Delhi High Court asks SEBI to share 'internal' investigation report with accused: 'Prima facie unfair'

Allowing the petition, the High Court rejected SEBI’s stand and said that under the regulator’s own framework, the investigation report is central to the decision-making process.

• Delhi High Court orders SEBI to share its investigation report with the accused
• Court says withholding report prejudices accused and violates fair trial rights
• Sensitive info in report can be redacted, but full denial is not allowed

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The Delhi High Court has held that the Securities and Exchange Board of India (SEBI) cannot deny an accused access to its investigation report when that document forms the foundation of the decision to prosecute.

The Court set aside a trial court order that had refused to direct disclosure of the report sought by Siddharth Shankar, an accused in a criminal complaint initiated by SEBI, in an 18-pages judgment seen by Moneycontrol.

Reserved on October 30 and pronounced on December 17, the ruling was delivered by Justice Neena Bansal Krishna in a petition challenging a January 2018 order of the trial court. That order had accepted SEBI’s argument that the investigation report was merely an internal document and that supplying only the papers annexed to the complaint was sufficient under criminal procedure.

SEBI’s criminal complaint, filed in December 2015, alleged violations of the SEBI Act and the Securities Contracts (Regulation) Act by Kassa Finvest Pvt. Ltd. and its directors, including Shankar.

The accused were summoned in January 2016. At the pre-charge stage, Shankar applied under Section 208 of the Code of Criminal Procedure seeking copies of various materials, including the investigation report referred to in the complaint, documents forming the basis of SEBI’s satisfaction to prosecute, and investor complaints and statements recorded during the probe.

Opposing the plea, SEBI maintained that it had not relied upon the investigation report in the complaint and that the document remained confidential. The trial court accepted this submission, prompting Shankar to approach the High Court.

Allowing the petition, the High Court rejected SEBI’s stand and said that under the regulator’s own framework, the investigation report is central to the decision-making process.

The Court noted that the Board is required to assess the findings of the investigation before proceeding further, making the report inseparable from the act of prosecution.

“It is evident that the Investigation Report prepared under Regulation 9, is the basis on which the Board decides whether there is violation and proceeds under Order 10, to take further action in terms of Regulations 11 and 12. It is a document which is relevant and essential for the Petitioner, to prepare their defence and to have a fair hearing,” the Court said.

Relying on the Supreme Court’s decision in T Takano v. SEBI, the High Court highlighted that disclosure in criminal proceedings is not confined to documents formally relied upon or filed along with the complaint. Any material that has a clear connection with the decision to prosecute and assists the accused in seeking discharge or preparing a defence must be made available, the Court observed.

The Court further held that withholding such material creates information asymmetry that directly prejudices the accused. Referring to Article 21 of the Constitution, it underscored that fairness and transparency are essential components of criminal trials and cannot be overridden by claims of regulatory confidentiality.

While acknowledging that certain portions of an investigation report may contain sensitive or third-party information, the Court clarified that such concerns can be addressed through appropriate redactions rather than complete denial of access.

It noted that the right to fair hearing is a guaranteed right.

"A person may be allowed to inspect the file and take the 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," the Court said.

It further observed if the 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."

Highlighting that the law is well-settled that if prejudicial allegations are being made against the person, it said that the person must be given particulars of that, before hearing so that the defence can be prepared.

The Delhi High Court directed SEBI to supply the investigation report to the accused in accordance with law, making it clear that criminal prosecutions cannot proceed on the basis of documents kept beyond the reach of the defence.