following guest post is contributed by Apoorv
Chaturvedi, who is a 4th year BA LLB student at the Jindal
Global Law School]
system with multiple regulators set up for promoting “healthy and orderly
and to “prevent malpractices” of companies, banks, stock
markets etc. This healthy development is very closely related to the principle
of transparency enshrined under the Right to Information Act, 2005 (“RTI Act”).
enactment of the RTI Act, government authorities and regulatory bodies have
held back the information sought for on the grounds of exemption under Section
8(1) of the RTI Act or on the grounds of holding the information in a fiduciary
capacity. However, the ground of “fiduciary relationship” cannot be used
Bank of India v Jayantilal N Mistry (decided on December 16, 2015), the Supreme Court made it mandatory
for the Reserve Bank of India (“RBI”) to disclose information about banks under
the RTI Act.
the information sought for under the RTI Act can be denied by the RBI and other
banks to the public on the grounds of economic interest, commercial confidence
and fiduciary relationship with other banks.
case) argued that RBI is vested with the powers to determine the banking
policies in the interest of the banking system, monetary stability and sound
economic growth. It was further submitted that through section 35 of the
Banking Regulation Act, 1949, the RBI has the power to conduct inspection of
the banks in the country. During this inspection conducted by the inspecting team,
most of the information accessed would be confidential. Under section 28 of the
Banking Regulation Act, it was submitted that the RBI in the public interest
may publish the information obtained by it in a consolidated form, but not
to safeguard the economic and financial stability of the country and is backed
by a huge contingent of expert advisors to advice on matters related to economy
of the country and nobody should doubt the bona fide activities of the bank.
Kolluru Parvathi Co-op Bank Ltd in which the Andhra Pradesh High Court held that “the court would be highly
chary to enter into area or scrutinising the decision of the Reserve Bank of
India”. It also relied on Pearless General Finance and
Investment Co. Limited v Reserve Bank of India in which the court
stated that it should not be interfering with the economic policies of the
country as it is a function of the experts.
promotes enhanced transparency” as it strengthens the market discipline, a bank
cannot disclose all the information because of the inherent need to preserve
confidentiality in relation to its customers. This reluctance in disclosures by
the RBI arises from “the potential market reaction that such disclosure
might trigger which may not be desirable”.
public interest as it would instead create misunderstanding in the minds of the
public and produce an adverse impact on public’s confidence on banks. This
would in turn affect the financial stability of the country as it rests on the
exempted under section 8(1) of the RTI Act under clause (a), (d) and (e).
However, under section 8(2) of the RTI Act a public authority may allow access to information, if public
interest in disclosure outweighs the harm to the protected interests.
various provisions of different statute like the Banking Regulation Act, 1949
(section 34A), the Reserve Bank of India Act, 1934 (section 45E), the Credit Information Companies (Regulation)
Act, 2005 (sections 17(4), 20 and 22) all of which deal with confidentiality
and privacy of information of banks.
further submitted by the petitioner that the Credit Information Companies Act,
2005 was brought into force after the RTI Act and that section 28 of the Banking Regulation
Act, 1949 was amended by the Credit Information Companies (Regulation) Act,
2005. This, according to the petitioner, clearly indicates that the RTI Act cannot
override credit information sought by any person in contradiction to the
statutory provisions for confidentiality.
the RBI, the right to information is a general provision which cannot override
specific provisions relating to confidentiality in earlier legislation in
accordance with the principle generalia
specialibus non derogant.
respondent on the other hand contended that the right to information regarding
the functioning of public institutions is a fundamental right under Article 19
of the Constitution of India. The respondent relied upon Union
of India v Association for Democratic Reforms, where the court held that “the right to get
information in a democracy is recognized all throughout and is a natural right
flowing from the concept of democracy.”
the point of “fiduciary relationship” the respondent cited Central Board
of Secondary Education v. Aditya Bandopadhyay in which the Court held
that “the words “information available to a person in his fiduciary relationship”
are used in section 8(1)(e) of the RTI Act in its normal and well recognised
sense, that is to refer to persons who act in in fiduciary capacity, with
respect to a certain beneficiary who are expected to be protected or benefited
by the action of the fiduciary.”
the court, “fiduciary relationship” has been defined as “a relationship in
which one person is under a duty to act for the benefit of the other on the
matters within the scope of the fiduciary relationship. It usually arises in
one of the four situations:
the faithful integrity of another, who as a result gains superiority or
influence over the first; or
responsibility over another; or
act or give advice to another on matters falling within the scope the
relationship that has traditionally been recognised as involving fiduciary
duties as with a lawyer and a client, or a stock broker and customer.” (para 55
Bank of India v Jayantilal N Mistry).
must not place himself in a position where his own interests conflicts with
that of his customer or the beneficiary. There must be real sensible
possibility of conflict.
must not profit from his position at the expense of his customer, the
rule – A fiduciary owes undivided loyalty to the beneficiary, not to place
himself in a position where his duty towards one customer conflicts with a duty
he owes to another customer. A consequence of this duty is that a fiduciary
must make available to a customer all the information that is relevant to the
confidentiality – A fiduciary must only use information obtained in confidence
and must not use it for his own advantage, or for the benefit of another
stated that the “RBI does not place
itself in a fiduciary relationship with the Financial Institutions because the
reports of the inspections, statements of the bank, information related to the
business obtained by the RBI are not under the pretext of confidence or trust.
In such cases, neither the RBI nor the banks act in interest of each other. By
attaching an additional “fiduciary” label to the statutory duty, the regulatory
authorities have intentional or unintentionally created an in terrorem effect.”
benefit of any public or private sector bank, and thus there is no fiduciary
relationship of ‘trust’ between them. The RBI is supposed to uphold public
interest and not the interest of individual banks. According to the Court, one
of the main characteristics of a fiduciary relationship is “trust and confidence”
which is not there between RBI and the banks.
interest of the public at large, the depositors, the country’s economy and the
banking sector. Thus, the Court held that the RBI ought to act with
transparency and is bound to comply with provision of the RTI Act.
being committed by the banks and it is the contrary that the same would go
against the public interest. The Court stated that even if there was a “fiduciary
relationship” under Section 2(f) of the RTI Act, the “information” shared
between them should be accessible by the public.
regulatory bodies of India as well. Regulatory bodies like the Securities and
Exchange Board of India (“SEBI”) and the Insurance Regulatory and Development
Authority (“IRDA”) could now be asked to provide information through the RTI
Act and they cannot deny that request on the grounds of “fiduciary
relationship”. The relationship of any particular company or bank with the
respective regulatory body cannot anymore be regarded as “fiduciary” in nature.
Furthermore, the Court also held that “the free flow of information about
affairs of Government paves way for debate in public policy and fosters
accountability in Government”. Thus the argument of “economic interest” (as
raised by the RBI) would also not work.
regards with the internal matters but after the judgement, the RTI Act could be
enforced to seek information in regards with other organizations that are being
regulated under these bodies. Consequently, like RBI, even IRDA’s and SEBI’s reports
of inspection of insurance companies can be sought to be disclosed.
be compelled to disclose information with respect to ongoing matters. This is
because it might cause huge damage to a particular company or bank if a show
cause notice issued to it is publicly released before the matter is closed and
the bank or company is actually find guilty of a violation. If a regulated
company or the regulated bank has not committed any wrong, they would suffer
from a huge loss only because of a publicly available show-cause notice for no
reason. Thus, the matter needs to be closed before it is disclosed to the
public under the RTI.
& Baby on SEBI ACT, A Legal Commentary on Securities & Exchange Board
of India, 1992. Taxmann.
Commission of UK, (1995). Fiduciary
Duties and Regulatory Rules. [online] London: Law Commission, p.2. Available
at: http://www.lawcom.gov.uk/wp-content/uploads/2015/04/lc236.pdf [Accessed 21
Jan. 2016]. Also see: para 56 of Reserve Bank
of India v Jayantilal N Mistry
of India v Jayantilal N Mistry