A Delhi High Court ruling has drawn a clear line between regulatory secrecy and criminal fairness, holding that when prosecution rests on an investigation report, the accused cannot be kept in the dark. The decision reshapes how India’s market regulator must balance confidentiality with constitutional guarantees.
When Secrecy Meets Criminal Process
In a significant judgment with implications for regulatory prosecutions across India, the Delhi High Court has held that the Securities and Exchange Board of India cannot deny an accused access to its investigation report when that document forms the foundation of a criminal prosecution.
The ruling arose from a challenge brought by Siddharth Shankar, one of the accused in a criminal complaint filed by SEBI, who sought disclosure of the investigation report underpinning the regulator’s decision to prosecute. A trial court had earlier rejected his request, accepting SEBI’s argument that the report was an internal and confidential document, and that supplying only the annexures filed with the complaint was sufficient under criminal procedure.
In an 18-page judgment delivered on December 17 and reserved earlier on October 30, Justice Neena Bansal Krishna of the Delhi High Court set aside that order, holding that criminal prosecutions cannot proceed on the basis of material kept beyond the reach of the defence.
The Investigation Report as the Backbone of Prosecution
At the heart of the dispute was the legal status of SEBI’s investigation report prepared under Regulation 9 of its enforcement framework. The court noted that this report is not a peripheral internal note, but the very document on which the regulator determines whether a violation has occurred and whether to proceed further under subsequent regulations.
“It is evident,” the court observed, “that the Investigation Report … is the basis on which the Board decides whether there is violation and proceeds … to take further action.” As such, the report was described as “relevant and essential” for an accused person to prepare a defence and secure a fair hearing.
The High Court emphasised that disclosure obligations in criminal proceedings are not confined to documents formally relied upon or filed with the complaint. Any material that has a clear nexus with the decision to prosecute, and which may assist the accused in seeking discharge or mounting a defence, must be made available.
In doing so, the court relied on the Supreme Court’s decision in T Takano v. SEBI, which underscored that withholding such material creates information asymmetry that directly prejudices the accused.
Fair Hearing, Redaction and the Limits of Confidentiality
While recognising SEBI’s concern that investigation reports may contain sensitive information or third-party data, the court rejected the notion that such concerns justify blanket non-disclosure. Instead, it held that confidentiality can be protected through appropriate redactions rather than a complete denial of access.
The judgment reaffirmed the right to a fair hearing as a constitutional guarantee under Article 21, stressing that “nothing should be used against the person, which has not been brought to his notice.” If relevant material is withheld, the court said, there is prima facie unfairness—regardless of whether that material arose before, during or after the hearing.
By drawing this distinction, the court attempted to strike a balance: regulators may protect genuinely sensitive information, but cannot invoke confidentiality as a shield against basic principles of criminal justice.
A Long-Running Case, and Wider Implications
The case itself traces back nearly a decade. SEBI’s criminal complaint, filed in December 2015, alleged violations of the SEBI Act and the Securities Contracts (Regulation) Act by Kassa Finvest Pvt. Ltd. and its directors, including Shankar. The accused were summoned in January 2016, and at the pre-charge stage, Shankar moved an application under Section 208 of the Code of Criminal Procedure seeking copies of various materials, including the investigation report, investor complaints and statements recorded during the probe.
SEBI opposed the plea, maintaining that it had not relied on the investigation report in its complaint and that the document remained confidential. The trial court accepted this position in a January 2018 order—now overturned by the High Court.
Beyond the immediate parties, legal experts say the ruling carries broader significance. It sends a clear signal that regulatory enforcement, when it crosses into criminal prosecution, must adhere to the same standards of transparency and fairness as any other criminal case. For SEBI and other regulators, the judgment underscores that internal processes cannot be insulated from scrutiny once they become the basis for depriving an individual of liberty.
As regulatory actions increasingly blur the line between civil enforcement and criminal liability, the court’s ruling reasserts a foundational principle: prosecution cannot be built on documents the defence is never allowed to see.
