Fiduciary Capacity of Regulators and the Right to Information

following guest post is contributed by Apoorv
, who is a 4th year BA LLB student at the Jindal
Global Law School]
The regulatory regime in India is a complex
system with multiple regulators set up for promoting “healthy and orderly
and to “prevent malpractices”[2] 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”).
It is however the case that even after the
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
In a recent judgement, Reserve
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 principal issue in the case was whether
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.
Counsel for the RBI (the petitioner in this
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
The RBI further submitted that its role is
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.
The petitioner relied on B.
Suryanarayana v.
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.
The petitioner had further submitted that while RBI “recognizes and
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 fromthe potential market reaction that such disclosure
might trigger which may not be desirable”.
The disclosure, according to the petitioner would not really serve the
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
public confidence.
The petitioner further contended that the information sought for was
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.
The petitioner referred to
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.
It was
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.
According to
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.”
With regard to
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.”
According to
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:
(1) When one person places trust in
the faithful integrity of another, who as a result gains superiority or
influence over the first; or
(2) When one person assumes control and
responsibility over another; or
(3) When one person has a duty to
act or give advice to another on matters falling within the scope the
relationship; or
(4) When there is specific
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
The scope of the fiduciary relationship consists of the following rules:[4]
(i)  “No Conflict rule – A fiduciary
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.
(ii) No profit rule – A fiduciary
must not profit from his position at the expense of his customer, the
(iii)            Undivided loyalty
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
customer’s affairs.
(iv)            Duty of
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
The Court upheld Central Information Commission’s (“CIC”) decisions and
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.
It was further stated that the RBI has no legal duty to maximise the
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.
According to the Court, the RBI has a statutory duty to uphold the
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.
It was further held that people should know about the irregularities
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.
This judgment rendered by the Supreme Court could impact the other
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.
These regulatory bodies were already under the ambit of the RTI Act in
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.
However, it is important to note that these regulatory bodies should not
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.  
Apoorv Chaturvedi

[1] SEBI Annual Report, 1988-89, p.1.

[2] Agrawal, S. and Baby, R. Agrawal
& Baby on SEBI ACT, A Legal Commentary on Securities & Exchange Board
of India, 1992
. Taxmann.
[3] AIR 2002 SC 2112

Commission of UK, (1995). Fiduciary
Duties and Regulatory Rules
. [online] London: Law Commission, p.2. Available
at: [Accessed 21
Jan. 2016].
Also see: para 56 of Reserve Bank
of India v Jayantilal N Mistry
[5] Para 58, Reserve Bank
of India v Jayantilal N Mistry

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.

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