed as inadmissible in the Court of Appeal’s first review. However, the issue had been remedied by the review of Mr Pastörs’ second bias complaint, which had been aimed at all the members of the initial Court of Appeal panel and had been dealt with by three judges who had not had any previous involvement in the case. Nor had the applicant made any concrete arguments as to why a professional judge married to another professional judge should be biased when deciding on the same case at a different level of jurisdiction. There were thus no objectively justified doubts about the Court of Appeal’s impartiality and there had been no violation of Article 6.

Judges Grozev and Mits expressed a joint dissenting opinion. [Pastörs v. Germany, Application No. 55225 of 14, decided on 03-10-2019]