RBI under RTI scanner

Supreme court asks RBI to disclose all information about banks under RTI


Venkatesh Nayak | December 17, 2015

In what will be described as a landmark judgment in the history of the implementation of the Right to Information Act, 2005 (RTI Act), the supreme court of India has thrown out hook, line and sinker. It has rejected the plea of the Reserve Bank of India (RBI) to not to disclose information to the general public about the action it takes against banks against their alleged irregularities. In a batch matter of 11 cases transferred from the high courts of Mumbai and Delhi namely, RBI vs Jayantilal N. Mistry [Transferred Case (Civil) No. 707 of 2012 & other related matters] the apex court upheld the orders of single commissioner benches of the central information commission (CIC) directing RBI to disclose a deal of information about action taken regarding irregularities of banks, loan defaulters, etc.

It is noteworthy that ten of these cases were decided by the then information commissioner, Shailesh Gandhi and one by former IC and later chief IC, Satyananda Mishra. I hope all those who had criticised Gandhi's speed in disposing appeals and complaints (thereby setting new standards for the institution which unfortunately have plummetted again) and the alleged "unsatisfactory" quality of several of his decisions will now reconsider their views. Ordinarily, I would refrain from commenting on the identity and the performance of individuals who adjudicate cases at the information commissions. However, this ex-commissioner's legacy deserves in-depth and informed debate, particularly in the light of what the apex court has said in the judgment and due to the fact that he was the first civil society appointee in the CIC.

Information which RBI refused to disclose under the RTI Act
The RBI invoked possible detriment to the nation's economic interest [Section 8(1)(a)], commercial confidence of banks [Section 8(1)(d)] and fiduciary relationship with the banks to reject information access when the RTI applicants sought the following categories of information under the RTI Act:

1) Reports of inspection of public sector banks including cooperative banks conducted by the RBI on receipt of complaints of irregularities against them, fines imposed on them, all correspondence conducted with them in this regard and final reports and findings of RBI in such cases.

2) List of loan defaulters and action taken against them.

3) Minutes of board meetings of banks.

4) Losses suffered by banks in the currency derivatives market (market to market losses).

5) Grade classification of a cooperative bank, etc.

What arguments were placed before and how did the court rule?

The counsel for RBI argued mainly the following grounds:
a) That the single member benches of the CIC treated as per incuriam a full bench (FB) decision of the CIC from 2006 which had ruled that ordinarily bank-related information shall not be disclosed for reasons of economic security, fiduciary relationship, etc. (incidentally I could not find this decision in the matter of Ravin Ranchhodlal Patel vs. RBI anywhere on the CIC's website) because that FB had not examined the possibility of disclosure on grounds of overweighing public interest under Section 8(2) of the RTI Act.

b) That Section 22 of the RTI Act which gives it overriding authority did not nullify previous laws that relate to the banking sector which the RBI is bound to follow and under whose provisions confidentiality of information is a requirement; and

c) That confidentiality of information in regulatory activities is a common feature in foreign jurisdictions.

The counsel for the respondents drew the attention of the connection between the constitution, its preamble, the fundamental right of the people to know under article 19(1) of the constitution, the preamble of the RTI Act, its purpose and the nature of exemptions as well as the public interest override, apart from citing the apex court's opinion about the importance of RTI from various judgements.

After recollecting the essence of the parliamentary debate on the RTI Bill from 10 years ago, the apex court refused to buy the RBI's argument that it was in a fiduciary relationship vis-a-vis banks. After examining the nature of fiduciary relationships, the court held:

“58. In the instant case, the RBI does not place itself in a fiduciary relationship with the financial institutions (though, in word it puts itself to be in that position) because, the reports of the inspections, statements of the bank, information related to the business obtained by the RBI are not under the pretext of confidence or trust. In this case neither the RBI nor the banks act in the interest of each other. By attaching an additional “fiduciary” label to the statutory duty, the regulatory authorities have intentionally or unintentionally created an in terrorem [in fear] effect.”

“59. RBI is a statutory body set up by the RBI Act as India’s central bank. It is a statutory regulatory authority to oversee the functioning of the banks and the country’s banking sector...”

“60. RBI is supposed to uphold public interest and not the interest of individual banks. RBI is clearly not in any fiduciary relationship with any bank. 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. RBI has a statutory duty to uphold the interest of the public at large, the depositors, the country’s economy and the banking sector. Thus, RBI ought to act with transparency and not hide information that might embarrass individual banks. It is duty bound to comply with the provisions of the RTI Act and disclose the information sought by the respondents herein.”

“62. The exemption contained in Section 8(1)(e) applies to exceptional cases and only with regard to certain pieces of information, for which disclosure is unwarranted or undesirable. If information is available with a regulatory agency not in fiduciary relationship, there is no reason to withhold the disclosure of the same. However, where information is required by mandate of law to be provided to an authority, it cannot be said that such information is being provided in a fiduciary relationship. As in the instant case, the financial institutions have an obligation to provide all the information to the RBI and such an information shared under an obligation/ duty cannot be considered to come under the purview of being shared in fiduciary relationship...”
“68. Even if we were to consider that RBI and the financial institutions shared a “Fiduciary Relationship”, Section 2(f) would still make the information shared between them to be accessible by the public. The facts reveal that Banks are trying to cover up their underhand actions, they are even more liable to be subjected to public scrutiny.”

“69. We have surmised that many financial institutions have resorted to such acts which are neither clean nor transparent. The RBI in association with them has been trying to cover up their acts from public scrutiny. It is the responsibility of the RBI to take rigid action against those Banks which have been practicing disreputable business practices.”

“70. From the past we have also come across financial institutions which have tried to defraud the public. These acts are neither in the best interests of the country nor in the interests of citizens. To our surprise, the RBI as a watch dog should have been more dedicated towards disclosing information to the general public under the Right to Information Act.”

The apex court dismissed RBI's plea that the economic interests of the country would be hurt by disclosure with the following words:

"61. The baseless and unsubstantiated argument of the RBI that the disclosure would hurt the economic interest of the country is totally misconceived. In the impugned order, the CIC has given several reasons to state why the disclosure of the information sought by the respondents would hugely serve public interest, and non-disclosure would be significantly detrimental to public interest and not in the economic interest of India. RBI’s argument that if people, who are sovereign, are made aware of the irregularities being committed by the banks then the country’s economic security would be endangered, is not only absurd but is equally misconceived and baseless.”

“73. Economic interest of a nation in most common parlance are the goals which a nation wants to attain to fulfill its national objectives. It is the part of our national interest, meaning thereby national interest can’t be seen with the spectacles (glasses) devoid of economic interest.”

“74. It includes in its ambit a wide range of economic transactions or economic activities necessary and beneficial to attain the goals of a nation, which definitely includes as an objective economic empowerment of its citizens. It has been recognized and understood without any doubt now that one of the tool to attain this goal is to make information available to people. Because an informed citizen has the capacity to reasoned action and also to evaluate the actions of the legislature and executives, which is very important in a participative democracy and this will serve the nation’s interest better which as stated above also includes its economic interests. Recognizing the significance of this tool it has not only been made one of the fundamental rights under Article 19 of the Constitution but also a Central Act has been brought into effect on 12th October 2005 as the Right to Information Act, 2005.”
The apex court appreciated the CIC's reasoning in its orders in the following words:

“81. In rest of the cases the CIC has considered elaborately the information sought for and passed orders which in our opinion do not suffer from any error of law, irrationality or arbitrariness.”

“82. We have, therefore, given our anxious consideration to the matter and came to the conclusion that the Central Information Commissioner has passed the impugned orders giving valid reasons and the said orders, therefore, need no interference by this Court.”
This judgement of the apex court echoes the findings of the Madras High Court in the matter of Mr. K J Doraiswamy vs The Assistant General Manager, State Bank of India, Erode Branch and The Chief Manager (PBD), State Bank of India, ErodeBranch (0837) [(2006) 4MLJ 1877] where the issue was disclosure of names of loan defaulters. The high court held as follows:

"31. ... Thus the aforesaid provision [Section 8(1)(j)] leaves no room for any doubt that the 'Right to Privacy' fades out in front of the 'Right to Information' and 'larger public interest'.”

“32. If borrowers could find newer and newer methods to avoid repayment of the loans, the Banks are also entitled to invent novel methods to recover their dues." [by publishing their names, photos and details in newspapers]”

The apex court also noted with dismay the attitude of public authorities towards RTI in the following words:

"61. ... it had long since come to our attention that the Public Information Officers (PIO) under the guise of one of the exceptions given under Section 8 of RTI Act, have evaded the general public from getting their hands on the rightful information that they are entitled to.”

“65. And in this case the RBI and the Banks have sidestepped the General public’s demand to give the requisite information on the pretext of “Fiduciary relationship” and "Economic Interest”. This attitude of the RBI will only attract more suspicion and disbelief in them. RBI as a regulatory authority should work to make the Banks accountable to their actions."

I hope PIOs will read this judgement as thoroughly as they read other judgements of the apex court (like the CBSE case), which they used to reject access to information at the drop of a hat and adopt a more positive approach towards implementing the RTI Act.

I have a few other concerns about the manner in which the specific RTI queries were dealt with by the apex court without examining the likely impact of their disclosure as the harm test required to be applied under Section 8 was not applied satisfactorily in each of the 11 cases before subjecting them to the public interest override in Section 8(2) of the RTI Act. Thankfully, the obstacle created by the Thalappalam judgement of the apex court regarding accessing information about cooperative societies and banks is beginning to melt away.

To read the full SC judgement, click here



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