‘SEBI cannot rely on probe report without giving copy of it to accused’

The Delhi High Court recently observed that the Securities and Exchange Board of India (SEBI) could not have withheld its investigation report from an accused. Justice Neena Bansal Krishna set aside a trial court order refusing disclosure of the investigation report sought by Siddharth Shankar, an accused in a criminal complaint filed by SEBI. “It is evident that the Investigation Report prepared under Regulation 9, is the basis on which the Board decides whether there is a violation and proceeds under Order 10, to take further action in terms of Regulations 11 and 12. It is a document which is relevant and essential for the Petitioner, to prepare their defence and to have a fair hearing,” the Court said.

SEBI had filed the criminal complaint in December 2015 against Kassa Finvest Pvt Ltd and its Directors, including the petitioner, alleging violations of the SEBI Act and the Securities Contracts (Regulation) Act. The accused were summoned by the trial court in January 2016. At the pre-charge stage, the petitioner sought copies of several documents under Section 208 of the Code of Criminal Procedure, including the investigation report referred to in the complaint, the material forming the basis of SEBI’s satisfaction to prosecute, and investor complaints and statements recorded during the investigation.

SEBI opposed the request, contending that the investigation report was an internal document and had not been relied upon in the complaint. The trial court, accepting this contention, dismissed the application in January 2018, holding that the supply of documents annexed to the complaint was sufficient compliance with criminal procedure. This was challenged before the High Court. Allowing the petition, the High Court rejected SEBI’s position and held that the investigation report is an “intrinsic component” of the decision to prosecute.