SEBI cannot rely on “intrinsic” investigation report without giving copy of it to accused: Delhi High Court

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 since the report lay at the heart of its decision to prosecute [Siddharth Shankar Vs SEBI].

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 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 by Shankar (petitioner) 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.

Under SEBI’s regulatory framework, the Court noted, the Board is required to form its satisfaction after considering the investigation report. As a result, once prosecution is initiated, the report cannot be treated as a mere internal or administrative document insulated from disclosure.

Relying on the Supreme Court’s ruling in T Takano v. SEBI, the Court reiterated that disclosure obligations in criminal law are not limited to documents formally relied upon or annexed to the complaint. Any material that has a clear nexus with the decision to prosecute and is relevant for the accused to seek discharge or defend himself must be disclosed.

The Court observed that denial of such material creates information asymmetry, which directly undermines the accused’s ability to challenge the prosecution's case.

Referring to Article 21 of the Constitution, the Court held that criminal proceedings must meet standards of fairness and transparency, and regulatory confidentiality cannot override the accused’s right to a fair trial.

While acknowledging that certain sensitive or third-party information may require protection, the Court clarified that such concerns can be addressed through redactions, and not through “blanket non-disclosure” of the investigation report.

Allowing the petition, the Delhi High Court directed SEBI to supply the investigation report to the accused in accordance with law, making it clear that prosecutions cannot proceed on material kept hidden from the defence.

The petitioner Siddharth Shankar was represented by Advocates Adit S Pujari and Manvendra Singh Shekhawat.

SEBI was represented by Senior Advocate Sunil Dalal with Advocates Ashish Aggarwal, Shivani Joshi, Ankit Rana, Shipra Bali, Bharat Khurana and Sarthak Malhotra.

[Read Judgment]