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Central Information Commission

Shri.K P Muralidharan Nair vs Reserve Bank Of India on 9 January, 2012

                        CENTRAL INFORMATION COMMISSION
                            Club Building (Near Post Office)
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                                                            Decision No. CIC/SG/A/2011/002841/16732
                                                                    Appeal No. CIC/SG/A/2011/002841

Relevant Facts emerging from the Appeal

Appellant                           :       Mr. K.P. Muralidharan Nair,
                                            Indian Sugar Exim Corporation,
                                            Eucharistic Congress Building NO.1,
                                            3rd Floor, 5, Convent Street,
                                            Colaba, Mumbai - 400 001

Respondent                          :       Dr. N. Krishna Mohan,

PIO & Chief General Manager, Reserve Bank of India, Dept. of Banking Supervision, Central Office, Centre - I, Cuffe Parade, Colaba, Mumbai - 400005 RTI application filed on : 19/05/2011 PIO replied : 27/05/2011 First appeal filed on : 14/06/2011 First Appellate Authority order : 19/07/2011 Second Appeal received on : 11/10/2011 S. No Information Sought Reply of the PIO

1. What contraventions and violations were made The bank was penalized along with 18 other by SCB in respect of non-compliance of RBI banks for contravention of various instructions instructions on derivatives, for which RBI has issued by the Reserve Bank of India in respect imposed penalty of INR 10 lakhs on SCB in of derivatives, such as, failure to carry out due exercise of its powers vested under Section diligence in regard to suitability of products to 47A(1)(b) of the Banking Regulations Act, users not having risk management policies and 1949 and as stated in the RBI press release not verifying the underlying/adequacy of dated April 26, 2011issued by Department of underlying and eligible limits under past Communication, RBI. performance route. The information is also available on our web site under press release.

2. Please provide us the copies/details of all the Complaints are received by Reserve Bank of complaints filed with RBI against SCB, India and as they constitute third party accusing SCB of mis-selling derivative information, the information requested by products, failure to carry out due diligence in cannot be disclosed in terms section 8(1) (d) of regard to suitability of products, not verifying the RTI Act 2005. the underlying/adequacy of underlying and eligible limits under past performance and various other non-compliance of RBI Instructions on derivatives.

Also, please provide the above information in prescribed format.

3. Please provide us the copies of all the written The action has been taken against the bank replies/correspondences made by SCB with based on the findings of the Annual Financial RBI and the recordings of all the oral Inspection (AFI) of the bank which is submissions made by SCB to defend and conducted under the provisions of Sec 35 of explain the violations/contraventions made by the BR act 1949. The findings of the inspection SCB. are confidential in nature intended specifically for the supervised entities and for corrective action by them. The information is received by us in fiduciary capacity, disclosure of which may prejudicially affect the economic interest of the state. As such the information cannot b disclosed in terms of Section 8(1)(A) and (e) of the RTI Act 2005

4. Please provide us the details/copies of the Same as above.

findings, recordings, enquiry reports, directive orders, file notings and/or any information on the investigations conducted by RBI against SCB in respect of non-compliance by SCB in respect of non-compliance of RBI instruction on derivatives.

Also, please provide the above information in prescribed format.

Grounds for the First Appeal:

Incomplete and unsatisfactory information provided by the PIO. Order of the First Appellate Authority (FAA):

Not mentioned.

Grounds for the Second Appeal:

Incomplete and unsatisfactory information provided by the PIO Relevant Facts emerging during Hearing:

The following were present Appellant: Mr. D. A. Vasal representing Mr. K.P. Muralidharan Nair;

Respondent: Ms. Jonaki Sain, Dy. Legal Advisor on behalf of Dr. N. Krishna Mohan, PIO & Chief General Manager via video - conference from NIC Studio- Mumbai;

The Respondent has claimed that information on query 2 was exempt under Section 8(1)(d) of the RTI Act and information sought in queries 3 and 4 was exempt under Sections 8(1)(a) and (e) of the RTI Act. The Appellant stated that this Bench, in a number of decisions, has ruled that the information sought (as that in the present matter) must be disclosed under the RTI Act. The Respondent submitted that as regards some of these decisions, a stay has been obtained from the relevant High Court(s). It was noted by the Bench that these stay orders are specific and apply only to the specific order of the Commission sought to be stayed.

Whether information sought in query 2 is exempt under Section 8(1)(d) of the RTI Act. Section 8(1)(d) of the RTI Act exempts from disclosure- "information including commercial confidence, trade secrets or intellectual property, the disclosure of which would harm the competitive position of a third party, unless the competent authority is satisfied that larger public interest warrants the disclosure of such information;". In order to claim the exemption under Section 8(1)(d) of the RTI Act, the PIO must establish that disclosure of the information sought (which may include commercial or trade secrets, Page 2 of 5 intellectual property or similar information) would result in harming the competitive position of a third party. As per Section 19(5) of the RTI Act, the burden of establishing the applicability of the exemption lies on the PIO.

The Appellant, in query 2, has sought copies/details of all the complaints filed with RBI against SCB accusing SCB of mis-selling derivative products, failure to carry out due diligence in regard to suitability of products, not verifying the adequacy of underlying and eligible limits under past performance and various other non-compliance of RBI instructions on derivatives. The PIO has argued that the complaints are received by RBI and as they constitute third party information, the information was exempt from disclosure under Section 8(1)(d) of the RTI Act. It appears that the PIO is arguing that disclosure of information regarding complaints received from third parties would harm the competitive position of the third party. This Bench is unable to appreciate how disclosure of complaints made against SCB would harm the competitive position of the person/entity making these complaints. Moreover, the PIO has not even clarified the nature/identity of the third party. Section 19 (5) of the RTI Act states that 'In any appeal proceedings, the onus to prove that denial of a request was justified shall be on the Central Public Information Officer or State Public Information Officer, as the case may be, who denied the request.' The PIO has not justified this denial claiming exemption under Section 8 (1) (d). Therefore, the denial of information on query 2 on the basis of Section 8(1)(d) of the RTI Act is rejected.

Whether information sought in queries 3 and 4 is exempt under Sections 8(1)(a) and (e) of the RTI Act.

In queries 3 and 4, the Appellant has sought copies of all the written replies/correspondences made by SCB with RBI and the recordings of all the oral submissions made by SCB to defend and explain the violations/contraventions made by SCB. The Appellant has also sought details/copies of the findings, recordings, enquiry reports, directive orders, file notings and/or any information on the investigations conducted by RBI against SCB in respect of non-compliance by SCB of RBI's instruction on derivatives.

The PIO has stated that action against SCB has been taken based on the findings of the Annual Financial Inspection (AFI) of SCB which is conducted under the provisions of Sec 35 of the BR Act 1949. The findings of the inspection are confidential in nature intended specifically for the supervised entities and for corrective action by them. The information is received by RBI in fiduciary capacity, disclosure of which may prejudicially affect the economic interest of the state. Therefore, the information sought cannot be disclosed in terms of Sections 8(1)(a) and (e) of the RTI Act.

Section 8(1)(a) of the RTI Act Section 8(1)(a) of the RTI Act exempts "information, disclosure of which would prejudicially affect the sovereignty and integrity of India, the security, strategic, scientific or economic interests of the State, relation with foreign State or lead to incitement of an offence". It is unlikely that disclosure of information sought in queries 3 and 4 would prejudicially affect the sovereignty and integrity of India, the security, strategic or scientific interests of the State, or relation with foreign State, or lead to incitement of an offence. Hence it must be examined whether the economic interests of the State are likely to be prejudicially affected by disclosure of the information. The information sought is copies of all the written replies/correspondences made by SCB with RBI, recordings of oral submissions made by SCB to defend and explain the violations/contraventions made by it, details/copies of the findings, recordings, enquiry reports, directive orders, file notings and/or any information on the investigations conducted by RBI against SCB in respect of non-compliance by SCB.

This Bench is unable to understand how disclosing this information would affect the economic interests of the State. Financial stability of a nation cannot lie solely on public confidence in banks/financial institutions, and certainly not where banks/financial institutions holding public funds are involved in irregularities. The submissions of the Respondent appear to suggest that the banking system and the economic state of this Nation are extremely fragile and therefore, the information should not be disclosed.

The Commission does not believe there is any merit in the argument that disclosure of information about non-compliance of regulatory norms by SCB and action taken thereon by RBI can have any impact on the economy of India.

Section 8(2) of the RTI Act states, "Notwithstanding anything in the Official Secrets Act, 1923 nor any of the exemptions permissible in accordance with sub-section (1), a public authority may allow access to information, if public interests in disclosure outweighs the harm to the protected interests". The RBI is a regulatory authority which is responsible for inter alia monitoring subordinate banks and institutions. Needless to state significant amounts of public funds are kept with such banks and institutions. Therefore, it is only logical that the public has a right to know about the functioning and working of such entities including any lapses in regulatory compliances. If there are certain irregularities in the working and functioning of such banks and institutions, the citizens certainly have a right to know about the same. The best check on arbitrariness, mistakes and corruption is transparency, which allows thousands of citizens to act as monitors of public interest. A Nation's economic interests lie in the robustness of its Institutions and weeding out of the bad ones. There must be transparency as regards such organisations so that citizens can make an informed choice about them. In view of the same, this Bench is of the considered opinion that even if the information sought in queries 3 and 4 was exempt under Section 8(1)(a) of the RTI Act,-as claimed by the Respondent,- Section 8(2) of the RTI Act would mandate disclosure of the information sought.

Section 8(1)(e) of the RTI Act Section 8(1)(e) of the RTI Act exempts from disclosure "information available to a person in his fiduciary relationship, unless the competent authority is satisfied that the larger public interest warrants the disclosure of such information;". The traditional definition of a fiduciary is a person who occupies a position of trust in relation to someone else, therefore requiring him to act for the latter's benefit within the scope of that relationship. In business or law, we generally mean someone who has specific duties, such as those that attend a particular profession or role, e.g. doctor, lawyer, financial analyst or trustee. Another important characteristic of such a relationship is that the information must be given by the holder of information who must have a choice- as when a litigant goes to a particular lawyer, a customer chooses a particular bank, or a patient goes to particular doctor. An equally important characteristic for the relationship to qualify as a fiduciary relationship is that the provider of information gives the information for using it for the benefit of the one who is providing the information. All relationships usually have an element of trust, but all of them cannot be classified as fiduciary. Information provided in discharge of a statutory requirement, or to obtain a job, or to get a license, cannot be considered to have been given in a fiduciary relationship.

In the instant case, while the correspondence exchanged between RBI and SCB may have been maintained in a confidential manner, there does not appear to be any duty case upon RBI to act in benefit of SCB. In fact, both- correspondence exchanged as well as recordings of submissions by RBI are likely to be in the course of inspection of SCB carried out by RBI under Section 35 of the B.R. Act. When RBI carries out inspection of banks under Section 35 of the BR Act, it does so in a regulatory/monitoring capacity. The information provided to RBI by the Bank is clearly in discharge of statutory obligations. Therefore, there does not appear to be a creation of any fiduciary relationship between RBI and SCB.

Citizens have a right to know about the working of banking companies including any regulatory lapses. If there are irregularities in the functioning of SCB including any regulatory lapses which may be reflected in the information sought in queries 3 and 4, citizens certainly have a right to know about the same. A larger public interest would be served by disclosing this information- under Section 8(2) of the RTI Act. Sunlight is the best disinfectant, and darkness is the friend of the corrupt and the criminal. In view of the same, this Bench is of the considered opinion that even if the information sought in queries 3 and4 was exempted under Section 8(1)(e) of the RTI Act,-as claimed by the Respondent,- Section 8(2) of the RTI Act would mandate disclosure of the information sought.

Decision:

The Appeal is allowed. The PIO is directed to provide the complete information as per records to the Appellant before 5 February 2012.

This decision is announced in open chamber.

Notice of this decision be given free of cost to the parties.

Any information in compliance with this Order will be provided free of cost as per Section 7(6) of RTI Act.

Shailesh Gandhi Information Commissioner 09 January 2012 (In any correspondence on this decision, mention the complete decision number.) (PG) Page 5 of 5