SEBI ordered to disclose investigation report after High Court ruling overturned

The Securities Appellate Tribunal quashed the confirmatory order against the appellant but allowed SEBI to issue a fresh show cause notice based on new evidence. The High Court ruled that the investigation report need not be disclosed, relying on precedent. However, the appellant's argument that non-disclosure violated natural justice principles prevailed. The judgment of the High Court was set aside, directing SEBI to disclose relevant parts of the investigation report and provide the appellant a fair opportunity to respond.

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Issues: Whether the investigation report prepared under Regulation 9 of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003 had to be disclosed to the noticee at the stage of adjudication under Regulation 10, and if so, to what extent disclosure could be withheld on grounds of third-party confidentiality and market sensitivity.

Analysis: Regulation 10 makes the Board's satisfaction conditional upon consideration of the investigation report submitted under Regulation 9 and upon affording a reasonable opportunity of hearing. The report is therefore not a mere internal communication, but material that enters the decisional process and can influence the outcome. The right to disclosure in adjudicatory proceedings is grounded in natural justice, audi alteram partem, fairness, and the transparency of decision-making. A distinction drawn in earlier authority between materials needed only to decide whether proceedings should commence and materials relevant to adjudication does not justify withholding a report that forms part of the basis for final action. At the same time, disclosure is not absolute: portions containing third-party personal data, strategic information, or market-sensitive confidential material may be redacted, but only to that limited extent. The authority must identify and furnish the parts relevant to the specific allegations, and a blanket refusal is impermissible.

Conclusion: The noticee was entitled to disclosure of the relevant parts of the investigation report, subject to limited redaction of confidential third-party and market-sensitive material.

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