SEBI must share secret reports it used to file criminal case, Supreme Court tells regulator

SEBI hired two retired experts to build a criminal case against Reliance. Then it refused to show them the reports. The Supreme Court just stepped in.

The regulator spent nearly two decades investigating one of India's largest companies. It commissioned opinions from a retired Supreme Court judge and a chartered accountant. It used those opinions to file a criminal complaint. But when Reliance asked to see the very documents SEBI relied upon, the regulator said no — those were privileged, confidential, protected.

The question before the Supreme Court was simple: Can a regulator hide the reports it used to file a criminal case, or must it show its cards before the trial even begins?

When the 1994 allotment came back to haunt

In 1994, Reliance Industries Ltd allegedly allotted 12 crore equity shares to entities connected with its promoters. The funding, the complaint said, came from Reliance itself and its group companies — a potential violation of Section 77 of the Companies Act, 1956 (a provision that prohibits a company from financing the purchase of its own shares).

A complaint reached SEBI on 21 January 2002. The regulator investigated. But its own report, submitted on 4 February 2005, was inconclusive — it could not definitively say whether the law had been broken. The Ministry of Corporate Affairs also looked into the matter and found no violation of Section 77.

SEBI did not close the file. Instead, it sought external opinions. It hired Justice (Retd.) B.N. Srikrishna, a former Supreme Court judge, to give two separate opinions. It also commissioned a report from CA Y.H. Malegam, a veteran chartered accountant. These three documents, SEBI believed, gave it the ammunition to proceed criminally. The 2005 report sat in a sealed envelope, its inconclusive findings a quiet counterpoint to the regulator's later aggression.

The settlement that never was

Reliance tried to settle the matter on 29 September 2011, filing a settlement application without prejudice to its rights. But SEBI terminated the settlement process. On 16 July 2020, it filed a criminal complaint in a special court in Mumbai, alleging violations under Sections 24(1) read with 27 of the SEBI Act (offences and penalties), the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995 (PFUTP Regulations — rules against fraudulent and unfair trade practices in the securities market), the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (SAST Regulations), and Sections 77(2)/77A read with 55A of the Companies Act, 1956.

The special court threw the complaint out. Its reason: the case was time-barred — too many years had passed since the alleged offence. SEBI challenged that dismissal in the Bombay High Court. That revision petition is still pending.

But Reliance had its own problem. It wanted to see the three expert documents that SEBI had used to build the case against it. It filed an application before the High Court seeking disclosure. The High Court deferred the application — it would decide later, after the main case progressed. The settlement application, signed without prejudice, lay in the file as a reminder of a path not taken.

Reliance went to the Supreme Court.

What SEBI argued — and why it lost

SEBI gave three reasons for withholding the documents.

First, it said the opinions were protected by legal privilege under Section 129 of the Indian Evidence Act, 1872 (a provision that protects confidential communications between a client and their legal adviser from being disclosed in court). The retired judge and the chartered accountant, SEBI argued, were its legal advisers. Their opinions were privileged.

Second, SEBI said that under Section 207 of the CrPC (the provision that requires the prosecution to supply copies of documents to the accused after the court takes cognizance of the case), disclosure could only happen after the court formally accepted the complaint. Since the special court had dismissed the complaint as time-barred, and the High Court had not yet decided the revision petition, the stage for disclosure had not arrived.

Third, SEBI argued that the documents were confidential under Regulation 29 of the SEBI Settlement Regulations, 2018 (a rule that protects information shared during settlement negotiations from disclosure). Since Reliance had itself participated in settlement talks, it could not now demand those documents.

Reliance countered that SEBI was cherry-picking — using the opinions to file a criminal case but hiding them from the accused. That, the company said, violated the most basic principle of fairness: you cannot build a case against someone and then refuse to show them the evidence. The bench leaned forward when SEBI argued privilege, the courtroom still as the regulator pressed its case.

Why the Supreme Court said SEBI must play fair

The bench — Chief Justice N.V. Ramana, Justice J.K. Maheshwari, and Justice Hima Kohli — rejected every argument SEBI made.

On privilege: The court held that the expert opinions were not legal advice in the traditional sense. They were "extensions of the investigation, not privileged legal advice." When a regulator's own investigation is inconclusive, and it hires experts to determine whether a crime has occurred, those experts are not giving privileged legal advice — they are helping the regulator decide whether to prosecute. That is an investigative function, not a legal-advisory one. Section 129 did not apply.

On timing: The court said Section 207 CrPC cannot be read as a rigid barrier. If a regulator initiates prosecution based on documents it refuses to disclose, and if those documents contain material that might help the accused, the accused has a right to see them before the trial starts. Article 21 of the Constitution (the right to life and personal liberty, which includes the right to a fair trial) demands nothing less. The court relied on its earlier decisions in T. Takano v. Securities and Exchange Board of India (2022 SCC Online SC 210), S.P. Velumani v. Arappor Iyakkam (2022 SCC Online SC 663), and State Bank of Patiala v. S.K. Sharma ((1996) 3 SCC 364) to reinforce this principle. It also drew on English precedents — Three Rivers District Council v. Governor and Company of the Bank of England ([2004] UKHL 48) and Nea Karteria Maritime Co Ltd v. Atlantic and Great Lakes Steamship Corporation ([1981] Com LR 138) — to distinguish between privileged legal advice and investigative opinions.

On cherry-picking: The court found that SEBI had already disclosed parts of the documents — selectively revealing inculpatory portions (bits that hurt Reliance) while hiding exculpatory portions (bits that might help Reliance). That, the court said, was impermissible. Once a party discloses part of a privileged document, it waives privilege over the entire document. You cannot have it both ways. The court also cited Fiona Shrikhande v. State of Maharashtra ((2013) 14 SCC 44) on the importance of fair trial rights.

The court directed SEBI to hand over all three documents — both opinions of Justice Srikrishna and the report of CA Malegam — to Reliance forthwith. The operative order read: "We allow the present appeal and direct the respondents to furnish a copy of the following documents to the appellant forthwith: (i) First opinion of Justice (Retired) B.N. Srikrishna, (ii) Report of Y.H. Malegam, (iii) Second opinion of Justice (Retired) B.N. Srikrishna." The file, thin and worn from years of litigation, felt heavier now with the weight of that order.

What this means for every accused person

This judgment is not just about SEBI and Reliance. It applies to every statutory regulator — the RBI, the CCI, the Income Tax Department — that initiates criminal prosecution. The principle is simple: if you use a document to build a case, you must show it to the person you are prosecuting. You cannot hide behind privilege, procedure, or confidentiality.

For practitioners, the takeaway is this: whenever a regulator refuses pre-trial disclosure, cite this case. The court has made clear that natural justice and Article 21 override procedural technicalities. The accused does not have to wait for cognizance. The accused does not have to accept cherry-picked disclosures. The accused has a right to see the full record that the regulator used against them.

THE PLAY: If a regulator refuses to disclose documents it relied upon to file a criminal case, move the court immediately — do not wait for the trial to begin, and cite Reliance Industries v. SEBI for the proposition that fairness demands pre-cognizance disclosure.

The court ended where it began: with three documents and a regulator that tried to hide them. The smell of old paper, the silence of the bench, the weight of a file that finally saw the light — the Supreme Court had spoken, and SEBI had to listen.