Financial regulators nullify the law

WITHOUT CONTEMPT

There is a furore in the nation over the proposed amendments to the Right to Information Act, 2005 (RTI Act). Statements emanating from the highest levels of the government suggest that the RTI Act will be amended to remove file notings from the ambit of the information accessible to citizens "" a move that would stultify the very object of this salutary legislation.

The prime minister, who is reported to have announced the intended amendments, has worked long years as a seasoned bureaucrat in his earlier avatar, and is reputed for being the only prime minister to extensively read his files, and more importantly, to make copious notes. A former central banker himself, the prime minister surely seems to have been guided by the financial regulators in his efforts to curb the reach of the RTI Act.

The Securities and Exchange Board of India (Sebi) was among the first to publish a policy announcement of its decision to implement the RTI Act. However, the experience of its constituents in exercising their rights under the RTI Act is very illuminating. Recently, some stock broking firms invoked the RTI Act. They wanted to know the rationale adopted by Sebi in treating the merger of certain other broking companies on a footing diametrically opposite to how they were being treated. The idea was simple. If the regulator had taken a view with a particular set of cases, all other similarly-placed persons ought to know why such a view was taken, and consequently, have the ability to enforce equal treatment of all similarly-placed cases.

One would have thought that Sebi, perceived as being the most progressive in sharing information, thanks to its press releases and press conferences, would have responded fairly. However, Sebi simply refused to part with the information. The specious ground used in terse and disdainful letters from Sebi's junior officials was that the applicants who had requested this information had filed appeals in the Securities Appellate Tribunal challenging Sebi's discriminatory treatment, and were therefore disentitled to the information.

This is a travesty of the law. If exercising one's statutory right to appeal a wrong decision were to be a disqualification for invoking the RTI Act, Parliament would have said so. If Sebi's approach were to have been Parliament's intent, the RTI Act would have stipulated that no information received under the RTI Act could be relied upon in any litigation. Parliament has rightly not said so "" it would only make the entire scheme and purpose of the RTI Act redundant.

Very often, decisions of financial regulators are noted on files, and not communicated to their constituencies. For instance, the hugely controversial proceedings over acquisition of shares in Herbertsons Ltd would brilliantly represent the irony of our times. The Vijay Mallya-Kishor Chhabria dispute for control over Herbertsons erupted only because file notings of the Sebi Chairman in the late 1990s had recorded his decision to direct the Chhabrias to make an open offer for allegedly violating the Takeover Regulations.

Without the benefit of any legislation such as the RTI Act, files relating to this case were merrily available to both warring sides. One side used the files to volunteer external legal advice to Sebi to suit its case, and eventually controlled the outcome of the Sebi proceedings, while the other side was able to produce all of this as documentary evidence in court. However, today, despite the existence of the RTI Act, genuine market intermediaries are being denied basic information to which they have not only a vested statutory right, but more importantly, a clear-cut moral right.

If this was not bad enough, the manner in which publicly-communicated decisions are being implemented leaves a lot to be desired. A publicly-communicated order obviates the need to invoke the RTI Act. Recently, this column wrote about how Sebi had clarified a particular ambiguity in its regulations by passing a publicly-communicated exemption order. However, it is now learnt that Sebi is not automatically applying the same principle to all similar cases. Instead, Sebi is said to be asking every similarly-placed person to make a special application for a similar exemption order.

The only officials and authorities in the government who appear happy to provide information under the RTI Act (of course, not pertaining to themselves or their actions) are officials of the income-tax department. Tax officials are busy sending notices to assesses asking them to show cause why their returns ought not to be made public. But that can form a subject matter of a separate column altogether.

(The author is a partner of JSA, Advocates & Solicitors. The views expressed herein are his own.)

email: somasekhar@jsalaw.com