[Nandini Garg is a 4th year B.A., LL.B. (Hons.) student at National Law Institute University in Bhopal]
In November, 2017, Reuters reported that the second quarter earnings of 12 companies, including popular blue chips such as Dr. Reddy’s, Cipla, Tata Steel etc., were being circulated on private WhatsApp groups. This prompted the Securities and Exchange Board of India (“SEBI”) to conduct one of its largest investigations into what is popularly known as the WhatsApp leak case. Till date multiple locations have been raided, and documents have been searched and seized. Companies such as Axis Bank, HDFC Bank, Tata Motors and Bata India have also been directed by SEBI to carry out internal inquires.
A situation similar to the present case arose in Indian Council of Investors v. Union of India & Ors. wherein SEBI called for Call Data Records (“CDRs”) and details of tower location from telecom service providers for the purpose of investigation. The power of SEBI to call for such information was affirmed by the Bombay High Court, but it also cautioned that such power is capable of misuse and can violate a citizen’s right to privacy. The Court stated that such power is to be exercised after complying with the certain safeguards. CDRs or information regarding tower location can be called for:
i. Only those persons against whom any investigation or enquiry is being conducted by SEBI,
ii. Only by an officer who is duly authorized by SEBI,
iii. Only when the authorized officer is of the opinion that CDRs and/or information regarding tower location would be relevant for any investigation or enquiry, and
iv. Only when it is in accordance with law because CDRs of any such subscriber and information regarding tower location is a matter of confidentiality and privacy.
The Supreme Court of India in the case of Justice K.S. Puttaswamy & Ors. v. Union of India& Ors. declared right to privacy as a fundamental right. It is a combination of various rights provided under Part III of the Constitution and is subject to certain limitations. Justice Chelameshwar in the aforementioned case observed that:
the limitations are to be identified on case to case basis depending upon the nature of the privacy interest claimed. There are different standards of review to test infractions of fundamental rights. While the concept of reasonableness overarches Part III, it operates differently across Articles (even if only slightly differently across some of them)… to begin with, the options canvassed for limiting the right to privacy include an Article 14 type reasonableness enquiry; limitation as per the express provisions of Article 19; a just, fair and reasonable basis (that is, substantive due process) for limitation per Article 21…
Right against access to communication, or control over it is covered under Articles 19 and 21 of the Constitution. Any limitation on the privacy of personal communications of an individual has to pass the following three tests:
1. Legality: There must be some law in existence which permits the interruption of privacy. As per Article 21, no person can be deprived of his life or personal liberty except in accordance with the procedure established by law.
Reasonableness: The reason behind the restriction is to be examined to see if it is valid and not arbitrary. This requirement ensures that the need for encroachment arises out of ‘a legitimate state aim’.
3. Proportionality: The means adopted to limit the privacy and the end which is sought to be achieved by such limitation must be proportionate. This precondition provides protection against arbitrary action by balancing the interests of right-holder and right-controller.
Sub-section (1) of section 11 of the Securities and Exchange Board of India Act, 1992 (“SEBI Act”) casts an obligation on SEBI to protect the interest of investors in securities, to promote the development of the securities market, and to regulate the securities market. Securities market is a speculative market in which varied situations may arise, all of which cannot be contemplated in advance. Therefore, looking to the exigencies and the requirement, SEBI has been entrusted with the duty and function ‘to take such measures as it thinks fit’. Following the 2014 amendment, section 11(2)(ia) of the SEBI Act was substituted to enable SEBI to call for information/record from “any person” as opposed to the earlier provisions empowering SEBI to call for information only from an authority or board or corporation established under an Act.
The Supreme Court in Sahara India Real Estate Corporation Limited and others v. Securities and Exchange Board of India and another, while considering the powers of SEBI, observed as follows:
From a collective perusal of Sections 11, 11-A, 11-B and 11-C of the SEBI Act, the conclusions drawn by SAT that on the subject of regulating the securities market and protecting interest of investors in securities, the SEBI Act is a standalone enactment and SEBI’s powers thereunder are not fettered by any other law including the Companies Act, is fully justified.
In 2016, SEBI released a consultation paper wherein it proposed to forbid any person from sharing trading tips and stock specific recommendations to the general public through social networking media such as WhatsApp, Twitter, Facebook, etc. Only persons registered as Investment Advisers were exempted. In Karmanya Singh, the Court noted that there is no regulatory framework governing the functioning of internet messaging applications like WhatsApp in India. Later, the Supreme Court in the same case constituted a Committee of Experts under the chairmanship of Justice B.N. Srikrishna to identify key data protection issues in India and recommend methods of addressing them.
The limitations on individual’s right to privacy with respect to prosecution of white collar crimes have not been previously dealt with in India. WhatsApp might end up waging bitter legal battles with SEBI due to such open defiance. Further, if SEBI succeeds in extracting data out from WhatsApp, it might create a slippery slope with other government agencies making similar claims. The legislature as well as the judiciary need to strike a delicate balance between the interests of the market regulator and individuals. With economic scandals making headlines every other day and the ever-increasing use and advancement of technology, the issue needs immediate redressal.
– Nandini Garg
So for obvious reason, would like to be anonymous here.
Its a brilliant article that covers the law vis-a-vis non-cooperative parties.
but it assumes that under the circumstances, it would be possible for the employees to object to anybody snooping through there personal electronic devices. that would include laptops, mobiles, tablets.
From what I understand, SEBI has passed the buck to the respective listed entity to report what action they have taken to control this step.
So the case is not SEBI(state/ govt body) vs Whatsapp & other(private employee).
Its more like a private entity vs its employees – even for snooping on personal electronic devices, in some cases even of spouses.
when that happens, practical aspects come into picture.
and Indians don’t really object.
the above is not some theory.
IMPROMPTU (to share independent but instant thoughts):
POSER: Is there not a glaring Inconsistency in SC’s separate verdicts in the two cited cases ?
There is prima facie an obviously ominous contradiction between the line(s) of judicial reasoning followed /adopted in the two cases (citation given elsewhere herein). And, the projected view to the effect that the matter may have to be considered and decided on a case to case basis, etc., can really be no comfort , should due regard be had to / from the viewpoint of , the larger interests of THE PEOPLE directly or indirectly impacted economically.
For an attempt at dilation >https://www.facebook.com/swaminathanv3/posts/1633907760018837