TMI Blog2022 (2) TMI 907X X X X Extracts X X X X X X X X Extracts X X X X ..... based on the stage of the proceedings. It was held that it is sufficient to disclose the materials relied on if it is for the purpose of issuing a show cause notice for initiating inquiry. In the present case, since the report of the investigating authority under Regulation 9 enters into the calculus of circumstances borne in mind by the Board in arriving at its satisfaction under Regulation 10 for taking actions as specified in Regulations 11 and 12, it would be contrary to the Regulations to assert that the investigation report is merely an internal document of which a disclosure is not warranted. In any event, the language of Regulation 10 makes it clear that the Board forms an opinion regarding the violation of Regulations after considering the investigation report prepared under Regulation 9. Thus, the investigation report has to be duly disclosed to the noticee. However, 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. Contention of the respondents that since the investigation report under Regulation 9 would also include information on commercial and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the appellant to defend his case against the action proposed to be taken against him need to be disclosed. The notice to show cause issued to the appellant is for violation of the provisions of the SEBI Act, SCRA and PFUTP Regulations. The show cause notice has specifically referred to what was revealed during the course of the investigation and has invoked the provisions of the PFUTP Regulations in the allegations against the appellant. Conclusion:- (i) The appellant has a right to disclosure of the material relevant to the proceedings initiated against him. A deviation from the general rule of disclosure of relevant information was made in Natwar Singh (supra) based on the stage of the proceedings. It is sufficient to disclose the materials relied on if it is for the purpose of issuing a show cause notice for deciding whether to initiate an inquiry. However, all information that is relevant to the proceedings must be disclosed in adjudication proceedings; (ii) The Board under Regulation 10 considers the investigation report submitted by the Investigating Authority under Regulation 9, and if it is satisfied with the allegations, it could issue punitive measures und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Y Chandrachud And Sanjiv Khanna , JJ. For the Appellant : Mr. Ashim Sood, Adv. Ms. Shreya Suri, Adv. Ms.Vaishnavi Rao, Adv. Ms. Swati Mittal, Adv. Mr. Rhythm Buaria, Adv. Mr. Senu Nizar, Adv. Mr. Armaan Pratap Singh, Adv. Mr. Ekansh Gupta, Adv. Mr. Kuberinder Bajaj, Adv. Ms. Aurica Bhattacharya, Adv. Mr. Samarth Mohanty, Adv. Mr. Rajat Singh, AOR For the Respondent : Mr. Mahfooz Ahsan Nazki, AOR Mr. Rajat Singh, AOR JUDGMENT Dr Dhananjaya Y Chandrachud, J A. Factual Background .......................................................................................... 3 B Submissions of Counsel ................................................................................... 10 C. Analysis .......................................................................................................... 16 C.1 Regulatory Framework of PFUTP Regulations .......................................... 16 C.2 Duty to Disclose Investigative Material ...................................................... 23 C.3. Exceptions to the Duty to Disclose ............................................................ 43 D. Conclusion ...................... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anoj Kumar, Arvind Singhal and Anil Saini for their involvement in misstating the financial affairs. The first respondent in its ex parte interim order cum show cause notice prima facie found two others, including the appellant, responsible for facilitating the misstatements of the financial position. With regard to the role of the appellant, it was noted: On examination of the Organization Structure of Ricoh for past years, it is noted that T. Takano was the MD CEO of the Company till March 31, 2015. It is also noted that the mandate for PwC investigation was restricted to the half-year ended September 30, 2015 and not extended to all the years when the misstatements occurred. If Manoj Kumar, who was MD CEO in FY 2015-16 was held responsible for the fraud, it is only logical that T. Takano as the previous MD CEO (during whose tenure the fraud actually started) was also responsible for the misstatements. It appears that by restricting the investigation period mandated to PwC, the Company intended to restrain PwC from examining the transactions of the previous years and thereby ring-fence the earlier MD CEO, T. Takano. 4 Based on the investigation, it was noted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atements. 6 By an order dated 16 August 2018 Confirmatory order , the first respondent confirmed the directions issued in the ex parte interim order dated 12 February 2018. The order notes that though the facts indicate large-scale irregularities in business transactions, the time span of the irregularities and the exact role of the noticees are not fully ascertained, and therefore, it would be premature to give credence to the submissions of the individual noticees . It was also observed that a clear picture regarding the financial affairs of the company and the role of various noticees in the alleged fraud is yet to emerge pending such investigation. The time for submission of the forensic report by the first respondent was extended to 30 September 2018. SEBI appointed Pipara Co. LLP on 20 February 2019 to conduct a forensic audit of the books of account of the Company. The report of the forensic auditors was submitted on 25 October 2019. 7 The appellant challenged the confirmatory order before the Securities Appellate Tribunal Tribunal , Mumbai. The appeals were allowed and the order against the appellant was quashed on 29 January 2020 on the grounds that: (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orensic audit report, all material on which reliance has been placed while issuing the Show Cause Notice, and on which reliance is intended to be placed while making any adjudication on the Show Cause Notice ( material ). 10 By its communication dated 13 August 2020, the first respondent stated that the investigation report is an internal document which cannot be shared. The appellant was provided time until 9 August 2020 to inspect the other documents. The first respondent enclosed soft copies of the annexures to the forensic report and called upon the appellant to submit a reply. The appellant reiterated the demand to inspect the investigation report. By an email dated 4 September 2020, the appellant was informed that the investigation report of SEBI was not relied on to issue the show cause notice and hence, would not be provided. 11 The appellant filed a writ petition before the Bombay High Court challenging the show cause notice which was issued on 19 March 2020. In the alternative, inspection of all documents relied on to issue the show cause notice was sought. The appellant submitted before the High Court that to non-disclosure of all relevant documents relied on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r from the ones listed in an earlier show cause notice, which was issued to the appellant and was set aside by SAT on 29 January 2020 in Appeal No 427 of 2018. Further, the duty to disclose is not contingent on whether the respondent relies on a document; rather the duty is invoked when a request made for a document is found to be reasonable and relevant for the defence to be mounted by the noticee; (v) Regulation 10 mandates that the entire investigation report be disclosed to the noticee. This mandate can only be subject to certain well-recognized exceptions. Such exceptions must be invoked with the utmost circumspection by SEBI and for reasons that are recorded in writing; (vi) The decision of this Court in Natwar Singh (supra) supports the principle that material relied upon in a quasi-judicial proceeding must be disclosed to the person to whose prejudice such material may be used for taking adverse action; (vii) In Khudiram Das v. State of West Bengal (1975) 2 SCC 81 , this Court held that once a statute prescribes reliance on certain material, such material should be disclosed to the opposite party. This principle has been followed in multiple contexts, including pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the failure to disclose the investigation report amounts to a violation of Regulations 9 and 10. This is incorrect. The proceedings have been initiated under the provisions of the SEBI Act and the SCRA as well for a violation of the provisions of the PFUTP Regulations and the Listing Agreement. The SEBI Act and the SCRA are wider in scope than the PFUTP Regulations. Additionally, Regulation 11 of PFUTP Regulations specifically provides that the actions or directions may be issued without prejudice to the provisions contained in sub-sections (1), (2), (2A) and (3) of Sections 11 and 11B of the SEBI Act; (ii) SEBI conducts an investigation under Section 11C of the SEBI Act, where, based on the findings arrived at during the investigation, allegations are levelled in the show cause notice. Together with the show cause notice all the documents that have been relied upon by the investigator are provided to the noticee. In the present, case all the relevant documents have been provided to the noticee, including the report of Pipara and Co. which formed the basis of the show cause notice. The appellant is not entitled to any other documents; (iii) The quasi-judicial proceedings that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss and protect the privacy of those involved. UK Financial Conduct Authority also does not share confidential information even when the same is requested under the Freedom of Information Act stating that a clear confidentiality restriction encourages free flow of information and if confidential information were to be made public, sources would be less willing to give information. Article 54 of Directive 2004/39 of the EU Parliament provides a legal framework for securities market and mandates that information of such nature ought not to be shared. Thus, the refusal of SEBI to furnish the investigation report is in line with established global practices. C. Analysis C.1 Regulatory Framework of PFUTP Regulations 15 The PFUTP Regulations have been notified by SEBI in exercise of powers conferred by Section 30 of the SEBI Act. Regulation 2(c) defines the expression fraud in the following terms: 2(c) fraud includes any act, expression, omission or concealment committed whether in a deceitful manner or not by a person or by any other person with his connivance or by his agent while dealing in securities in order to induce another person or his agent to deal in secur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the provisions of the Act or the rules or the regulations, it may, at any time by order in writing, direct any officer not below the rank of Division Chief (hereinafter referred to as the Investigating Authority ) specified in the order to investigate the affairs of such intermediary or persons associated with the securities market or any other person and to report thereon to the Board in the manner provided in section 11C of the Act. Regulation 6 enunciates the powers of the investigating authority. 176. Without prejudice to the powers conferred under the Act, the Investigating Authority shall have the following powers for the conduct of investigation, namely : (1) to call for information or records from any person specified in section 11(2)(i) of the Act; (2) to undertake inspection of any book, or register, or other document or record of any listed public company or a public company (not being intermediaries referred to in section 12 of the Act) which intends to get its securities listed on any recognized stock exchange where the Investigating Authority has reasonable grounds to believe that such company has been conducting in violation of these regulations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f directors, partners, members or employees; and (vi) Examination on oath. 17 Under Regulation 7 187. The Investigating Authority may, after obtaining specific approval from the Chairman or Member also exercise all or any of the following powers, namely : (a) to call for information and record from any bank or any other authority or board or corporation established or constituted by or under any Central, State or Provincial Act in respect of any transaction in securities which are under investigation; (b) to make an application to the Judicial Magistrate of the first class having jurisdiction for an order for the seizure of any books, registers, other documents and record, if in the course of investigation, the Investigating Authority has reasonable ground to believe that such books, registers, other documents and record of, or relating to, any intermediary or any person associated with securities market in any manner may be destroyed, mutilated, altered, falsified or secreted; (c) to keep in his custody the books, registers, other documents and record seized under these regulations for such period not later than the conclusion of the investigation as he consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson at all reasonable times for the purpose of investigation; (b) extend to the Investigating Authority reasonable facilities for examining any books, accounts and other documents in his custody or control (whether kept manually or in computer or in any other form) reasonably required for the purposes of the investigation; (c) provide to such Investigating Authority any such books, accounts and records which, in the opinion of the Investigating Authority, are relevant to the investigation or, as the case may be, allow him to take out computer outprints thereof. imposes a duty to cooperate upon every person in respect of whom an investigation has been ordered under Regulation 7. 18 Regulation 9 upon which the controversy in the present case turns is extracted below: 9. The Investigating Authority shall, on completion of investigation, after taking into account all relevant facts, submit a report to the appointing authority: Provided that the Investigating Authority may submit an interim report pending completion of investigations if he considers necessary in the interest of investors and the securities market or as directed by the appointing authority. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is in violation or prima facie in violation of these regulations; (e) direct and intermediary or any person associated with the securities market in any manner not to dispose of or alienate an asset forming part of a fraudulent and unfair transaction; (f) require the person concerned to call upon any of its officers, other employees or representatives to refrain from dealing in securities in any particular manner; (g) prohibit the person concerned from disposing of any of the securities acquired in contravention of these regulations; (h) direct the person concerned to dispose of any such securities acquired in contravention of these regulations, in such manner as the Board may deem fit, for restoring the status quo ante. (2) The Board shall issue a press release in respect of any final order passed under sub-regulation (1) in at least two newspapers of which one shall have nationwide circulation and shall also put the order on the website of the Board. 12. (1) The Board may, without prejudice to the provisions contained in subsections (1), (2), (2A) and (3) of section 11 and section 11B of the Act, by an order, for reasons to be recorded in writ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. 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. C.2 Duty to Disclose Investigative Material 22 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 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial must be disclosed. 24 It would be fundamentally contrary to the principles of natural justice if the relevant part of the investigation report which pertains to the appellant is not disclosed. The appellant 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. 25 The consequence of the Board arriving at a satisfaction that there has been a violation of the regulations is that the Board can take recourse to the actions specified under Regulations 11 and 12. Regulation 11 empowers the Board to: (i) Suspend the trading of the security found to be involved in a fraudulent and unfair trade practice in a recognized stock exchange; (ii) Restraining persons from accessing the securities market and prohibiting any person associated with it from dealin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specified in that section of the Act, the Adjudicating Authority shall, issue a notice to such person requiring him to show cause within such period as may be specified in the notice (being not less than ten days from the date of service thereof) why an inquiry should not be held against him. (2) Every notice under sub-rule (1) to any such person shall indicate the nature of contravention alleged to have been committed by him. (3) After considering the cause, if any, shown by such person, the Adjudicating Authority is of the opinion that an inquiry should be held, he shall issue a notice fixing a date for the appearance of that person either personally or through his legal practitioner or a chartered accountant duly authorised by him. Rule 4(1) of the FEMA Rules 2000 indicates that in the first instance, the adjudicating authority has to issue a notice requiring the person to show cause why an enquiry should not be held against him. The stage of the notice under Rule 4(1) is not for adjudication but is for the purpose of deciding whether an enquiry should be held. If after considering the cause which is shown, the adjudicating authority is of the opinion that an enquiry s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... now the evidence to be used against him. This principle is firmly established and recognised by this Court in Dhakeswari Cotton Mills Ltd. v. CIT [AIR 1955 SC 65 : (1955) 1 SCR 941] . However, disclosure not necessarily involves supply of the material. A person may be allowed to inspect the file and take notes. Whatever mode is used, the fundamental principle remains that nothing should be used against the person which has not been brought to his notice. If relevant material is not disclosed to a party, there is prima facie unfairness irrespective of whether the material in question arose before, during or after the hearing. The law is fairly well settled if prejudicial allegations are to be made against a person, he must be given particulars of that before hearing so that he can prepare his defence. However, there are various exceptions to this general rule where disclosure of evidential material might inflict serious harm on the person directly concerned or other persons or where disclosure would be breach of confidence or might be injurious to the public interest because it would involve the revelation of official secrets, inhibit frankness of comment and the detection of crime, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the minimum requirement of a show-cause notice and consideration of cause shown would meet the ends of justice. A proper hearing always include, no doubt, a fair opportunity to those who are parties in the controversy for correcting or contradicting anything prejudicial to their view. 31 On the facts of that case, the Court held that the enquiry against the noticee was yet to commence: 36. In the present case, the inquiry against the noticee is yet to commence. The evidence as may be available upon which the adjudicating authority may place reliance, undoubtedly, is required to be furnished to the person proceeded against at the second stage of inquiry into allegations of contravention. It is at that stage, the adjudicating authority is not only required to give an opportunity to such person to produce such documents as evidence as he may consider relevant to the inquiry, but also enforce attendance of any person acquainted with the facts of the case to give evidence or to produce any document which in its opinion may be useful for or relevant to the subject-matter of the inquiry. It is no doubt true that natural justice often requires the disclosure of the reports a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the authority to the noticee is warranted. This was answered in the negative. This Court distinguished the stage of adjudication as distinct from the initial stage under Rule 4(1). At the stage of adjudication, all documents useful or relevant to the subject-matter have to be disclosed to the notice, subject to exceptions noticed by the court. 34 On behalf of the Board, it has been urged that the investigation report is in the nature of an inter-departmental communication and need not be disclosed. Reliance was placed on the judgment of this Court in Krishna Chandra Tandon (supra) to buttress the submission. However, it is clear from the judgment that even if the documents are merely inter-departmental communications, there is a duty to disclose such documents if they have been relied upon by the enquiry officer. A two-Judge Bench of this observed: 16. Mr Hardy next contended that the appellant had really no reasonable opportunity to defend himself and in this connection he invited our attention to some of the points connected with the enquiry with which we have now to deal. It was first contended that inspection of relevant records and copies of documents were not grant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al against the detenu which is of a highly damaging character and having nexus and relevancy with the object of detention, and proximity with the time when the subjective satisfaction forming the basis of the detention order was arrived at, it would be legitimate for the Court to infer that such material must have influenced the District Magistrate in arriving at his subjective satisfaction and in such a case the Court would refuse to accept the bald statement of the District Magistrate that he did not take such material into account and excluded it from consideration. It is elementary that the human mind does not function in compartments. When it receives impressions from different sources, it is the totality of the impressions which goes into the making of the decision and it is not possible to analyse and dissect the impressions and predicate which impressions went into the making of the decision and which did not. Nor is it an easy exercise to erase the impression created by particular circumstances so as to exclude the influence of such impression in the decision making process. Therefore, in a case where the material before the District Magistrate is of a character which woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tunity to the employee to consider the findings recorded by a third party like the enquiry officer without giving the employee an opportunity to reply to it. Although it is true that the disciplinary authority is supposed to arrive at its own findings on the basis of the evidence recorded in the inquiry, it is also equally true that the disciplinary authority takes into consideration the findings recorded by the enquiry officer along with the evidence on record. In the circumstances, the findings of the enquiry officer do constitute an important material before the disciplinary authority which is likely to influence its conclusions. If the enquiry officer were only to record the evidence and forward the same to the disciplinary authority, that would not constitute any additional material before the disciplinary authority of which the delinquent employee has no knowledge. However, when the enquiry officer goes further and records his findings, as stated above, which may or may not be based on the evidence on record or are contrary to the same or in ignorance of it, such findings are an additional material unknown to the employee but are taken into consideration by the disciplinary a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of natural justice which in itself is antithetical to justice. 31. Hence, in all cases where the enquiry officer's report is not furnished to the delinquent employee in the disciplinary proceedings, the Courts and Tribunals should cause the copy of the report to be furnished to the aggrieved employee if he has not already secured it before coming to the Court/Tribunal and give the employee an opportunity to show how his or her case was prejudiced because of the non-supply of the report. If after hearing the parties, the Court/Tribunal comes to the conclusion that the non-supply of the report would have made no difference to the ultimate findings and the punishment given, the Court/Tribunal should not interfere with the order of punishment. The Court/Tribunal should not mechanically set aside the order of punishment on the ground that the report was not furnished as is regrettably being done at present. (emphasis supplied) 36 In State Bank of Patiala v. SK Sharma (1996) 3 SCC 364 , this Court noted that if a facet of a rule of natural justice is violated on grounds of preserving public interest, the entire proceeding is not vitiated unless prejudice has been c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions contemplated by clauses (b) and (c) of the proviso to Article 311(2)] or to disclose the material on which a particular action is being taken. There may indeed be any number of varying situations which it is not possible for anyone to foresee. In our respectful opinion, the principles emerging from the decided cases can be stated in the following terms in relation to the disciplinary orders and enquiries: a distinction ought to be made between violation of the principle of natural justice, audi alteram partem, as such and violation of a facet of the said principle. In other words, distinction is between no notice / no hearing and no adequate hearing or to put it in different words, no opportunity and no adequate opportunity . To illustrate - take a case where the person is dismissed from service without hearing him altogether (as in Ridge v. Baldwin [1964 AC 40 : (1963) 2 All ER 66 : (1963) 2 WLR 935] ). It would be a case falling under the first category and the order of dismissal would be invalid - or void, if one chooses to use that expression (Calvin v. Carr [1980 AC 574 : (1979) 2 All ER 440 : (1979) 2 WLR 755, PC] ). But where the person is dismissed from service, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce has been placed upon a case reported in Chandrama Tewari v. Union of India [1987 Supp SCC 518 : 1988 SCC (L S) 226 : (1987) 5 ATC 369] . It has been observed in this case that the obligation to supply copies of documents is confined only to material and relevant documents which may have been relied upon in support of the charges. It is further observed that if a document even though mentioned in the memo of charges, has no bearing on the charges or if it is not relied upon or it may not be necessary for cross-examination of any witness, non-supply of such a document will not cause any prejudice to the delinquent. The inquiry would not be vitiated in such circumstances. In State of T.N. v. Thiru K.V. Perumal [(1996) 5 SCC 474 : 1996 SCC (L S) 1280] relied upon by the appellant, it is held that it is for the delinquent to show the relevance of a document a copy of which he insists to be supplied to him. Prejudice caused by non-supply of document has also to be seen. In yet another case relied upon by the learned counsel for the appellant, reported in State of U.P. v. Harendra Arora [(2001) 6 SCC 392 : 2001 SCC (L S) 959] it has been held that a delinquent must show the prejudice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sure. 40 The investigation report forms the material considering which, the Board arrives at a satisfaction regarding whether there has been a violation of the regulations. If it is satisfied that there has been a violation of the regulations, after giving a reasonable opportunity to be heard, the Board is empowered to take action according to Regulations 11 and 12. It would not suffice for the first respondent to claim as it did before the High Court that it did not rely on the investigation report. The ipse dixit of the authority that it was not influenced by certain material would not suffice. If the material is relevant to and has a nexus to the stage at which satisfaction is reached by an authority, such material would be deemed to be important for the purpose of adjudication. The written submissions of the Board clearly state that the findings of the investigation report are important for the authority to decide whether there are any prima facie grounds to initiate enforcement proceedings under Regulation 10. The relevant extract of the submissions is reproduced below: It is submitted that Regulation 9 of PFUTP Regulations require the Investigating Authority to submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. To prove prejudice, he must prove that had the material been disclosed to him the outcome or the punishment would have been different. The test for the extent of disclosure and the corresponding remedy for non-disclosure is dependent on the objective that the disclosure seeks to achieve. Therefore, the impact of non-disclosure on the reliability of the verdict must also be determined vis- -vis, the overall fairness of the proceeding. While determining the reliability of the verdict and punishment, the court must also look into the possible uses of the undisclosed information for purposes ancillary to the outcome, but that which might have impacted the verdict. 43 In Natwar Singh (supra), it was held that material which is relevant to the subject-matter of the proceedings must be disclosed, unless the scheme of the statute indicates to the contrary. The non-disclosure of such material is prima facie arbitrary. A deviation from this general rule was made based on the stage of the proceedings. It was held that it is sufficient to disclose the materials relied on if it is for the purpose of issuing a show cause notice for initiating inquiry. However, in the present case, since th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ghts. The report may contain market sensitive information which may impinge upon the interest of investors and the stability of the securities market. 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 third-party rights that may be affected. 46 In Natwar Singh (supra), this Court has observed that there are exceptions to the general rule of disclosing evidentiary material. This Court held that such exceptions can be invoked if the disclosure of material causes harm to others, is injurious to public health or breaches confidentiality. While identifying the purpose of disclosure, we have held that one of the crucial objectives of the right to disclosure is securing the transparency of institutions. The claims of third party rights vis- -vis the right to disclosure cannot be pitted as an issue of public in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice of the appellant, 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. 50 The notice to show cause issued to the appellant is for violation of the provisions of the SEBI Act, SCRA and PFUTP Regulations. The show cause notice has specifically referred to what was revealed during the course of the investigation and has invoked the provisions of the PFUTP Regulations in the allegations against the appellant. Para 8 (2) of the show cause notice is extracted below: (II) It is alleged that Mr. T. Takano, during whose tenure the business transactions with FDSL started by virtue of his position as MD CEO of Ricoh during FY 2012-13 to FY 2014-15, was actively involved in committing the fraud and had knowingly restricted the mandate given to PwC to six month so as to succeed in hiding his role in the commission of fraud of publishing untrue financial statement of Ricoh which resulted in misleading the investors about the financial performance of the company and thereby resulted in inducement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of punishment void only if the aggrieved person is able to prove that prejudice has been caused to him due to non-disclosure is founded both on the outcome and the process; (v) The right to disclosure is not absolute. The disclosure of information may affect other third-party interests and the stability and orderly functioning of the securities market. The respondent should prima facie establish that the disclosure of the report would affect third-party rights and the stability and orderly functioning of the securities market. The onus then shifts to the appellant to prove that the information is necessary to defend his case appropriately; and (vi) Where some portions of the enquiry report involve information on third-parties or confidential information on the securities market, the respondent cannot for that reason assert a privilege against disclosing any part of the report. The respondents can withhold disclosure of those sections of the report which deal with third-party personal information and strategic information bearing upon the stable and orderly functioning of the securities market. 52 The Board shall be duty-bound to provide copies of such parts of the repo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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