Reserve Bank of India v. Jayantilal N, Mistry and Ors

Reserve Bank of India and Ors. v. Jayantilal N. Mistry and Ors.
Brief Facts
In the case of Reserve Bank of India and Ors. v. Jayantilal N. Mistry and Ors. 1, the Supreme
Court discussed whether the Reserve Bank of India (“RBI”) and other Indian Banks can deny
information under the Right to Information Act, 2005 (“RTI Act”) to the public at large on the
grounds of economic interest, , commercial confidence, fiduciary relationship with other Banks,
and public interest.
Several applications were filled before the Central Public Information Officer (“CPIO”)
requesting the disclosure of information acquired by the RBI during its inspection of private and
public banks or Financial institutions. This information was denied on the ground that it was
exempted under sections 8(1)(a), 8(1)(d) and 8(1)(e) of the RTI Act. These denials were
challenged before the Central Information Commission (“CIC”), which directed the RBI to
disclose the relevant details. Thereafter, the RBI approached the Bombay and Delhi High Courts
through writ petitions which were eventually transferred to the Supreme Court on application.
Two main issues emerged from the arguments:
a. Whether the RTI Act being a general legislation can override certain specific legislations
which contain provisions granting confidentiality to the information obtained by the RBI?
b. Whether information sought under the RTI Act, can be denied by RBI and other banks to the
public at large on the ground of economic interest, commercial confidence and fiduciary
relationship between RBI and other banks?
Arguments:
The Petitioner (RBI) made the following submissions:
1. The RBI in exercise of powers conferred under Section 35 of the Banking Regulation Act,
1949 (“BRA”) conducts inspection of the banks in the country. Section 28 of the BRA, allows
RBI to publish the information obtained by it through such inspections, only in a consolidated
form and not otherwise.
2. The role of RBI is to safeguard the economic and financial stability of the country and it has a
large contingent of expert advisors relating to matters deciding the economy of the entire country
and nobody should doubt the bona fide of the bank.2
1
Supreme Court of India, Transferred Case (Civil) No. 91 of 2015 & other related matters, Decided On 16.12.2015
2
3. The Court should be highly cautious in interfering with the decision of RBI, as the economic
policy is a function of experts.
4. While RBI recognizes and promotes enhanced transparency in public interest, a bank may not
be able to disclose all data that may be relevant to assess its risk profile, due to the inherent need
to preserve confidentiality in relation to its customers. Thus, the benefits of supervisory
disclosure should be weighed against the risk posed to stakeholders, such as depositors.
5. As per the RBI policy, the reports of the annual financial inspection, scrutiny of all banks
/financial institutions are confidential documents which cannot be disclosed. Since these
documents reflect the RBI's (as the regulator) critical assessment of banks and financial
institutions and their functions, their disclosure would create misunderstanding/misinterpretation
in the minds of the public. Thus, it may prove counterproductive to the interests of the public,
and adversely affect the economic interest of the State.
6. The RTI Act being a general legislation does not override the provisions of the BRA, the
Reserve Bank of India Act, 1934 and the Credit Information Companies (Regulation) Act, 2005
(“CIC Act”), which protect the confidentiality of the information sought. Further, since the CIC
Act was enacted after the RTI Act, the confidentiality provisions in it would override rights
under the RTI Act.
7. Further, the exceptions under Section 8(1)(a), 8(1)(d) and 8(1)(e) of the RTI Act (which
pertain to information prejudicial to inter alia the sovereignty or economic interest of India,
information including commercial confidence the disclosure of which would harm the
competitive position of a third party or available to a person as a result of his fiduciary
relationship) would also apply to disclosure by the RBI and banks.
On the other hand, the Respondents submitted that:

1. The most important value for the functioning of a healthy and well informed democracy is
transparency, and all the agents of the public must be responsible for their conduct.
2. The RTI Act, as noted in its very preamble, does not create any new right but only provides
machinery to effectuate the fundamental right to information given under Article 19 of the
Constitution.
3. RTI Act contains a clear provision (Section 22) by virtue of which it overrides all other Acts
including Official Secrets Act. Thus, notwithstanding anything to the contrary
contained in any other law like RBI Act or BRA, the RTI Act shall prevail insofar as
transparency and access to information is concerned.
4. Moreover, the RTI Act 2005, being a later law, specifically brought in to usher transparency
and to transform the way official business is conducted, would have to override all earlier
practices and laws in order to achieve its objective.
5. Further, the exemptions sought by the RBI under Section 8(1)(a),(d) and 8(1) (e) of the RTI
Act are inapplicable to the facts of this case and that the disclosure would be in public interest.
Decision:
On the issue of whether an exemption can be sought on the grounds of fiduciary relationship
between RBI and other banks, the Court held that in reality, the RBI does not place itself in a
fiduciary relationship with the financial institutions because the reports of inspections, statements
of the bank and information related to the business obtained by the RBI are not under the pretext
of confidence or trust. Further, RBI has no legal duty to maximize the benefit of any public
sector or private sector bank and thus there is no relationship of 'trust' between them. Since the
RBI receives the information from banks and financial institutions under statutory obligations, it
cannot be considered to come under the purview of being shared in a fiduciary relationship.
Furthermore, even if the Court considered that RBI and Financial Institutions shared a "Fiduciary
Relationship", section 2(f) of the RTI Act would still make this information accessible
by the public.3
On the issue of economic interest, the Court held that economic interest of a nation is the goal
which a nation wants to attain to fulfill its national objectives. It is a part of our national interest,
meaning thereby that national interest cannot be considered without considering economic
interest. To bring transparency and accountability to a system, the citizens must be well-
educated, well-informed and well-aware. If the customers of commercial banks will remain
oblivious to the violations of RBI Guidelines and standards which such banks regularly commit,
then eventually the whole financial system of the country would be at a monumental loss. This
can only be prevented by a clear disclosure of such information to the general public. The
Supreme Court thus held clearly in favour of disclosure over protecting a fiduciary relationship.
Analysis:
This judgement holds significance since it allows for the disclosure of information in the banking
industry heretofore withheld by the RBI on the grounds of confidentiality. This includes the
information obtained by RBI during its regular inspections and audits from financial institutions,
and public and private banks. However, whether this move by the
Supreme Court will bring further transparency and accountability to the industry remains to be
seen. Further, this raises conflicting concerns of an overbroad approach that may lead to
compromising client information from the banks that RBI may have collected under the garb of
“public interest”.

Reserve Bank of India v. Jayantilal N, Mistry and Ors

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On the other hand, the Respondents submitted that:

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