The Securities and Exchange Board of India (SEBI) is required to disclose the Investigation Report prepared by an Investigating Authority [under Regulation 9 of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003 (PFUTP Regulations)] to a person who has been issued a Show Cause Notice, the Supreme Court of India recently ruled in the case of T. Takano v. SEBI1 (Noticee). The report is "an intrinsic component of the Board's satisfaction for assessing if there has been any breach of the Regulations," which is why this has been done.
In the instant case titled T. Takano v. Securities and Exchange Board of India, the issue raised for clarification before the Apex Court was:
Whether mere ipse dixit can be relied upon?
With regard to this issue, the Court disagreed with SEBI's claim that they were only required to divulge information that was "relied upon" in its SCN. The Court pointed out that it was insufficient for SEBI to merely state ipso facto that the report had not been cited. Regulation 10 required the Investigation Report to be taken into consideration for adjudication, making it pertinent and requiring disclosure. It was decided that the investigative report would, in all likelihood, have affected the SEBI judgement. Therefore, withholding information from a party that could have impacted the judgement of the authority performing an adjudicatory role damaged the integrity of the legal system and was against natural justice's tenets. Consequently, SEBI had a responsibility to make copies of those portions of the report. . It was argued that in cases where partial non-disclosure is involved, prejudice must be established in order to overturn a quasi-judicial authority's judgement. The evaluation would concentrate on how the result may have changed if the disclosure had been authorised. In response, the Bench ruled that the "process" should be respected more than the "result" and that "the influence of non-disclosure on the credibility of a judgement must also be considered vis-à-vis the overall fairness of the proceeding."
The Court categorically stated that,
"The Board shall be duty-bound to provide copies of such parts of the report which concern the specific allegations which have been levelled against the appellant in the notice to show cause. However, this does not entitle the appellant to receive sensitive information regarding third parties and unrelated transactions that may form part of the investigation report".