In the case of the Reserve Bank of India and Ors., v. Jayantilal 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 and public interest.

Several applications were filed before the Central Public Information Officer requesting the disclosure of information required by the RBI during its inspection of private and public banks and 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 clubbed together in the Supreme Court on application.
From the above petitions, two main issues emerged:
(i) 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?
(ii) Whether the information sought under the RTI Act can be denied by the RBI on the basis of commercial confidence, economic interests or fiduciary relationship with other banks?
The RBI contended that under section 35 of the Banking Regulation Act, 1949 (“BR Act”) it conducts inspection of the banks in the country and in its capacity as the regulator and supervisor of the banking system, has access to confidential information. Further, under section 28 of the BR Act, RBI is allowed to publish any such information in a consolidated form and not otherwise.

The economic policy is a function of the experts and should not be interfered by the courts. The RBI relied on a Supreme Court case wherein it was held that the role of RBI was to safeguard the economic and financial stability of the country and it had 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]. Thus, the courts should be highly cautious in interfering with the decision of RBI.

While the 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 its confidentiality in relation to its customers. Thus, the benefit of supervisory disclosure should be weighed against the risk posed to stakeholders.
As per the RBI policy, the reports of the annual financial inspection, scrutiny of all banks and financial institutions are confidential documents that cannot be disclosed. The annual financial inspection and scrutiny reports reflect the supervisor’s critical assessment of banks and financial institutions and their functions. Disclosure of this information would create misunderstanding and misinterpretation in the minds of the public and hence be significantly counter-productive.

Further, the RTI Act could not have the effect of nullifying and repealing any earlier statutes in relation to confidentiality. Thus, the RTI Act being a general provision could not override specific provisions relating to confidentiality in earlier legislation on the basis of the principle of generalia specialibus non derogant [3]

Lastly, the exceptions under section 8(1)(a), 8(1)(d) and 8(1)(e) of the RTI Act which contain provisions relating to the information prejudicial to 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 contended that the most important value for the functioning of a healthy and well informed democracy is transparency. All agents of public must be responsible for their conduct. The right to information regarding the functioning of public institutions is a fundamental right as enshrined under Article 19 of the Constitution of India.
Section 22 of the RTI Act contains a clear provision by virtue of which it overrides all other acts including the Official Secrets Act, 1923. Thus, notwithstanding anything to the contrary contained in any other laws like the BR Act, the RTI Act shall prevail insofar as transparency and access to information is concerned. Moreover, the exemptions sought by the RBI under sections 8(1)(a), 8(1)(d) and 8(1)(e) of the RTI Act are inapplicable to the facts of the case and the disclosure of the same will be in public interest.

As on the fiduciary capacity of the RBI, the respondents cited the case of Central Board of Secondary Education v. Aditya Bandopadhyay [5] wherein the Supreme Court held that,” ‘information available to a person in his fiduciary relationship are used in Section 8(1) (e) of the RTI Act in its normal and well recognized sense, that is to refer to persons who act in a fiduciary capacity, with reference to specific beneficiary or beneficiaries who are to be expected to be protected or benefited by the action of the fiduciary.”
The court defined a fiduciary relationship as a relationship in which one person is under a duty to act for the benefit of the other on the matters within the scope of the fiduciary relationship. Fiduciary relationships usually arise in one of the following four situations:
i. when one person places trust in the faithful integrity of another, who as a result gains superiority or influence over the first; or
ii. when one person assumes control and responsibility over another; or
iii. when one person has a duty to act or give advice to another on matters falling within the scope of the relationship; or
iv. when there is a specific relationship that has traditionally been recognized as involving fiduciary duties, as with a lawyer and a client, or a stockbroker and a customer.
On the issue of whether an exemption can be sought on the grounds of fiduciary relationship between RBI and other banks, the Supreme Court held that in reality, the RBI does not place itself in a fiduciary relationship with financial institutions as the reports of the inspections 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 the RBI and financial institutions shares a fiduciary relationship, section 2(f) of the RTI Act would still make this information accessible by the public.
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 the national interest i.e. national interest cannot be considered without considering economic interest. To bring transparency and accountability to a system, the citizens must be well-educated, well-aware and well-informed. If 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 disclosure of such information to the public. Thus, the Supreme Court decided in favour of the respondents and of disclosure over protecting a fiduciary relationship.
This decision of the Apex Court has clearly defined the relationship between the RBI and financial institutions. RBI will have to give more weightage to public interest than the interest of individual banks. There is now increased pressure on the RBI to disclose information and act with transparency. This includes the information obtained by the RBI during its regular inspections and audits of financial institutions and banks, both private and public. However, this blanket principle of disclosing information might lead to serious damage to the reputation of banks. For example, if a show cause notice issued to a bank is made public and no further action is taken by the RBI for lack of evidence, the commercial reputation of the bank may suffer irreparable damage.

Thus, whether this judgment will bring further transparency and accountability to the industry remains to be seen.

Tushnika Dayal (V-V)

[1] AIR 1 SC 2016
[2] Peerless General Finance and Investment Co. Limited and Another v. Reserve Bank of India 1992 2 SCC 343
[3] Principle of interpretation of statutes that states that where there are general words in a later statute, it cannot be held that the earlier statutes are repealed, altered or discarded.
[4] (2011) 8 SCC 497