Coming down heavily on the Reserve Bank of India (RBI for short) for depriving information under the RTI Act, 2005 in the name of fiduciary relationship between itself and the banks, the Supreme Court has in a landmark decision declared that RBI does not place itself in a fiduciary relationship with the Financial institutions 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.
The Supreme Court said that by attaching an additional “fiduciary” label to the statutory duty, the Regulatory authorities have intentionally or unintentionally created an in terrorem effect. The Court also added that neither the RBI nor the Banks act in the interest of each other. The Apex Court was considering a batch of transferred cases from various High Courts wherein the order passed by the Central Information Commission (CIC) directing the RBI to furnish the Information sought to the applicants under the RTI Act.
Appearing for the RBI, Mr. T.R. Andhyarujina contended that the information sought for is exempted under Section 8(1)(a), (d) and (e) of the Right to Information Act, 2005. As the regulator and supervisor of the banking system, the RBI has discretion in the disclosure of such information in public interest. Mr. Andhyarujina referred various decisions to the High Court and submitted that the disclosure of information would prejudicially affect the economic interest of the State. Further, if the information sought for is sensitive from the point of adverse market reaction leading to systematic crisis for financial stability.
He also submitted that the Commission erred in holding that even if the information sought for is exempted under Section 8(1) (a), (d) or (e) of the Right to Information Act, Section 8(2) of the RTI Act would mandate the disclosure of the information. The Court framed the following issue to be answered by it: whether all the information sought for under the Right to Information Act, 2005 can be denied by the Reserve Bank of India and other Banks to the public at large on the ground of economic interest, commercial confidence, fiduciary relationship with other Bank on the one hand and the public interest on the other.
Writing the judgment for the bench, Justice M.Y. Eqbal, expatiating on the nature of functions of the banking sector regulator said: “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. The Apex Court rejecting the 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,said that such a contention is not only absurd but is equally misconceived and baseless.
“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,” said the Bench.
The Court added that 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,” said the Bench. Surmising that many Financial Institutions have resorted to such acts which are neither clean nor transparent, the Apex Court slammed the RBI in association with them of trying to cover up their acts from public scrutiny.
The Bench reminded the RBI of its responsibility to take rigid action against those Banks which have been practicing disreputable business practices.