Supreme Court stays CIC order declaring NSE a public authority under RTI Act

The Supreme Court on Friday stayed a 2007 order of the Central Information Commission (CIC) declaring the National Stock Exchange of India (NSE) a public authority under the Right to Information Act (RTI Act). [National Stock Exchange vs. CIC].

A Bench of Justices Vikram Nath and Sandeep Mehta passed the interim order while issuing notice on NSE’s appeal against a Delhi High Court judgment that upheld the applicability of the RTI Act to the stock exchange.

“In the meantime, the execution and operation of the order passed by the Central Information Commissioner dated 7th June, 2007 shall remain stayed,” the Supreme Court ordered.

The CIC had declared stock exchanges, including the NSE, to be public authorities under Section 2(h) of the RTI Act. It had also directed the NSE and the Jaipur Stock Exchange to establish a mechanism for handling applications under the transparency law.

The High Court had upheld the same, leading to the appeal before the Supreme Court.

During the hearing, the apex court observed that transparency has assumed increasing importance.

“These are days of transparency,” the Bench remarked.

The Court also orally indicated that the protection enjoyed by the NSE against the CIC order may not continue indefinitely.

“This shield is not going to stand for very long anyhow,” it said.

The dispute dates back to 2007, when a full Bench of the CIC ruled that stock exchanges fell within the RTI Act. The NSE challenged that order before the Delhi High Court and secured an interim stay on July 4, 2007.

On April 15, 2010, Justice Sanjiv Khanna dismissed the NSE’s petition and upheld the CIC’s conclusion. Justice Khanna held that although the NSE was incorporated as a private company, its recognition under the Securities Contracts (Regulation) Act, 1956 transformed it into an authority performing public functions.

The NSE then filed an appeal before a Division Bench, which stayed the single-judge’s judgment on May 4, 2010. That appeal remained pending for nearly 16 years.

On July 1 this year, a Division Bench of Justices C Hari Shankar and Om Prakash Shukla dismissed the appeal and affirmed Justice Khanna’s ruling.

The Division Bench held that the NSE could not function as a stock exchange without recognition from the Securities and Exchange Board of India (SEBI). Since SEBI granted such recognition as a delegate of the Central government, the recognition order effectively constituted the NSE as an authority or institution of self-government.

The High Court also held that the Central government exercised deep and pervasive control over the exchange. It concluded that the NSE qualified as a public authority under both parts of Section 2(h) of the RTI Act.

The NSE argued today that it is a private company with no government shareholding. It said that around 40 per cent of its shareholding was held by domestic investors and 27 per cent by foreign investors.

Relying on the Supreme Court’s ruling in Thalappalam Service Cooperative Bank Limited v. State of Kerala, the NSE contended that it did not satisfy any of the conditions under Section 2(h) for being classified as a public authority.

The Court proceeded to stay the CIC order while issuing notice on NSE's appeal.

NSE was represented by Solicitor General Tushar Mehta and Senior Advocate Balbir Singh