RTI exemptions upheld for SEBI fiduciary information but third-party consultation required under Section 11 for rejected candidates data

Bombay HC partially set aside CIC's order on RTI application seeking SEBI information about Public-Interest-Directors appointment and stock exchange inspection reports. Court upheld exemptions under Section 8(1)(e) for queries 1, 2, 6-9 involving fiduciary information and commercial confidence. However, HC remanded queries 3-5 to CPIO for fresh consideration following Section 11 third-party procedure, as information about rejected PID candidates and inspection reports constituted third-party information requiring mandatory consultation before disclosure, emphasizing privacy protection and procedural compliance.

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The core legal questions considered in this judgment pertain to the scope and applicability of exemptions under the Right to Information Act, 2005 (RTI Act), specifically Sections 8 and 11, in relation to information sought from the Securities and Exchange Board of India (SEBI) concerning the appointment of Public-Interest-Directors (PIDs) on stock exchange boards and annual inspection reports of stock exchanges. The issues include whether certain information held by SEBI is exempt from disclosure on grounds of fiduciary relationship, personal privacy, commercial confidence, or economic interest of the State; the applicability of the third-party procedure under Section 11 of the RTI Act; the balance between the right to information and the right to privacy; and the extent to which precedents, particularly the Supreme Court's decisions in Reserve Bank of India vs. Jayantilal N. Mistry and CPIO vs. Subhash Chandra Agarwal, govern the disclosure of such information.

Regarding the first issue-the applicability of Section 8(1)(e) exemption for information held in fiduciary capacity-SEBI contended that file notings, correspondence, and documents related to framing policy and guidelines for appointing PIDs were held in such capacity and thus exempt. The Central Information Commission (CIC) accepted this contention, finding that disclosure could harm the interests of the suppliers of such information and the institutional integrity of SEBI. The Court noted that the information sought under Query No. 2 was vague but agreed that it included material supplied by candidates in confidence, justifying the fiduciary exemption. Consequently, the Court upheld the CIC's order rejecting disclosure of this information, applying the legal framework that exempts information held in fiduciary relationship unless larger public interest warrants disclosure. The Court found no compelling public interest to override the exemption in this context.

The second issue involved the exemption under Section 8(1)(j) concerning personal information in documents related to granting approval for appointment of PIDs (Query No. 3). SEBI claimed that the information constituted personal data of applicants, and disclosure would cause unwarranted invasion of privacy. The CIC partially upheld this but directed SEBI to provide a list of selected and rejected candidates with redactions, invoking the severability principle under Section 10. The Court analyzed that while the identities of appointed PIDs are public, the disclosure of rejected candidates' identities implicates privacy rights and third-party interests. It emphasized that the mandatory procedure under Section 11-requiring notice to third parties and opportunity to object-had not been followed before ordering disclosure. Drawing on the precedent of CPIO vs. Subhash Chandra Agarwal, the Court held that the procedure under Section 11 is mandatory for third-party information, including personal information relating to appointments. The Court set aside the CIC's order to the extent it directed disclosure without following Section 11 and remanded the matter for fresh consideration in compliance with the statutory procedure.

The third issue concerned the annual inspection reports of stock exchanges (Queries Nos. 4 and 5) and the extent of disclosure permissible under Section 8(1)(d), which exempts commercial confidence or trade secrets unless larger public interest warrants disclosure. SEBI contended that these reports contain sensitive economic information, including cybersecurity measures and pricing data, whose disclosure could harm the regulatory function and economic interests of the State. The CIC had allowed disclosure only of concluding comments or final findings, withholding full reports. The Court acknowledged the sensitive nature of such information and noted that annual reports relate to third parties (stock exchanges), thus invoking Section 11's procedural safeguards. It also distinguished the Supreme Court's decision in Jayantilal N. Mistry, which related to banks and RBI, from the present case involving stock exchanges and SEBI, emphasizing that the regulatory contexts differ. The Court observed that the CIC's direction for limited disclosure without following Section 11 was improper and remanded the matter for reconsideration after complying with statutory procedure.

Regarding the fourth cluster of queries (6 to 9), which sought broad and vague information such as inspection of all records, weblinks, and file notings on RTI petition movement, the Court agreed with SEBI's submission that such requests lacked sufficient clarity and precision. While no explicit exemption applied, the Court highlighted the requirement for applicants to frame requests with reasonable particularity to enable effective processing under the RTI Act. No substantive relief was granted on these queries.

The Court extensively analyzed the statutory framework of the RTI Act, focusing on Sections 8 and 11. Section 8(1) enumerates specific exemptions from disclosure, some absolute (clauses a, b, c, f, g, h) and others qualified (clauses d, e, i, j), where disclosure may be refused unless a larger public interest justifies it. Section 11 mandates a procedural safeguard for third-party information, requiring notice and opportunity to object before disclosure. The Court underscored the constitutional balance between the right to information under Article 19(1)(a) and the right to privacy under Article 21, as elaborated in the Constitution Bench decision in CPIO vs. Subhash Chandra Agarwal. The judgment emphasized that exemptions under the RTI Act are not absolute but subject to a case-by-case assessment of public interest versus potential harm.

The Court also considered the competing arguments regarding the applicability of the Jayantilal N. Mistry precedent. While Mr. Agarwal relied on it to argue for greater transparency and disclosure, SEBI and the stock exchanges distinguished it on the basis that it concerned banking regulation and not stock exchanges, which involve different sensitivities and economic considerations. The Court recognized these distinctions and noted subsequent Supreme Court observations in HDFC Bank Ltd. that questioned the balancing of privacy and information rights in Jayantilal N. Mistry. This nuanced approach informed the Court's decision to remand certain queries for fresh consideration rather than ordering outright disclosure.

In conclusion, the Court upheld the CIC's order insofar as it directed disclosure of publicly available information and information held in fiduciary capacity (Query Nos. 1 and 2, and general queries 6 to 9). It set aside the CIC's order concerning personal information related to PID appointments (Query No. 3) and annual inspection reports (Queries Nos. 4 and 5), remanding these for reconsideration after strict compliance with Section 11's procedural safeguards. The Court emphasized the mandatory nature of the third-party notice and objection procedure and the need to balance transparency with privacy and economic interests. No costs were imposed, and all parties were directed to act on an authenticated copy of the order.

Significant holdings include the following verbatim excerpts and principles:

"The procedure under Section 11 must be complied with not only in cases where information has been supplied to the public authority by a third party, but also when the information held by the public authority 'relates to' a third party."

"Clauses (d), (e), (i) and (j) to sub-section (1) of Section 8 provide a qualified exemption from disclosure. Where the Information Officer determines that the 'larger public interest' warrants a disclosure, the exemption cannot be invoked, and the information must be disclosed."

"Section 11 is not merely a procedural provision, but a substantive protection to third parties against the disclosure of their personal information held by public authorities, without their knowledge or consent."

"The RTI Act operationalizes the disclosure of information held by 'public authorities' to reduce the asymmetry of information between individual citizens and the State apparatus, fostering transparency and accountability."

"The right to information and the right to privacy are not absolute and must be balanced with due regard to public interest and potential harm."

"The information sought regarding appointments of Public Interest Directors involves subjective considerations and personal information of third parties, necessitating adherence to Section 11's procedural safeguards before disclosure."

These holdings establish that the RTI Act's exemptions and procedural safeguards must be scrupulously followed, especially where third-party personal or sensitive economic information is concerned, and that the public interest in disclosure must be weighed carefully against potential harms.

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