India: Supreme Court Unlocks Information Withheld By RBI

Last Updated: 5 February 2016
Article by Mohammad Kamran, M.S. Ananth and Vyapak Desai
  • Court upholds disclosure of information relating to banks under RTI Act
  • Information cannot be withheld from public on grounds of economic interest of the country
  • There is no fiduciary relationship between the RBI and the Banks

Introduction

Recently, the Supreme Court of India ("the Court") in Reserve Bank of India & Ors. v. Jantilal & Ors.1 emphatically ruled against objections of Reserve Bank of India ("RBI") and held that it cannot shy away from disclosing the information sought in applications filed under the Right to Information Act, 2005 ("RTI Act") acquired during inspection/ audit of private and public banks or financial institutions. Applicants sought information such as details of loans taken by industrialists, top defaulters who have not repaid to public sector banks, details of show cause notices and fines imposed by RBI on various banks etc. Disclosure was denied on grounds of fiduciary relationship shared between RBI and the banks, commercial confidentiality, and economic interest of India. The Court held that such information could not be withheld from public on the pretext of economic interest of India or the fiduciary relationship shared between the RBI and banks. It observed that banks and financial institutions had indulged in transactions which were neither "clean" nor "transparent" and RBI would shield these banks from transparency by denying such information. It further held that it was incumbent on RBI to provide information as sought and hold the banks accountable.

In reaching this conclusion, the Court impliedly rejected objections of commercial confidentiality and put the public good ahead of private commercial rights. It remains to be seen to what extent disclosure of such information will be used by regulators and public. There is also a possibility that similar information will be sought from other regulators of the financial markets.

Background

Various applications were filed with the Central Public Information Officer ("CPIO") of the RBI under the RTI Act requesting for information such as inspection reports of banks, reports on all banks gone on liquidation, irregularities and action taken reports, advisory notes issued to banks for violations of FEMA2 by them and their clients, list of banks which were issued show cause notices, detailed bank wise break up of mark to market losses because of currency derivatives, contraventions and violations made by specific banks and actions taken against them etc. However, these applications were denied by CPIO on the ground that such disclosure is exempted under section 8(1)(a), 8(1)(d) and 8(1)(e) of the RTI Act3. The decision of the CPIO was challenged in Central Information Commission ("CIC") which allowed the appeals on these applications and directed the CPIO to disclose the information sought by the applicants. Aggrieved by such orders of the CIC in these applications, the RBI filed writ petitions in the High Courts of Delhi and Bombay. It subsequently approached the Supreme Court seeking transfer of writ petitions pending in different High Courts to the Court.

Issues

  1. Whether the RTI Act overrides various provisions of special statutes which confer confidentiality to the information obtained by the RBI?

  2. Whether all information sought for under RTI Act, can be denied by RBI and other banks to the public at large on the ground of economic interest, commercial confidence and fiduciary relationship between RBI and other banks?

Arguments on behalf of the RBI and other banks

  1. That the RBI in the exercise of its powers conferred under section 35 of the Banking Regulation Act, 1949 conducts inspection of the banks in the country and it may, as per section 28, in public interest publish the information obtained by it, in a consolidated form but not otherwise.

  2. That the role of RBI is to safeguard the economic and financial stability of the country and it has a large contingent of expert advisors for deciding matters relating to the economy. The Court therefore, should be wary of any interference in the working of experts in matters of economic policy decisions.

  3. That the RBI as a supervisory and regulatory body obtains a lot of information and it may in its discretion not make public all information. This is because such disclosures may trigger an undesirable market reaction. Hence, the benefits of disclosure should accordingly be weighed against the risk to stakeholders (such as depositors).

  4. That as per the RBI policy, the reports of the annual financial inspection, scrutiny of all banks/ financial institutions are confidential documents that cannot be disclosed and disclosing the same would create misunderstanding/ misinterpretation in the minds of public which may cause an adverse impact on the public confidence in the bank. Hence, it will affect the economic interest of the state and would not serve larger public interest.

  5. That the RTI cannot override the provisions for confidentiality conferred on the RBI by the earlier statutes such as Banking Regulation Act, 1949 ("Banking Act"), Reserve Bank of India Act, 1934 ("RBI Act") and Credit Information Companies (Regulation) Act, 2005 ("Credit Information Act"). RTI Act with general provisions cannot override specific provisions relating to confidentiality in earlier legislations. RBI further argued that Credit Information Act was enacted after the RTI Act and it granted statutory confidentiality to information and therefore, this would override rights under the RTI Act.

Arguments on behalf of Respondents

  1. That the RTI Act, contains a clear provision (section 22)4 by which it overrides all other Acts including Official Secrets Act, 1923. Hence, in spite of anything to the contrary in any other Act, the RTI Act, will prevail where transparency and access to information is concerned. RTI Act, being a subsequent law must override all earlier practices and laws to achieve its objectives.

  2. That section 8(1)(a) of the RTI Act, was wrongly pleaded by the RBI because disclosing such information does not affect the economic interest of the country.

  3. That the larger public interest warrants the disclosure of such information even if (a) it affects the competitive position of banks or (2) is received by the RBI in its fiduciary capacity.

Court Analysis

The Court without dealing with whether the RTI Act overrides all other legislations that contain provisions of confidentiality, dealt with the other two contentions of the RBI as follows:

a. No fiduciary relationship between the RBI and other banks/ financial institutions

The Court rejected the contention that the information could not be disclosed because the RBI had a fiduciary relationship with banks. It held that where banks/ financial institutions have an obligation to provide all information to the RBI, such information shared under an obligation could not be considered to be in breach of any alleged fiduciary relationship. Furthermore, section 2(f)5 of the RTI Act would still make the information shared between them to be accessible by public, even if the institutions shared a fiduciary relationship. The information held by the RBI was not in confidence or trust.6 Court noted that RBI was a statutory regulatory authority established to oversee the functioning of banks and country's banking sector and therefore, it ought to act with transparency and not hide information that might embarrass individual banks.

b. Disclosure is not a threat to economic interests of India

The Court declined RBI's plea that the country's economic security would be endangered if people come to know of the irregularities being committed by the banks. It agreed with the CIC in holding that if people remain oblivious to irregularities committed by such banks, then the whole financial system would be at a monumental loss. Furthermore, sidestepping general public's demand to give the requisite information on the pretext of "fiduciary relationship" and "economic interest" would only attract more suspicion and disbelief in them.

Conclusion

The Court did not deal with arguments about balancing interests regarding the respective legislations and has instead examined the larger public good. In an appropriate case, it might be open to a party to argue that these issues have not been considered by courts and hence, information ought not to be disclosed. The judgment has unlocked a lot of information sitting in the vaults of the RBI protected so far on grounds of confidentiality. It includes all information obtained by RBI from financial institutions including private banks and their respective clients. It remains to be seen how this information is used by applicants. It would also be open to applicants to seek similar and comparable information from other regulators or information relating to market infrastructure institutions.

Footnotes

1 Transferred Case (Civil) no. 91 of 2015; 2015 SCC Online SC 1326

2 Foreign Exchange Management Act, 1999

3 Section 8 - Exemption from disclosure of information.--

(1) Notwithstanding anything contained in this Act, there shall be no obligation to give any citizen,--

(a) information, disclosure of which would prejudicially affect the sovereignty and integrity of India, the security, strategic, scientific or economic interests of the State, relation with foreign State or lead to incitement of an offence;

(b) ...

(c) ...

(d) information including commercial confidence, trade secrets or intellectual property, the disclosure of which would harm the competitive position of a third party, unless the competent authority is satisfied that larger public interest warrants the disclosure of such information;

(e) information available to a person in his fiduciary relationship, unless the competent authority is satisfied that the larger public interest warrants the disclosure of such information;

(f)..."

4 Section 22 – Act to have an overriding effect. - The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in the Official Secrets Act, 1923(19 of 1923), and any other law for the time being, in force or in any instrument having effect by virtue of any law other than this Act.

5 Section 2(f) - "information" means any material in any form, including records, documents, memos, e-mails, opinions, advices, press releases, circulars, orders, logbooks, contracts, reports, papers, samples, models, data material held in any electronic form and information relating to any private body which can be accessed by a public authority under any other law for the time being in force;

6 Relying on Central Board of Secondary Education and Anr. v. Aditya Bandhopadhyay and Ors., (2011) 8 SCC 497

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Mohammad Kamran
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions