2025 (7) TMI 936 - HC - SEBI

Exemption of SEBI from disclosure of information - on grounds of fiduciary relationship personal privacy commercial confidence or economic interest of the State - infringement of copyright subsisting in a person other than the State - Third party information - Scope and applicability of exemptions under the Right to Information Act 2005 (RTI Act) specifically Sections 8 and 11 in relation to information sought from the Securities and Exchange Board of India (SEBI) concerning the appointment of Public-Interest-Directors (PIDs) on stock exchange boards and annual inspection reports of stock exchanges - interplay between the right to privacy and the Right to Information Act. HELD THAT - The scheme of Sections 8 and 11 of the RTI Act was analyzed by the Constitution Bench of the Hon ble Supreme Court in CPIO Vs Subhash Chandra Agarwal 2019 (11) TMI 895 - SUPREME COURT . The Court explained that the RTI Act operationalizes the disclosure of information held by public authorities to reduce the asymmetry of information between individual citizens and the State apparatus. The RTI Act facilitates transparency in the decisions of public authorities holds public officials accountable for any misconduct or illegality and empowers individuals to bring to light matters of public interest. The RTI Act has provided a powerful instrument to citizens and individuals engaged in advocacy and journalism. It fosters a culture of assertion among citizen-activists whistle-blowers and above all each citizen with a general interest in the affairs of the State. In the body of the CIC s impugned order the observations suggest that the CIC accepted SEBI s contention that the information which was sought was held by SEBI in its fiduciary capacity. Such information includes commercial information the disclosure of which may harm the interests of the suppliers of such information. The CIC assessed the institutional impact of disclosing this information in the instant case and opined that the possibility of harm or injury emanating from the disclosure outweighed the public interest. Therefore the exemption under Section 8(1)(e) of the RTI as claimed by the SEBI was upheld and allowed. In the directions issued in the impugned order under the caption of decision there is no reference to any decision or direction on point No. 2 which dealt with query No. 2. The information sought by Mr. Agarwal under query No. 2 is a little confusing and vague. The information sought relates to file noting correspondence and other documents on framing policy guidelines etc. as referred to in query (1) above for SEBI having its role in appointing PIDs on the Boards of MII BSE NSE MCX and MCX Clearing Corporation Limited. Nevertheless such information can be said to have been held in fiduciary capacity by the SEBI. Because this would include information supplied by candidates to be considered for appointment as PIDs in good faith and candour trusting that confidentiality would be maintained. Therefore we do not think that any case is made out to interfere with the impugned order to the extent it rejects information regarding query No. 2. The information sought under Query No. 3 could include personal information about the various Applicants or candidates desirous of being appointed as PIDs on the stock exchange. The list of those appointed as PIDs would obviously be in the public domain and obtaining this information would pose no difficulty. Similarly if the Applicant had entertained any doubts about the appointed PIDs not fulfilling the prescribed qualifications information in that regard could have been sought and the exemption under Section 8(1)(j) would not have applied. However seeking omnibus information about not only those appointed as PIDs but also those who may not have been appointed as PIDs could in a given case cause an unwarranted invasion of the privacy of such persons or candidates. The CIC has also taken into account the public interest aspect. The CIC s order is vulnerable to the extent it directs the supply of a list of rejected candidates even though such rejected candidates would be third parties as defined under Section 2(n) of the RTI Act. If information regarding the rejected candidates including their names is to be disclosed the third-party procedure prescribed under Section 11 must be followed. Once again this is not a case of selection through a competitive examination or by a departmental promotion committee or departmental selection committee where considerations would differ. The subjective element in such selections is minimal and the results of written tests or marks obtained in interviews are usually made public. The information is generally uploaded to the designated website and is available for the concerned to access. There may be several factors relevant to their non-selection. They may not want these matters to be made public. Their privacy concerns cannot be disregarded without giving them an opportunity to oppose such disclosures if they so choose. The provisions in Section 11 which are mandatory cannot be avoided or bypassed in such situations. In the case of CPIO V/s. Subhash Chandra Agarwal 2019 (11) TMI 895 - SUPREME COURT the Applicants had sought copies of correspondence exchanged between constitutional authorities together with file-notings relating to the appointment of Supreme Court Judges superseding the seniority of some High Court Judges. The Court held that such information falls within the meaning of third party information and the procedure under Section 11 must be complied with in arriving at a determination. Therefore the matter was remanded to the CPIO to examine it afresh following the procedure prescribed under Section 11 of the RTI Act. Therefore insofar as Query No.3 is concerned we set aside the CIC s impugned order and remand the matter to the CPIO to consider Mr Agarwal s request afresh by following the provisions of Section 11. Query Nos. 4 and 5 concern the annual inspection reports made by SEBI for a certain specified period. The impugned order by applying the exemption under Section 8(1)(d) has not granted full inspection but only directed that concluding comments/final findings (year-wise) be provided in public interest. Again we note that the annual inspection reports would include information about stock exchanges such as BSE and NSE. Furthermore the banks and the role of the RBI in regulating their affairs cannot be equated with stock exchanges and the role of SEBI in regulating the stock exchanges. In any event the annual general reports based upon information furnished by the various stock exchanges can be said to constitute information related to third parties. Therefore without following the provisions of Section 11 of the RTI Act there was no question of directing even the limited disclosures that have been made. We therefore dispose of these Petitions by passing the following order (i) The CIC s impugned order in so far as Query Nos. 1 2 6 7 8 and 9 is not interfered with. (ii) The CIC s impugned order regarding Query Nos. 3 4 and 5 is set aside and the matter is remanded to the CPIO for fresh consideration of the Petitioners request for information on these queries but after following the provisions of Section 11 of the RTI Act.

Summary

The core legal questions considered in this judgment pertain to the scope and applicability of exemptions under the Right to Information Act, 2005 (RTI Act), specifically Sections 8 and 11, in relation to information sought from the Securities and Exchange Board of India (SEBI) concerning the appointment of Public-Interest-Directors (PIDs) on stock exchange boards and annual inspection reports of stock exchanges. The issues include whether certain information held by SEBI is exempt from disclosure on grounds of fiduciary relationship, personal privacy, commercial confidence, or economic interest of the State; the applicability of the third-party procedure under Section 11 of the RTI Act; the balance between the right to information and the right to privacy; and the extent to which precedents, particularly the Supreme Court's decisions in Reserve Bank of India vs. Jayantilal N. Mistry and CPIO vs. Subhash Chandra Agarwal, govern the disclosure of such information.

Regarding the first issue-the applicability of Section 8(1)(e) exemption for information held in fiduciary capacity-SEBI contended that file notings, correspondence, and documents related to framing policy and guidelines for appointing PIDs were held in such capacity and thus exempt. The Central Information Commission (CIC) accepted this contention, finding that disclosure could harm the interests of the suppliers of such information and the institutional integrity of SEBI. The Court noted that the information sought under Query No. 2 was vague but agreed that it included material supplied by candidates in confidence, justifying the fiduciary exemption. Consequently, the Court upheld the CIC's order rejecting disclosure of this information, applying the legal framework that exempts information held in fiduciary relationship unless larger public interest warrants disclosure. The Court found no compelling public interest to override the exemption in this context.

The second issue involved the exemption under Section 8(1)(j) concerning personal information in documents related to granting approval for appointment of PIDs (Query No. 3). SEBI claimed that the information constituted personal data of applicants, and disclosure would cause unwarranted invasion of privacy. The CIC partially upheld this but directed SEBI to provide a list of selected and rejected candidates with redactions, invoking the severability principle under Section 10. The Court analyzed that while the identities of appointed PIDs are public, the disclosure of rejected candidates' identities implicates privacy rights and third-party interests. It emphasized that the mandatory procedure under Section 11-requiring notice to third parties and opportunity to object-had not been followed before ordering disclosure. Drawing on the precedent of CPIO vs. Subhash Chandra Agarwal, the Court held that the procedure under Section 11 is mandatory for third-party information, including personal information relating to appointments. The Court set aside the CIC's order to the extent it directed disclosure without following Section 11 and remanded the matter for fresh consideration in compliance with the statutory procedure.

The third issue concerned the annual inspection reports of stock exchanges (Queries Nos. 4 and 5) and the extent of disclosure permissible under Section 8(1)(d), which exempts commercial confidence or trade secrets unless larger public interest warrants disclosure. SEBI contended that these reports contain sensitive economic information, including cybersecurity measures and pricing data, whose disclosure could harm the regulatory function and economic interests of the State. The CIC had allowed disclosure only of concluding comments or final findings, withholding full reports. The Court acknowledged the sensitive nature of such information and noted that annual reports relate to third parties (stock exchanges), thus invoking Section 11's procedural safeguards. It also distinguished the Supreme Court's decision in Jayantilal N. Mistry, which related to banks and RBI, from the present case involving stock exchanges and SEBI, emphasizing that the regulatory contexts differ. The Court observed that the CIC's direction for limited disclosure without following Section 11 was improper and remanded the matter for reconsideration after complying with statutory procedure.

Regarding the fourth cluster of queries (6 to 9), which sought broad and vague information such as inspection of all records, weblinks, and file notings on RTI petition movement, the Court agreed with SEBI's submission that such requests lacked sufficient clarity and precision. While no explicit exemption applied, the Court highlighted the requirement for applicants to frame requests with reasonable particularity to enable effective processing under the RTI Act. No substantive relief was granted on these queries.

The Court extensively analyzed the statutory framework of the RTI Act, focusing on Sections 8 and 11. Section 8(1) enumerates specific exemptions from disclosure, some absolute (clauses a, b, c, f, g, h) and others qualified (clauses d, e, i, j), where disclosure may be refused unless a larger public interest justifies it. Section 11 mandates a procedural safeguard for third-party information, requiring notice and opportunity to object before disclosure. The Court underscored the constitutional balance between the right to information under Article 19(1)(a) and the right to privacy under Article 21, as elaborated in the Constitution Bench decision in CPIO vs. Subhash Chandra Agarwal. The judgment emphasized that exemptions under the RTI Act are not absolute but subject to a case-by-case assessment of public interest versus potential harm.

The Court also considered the competing arguments regarding the applicability of the Jayantilal N. Mistry precedent. While Mr. Agarwal relied on it to argue for greater transparency and disclosure, SEBI and the stock exchanges distinguished it on the basis that it concerned banking regulation and not stock exchanges, which involve different sensitivities and economic considerations. The Court recognized these distinctions and noted subsequent Supreme Court observations in HDFC Bank Ltd. that questioned the balancing of privacy and information rights in Jayantilal N. Mistry. This nuanced approach informed the Court's decision to remand certain queries for fresh consideration rather than ordering outright disclosure.

In conclusion, the Court upheld the CIC's order insofar as it directed disclosure of publicly available information and information held in fiduciary capacity (Query Nos. 1 and 2, and general queries 6 to 9). It set aside the CIC's order concerning personal information related to PID appointments (Query No. 3) and annual inspection reports (Queries Nos. 4 and 5), remanding these for reconsideration after strict compliance with Section 11's procedural safeguards. The Court emphasized the mandatory nature of the third-party notice and objection procedure and the need to balance transparency with privacy and economic interests. No costs were imposed, and all parties were directed to act on an authenticated copy of the order.

Significant holdings include the following verbatim excerpts and principles:

"The procedure under Section 11 must be complied with not only in cases where information has been supplied to the public authority by a third party, but also when the information held by the public authority 'relates to' a third party."

"Clauses (d), (e), (i) and (j) to sub-section (1) of Section 8 provide a qualified exemption from disclosure. Where the Information Officer determines that the 'larger public interest' warrants a disclosure, the exemption cannot be invoked, and the information must be disclosed."

"Section 11 is not merely a procedural provision, but a substantive protection to third parties against the disclosure of their personal information held by public authorities, without their knowledge or consent."

"The RTI Act operationalizes the disclosure of information held by 'public authorities' to reduce the asymmetry of information between individual citizens and the State apparatus, fostering transparency and accountability."

"The right to information and the right to privacy are not absolute and must be balanced with due regard to public interest and potential harm."

"The information sought regarding appointments of Public Interest Directors involves subjective considerations and personal information of third parties, necessitating adherence to Section 11's procedural safeguards before disclosure."

These holdings establish that the RTI Act's exemptions and procedural safeguards must be scrupulously followed, especially where third-party personal or sensitive economic information is concerned, and that the public interest in disclosure must be weighed carefully against potential harms.