Earlier this month, Justice C Hari Shankar and Justice Om Prakash Shukla of the Delhi High Court held that the National Stock Exchange, or NSE, is a “public authority” under the Right to Information Act. The judgment is yet another example of a disturbing irony in RTI jurisprudence.
While entities that most citizens instinctively regard as “public institutions” have increasingly escaped the RTI Act, courts have shown a greater willingness to subject private commercial institutions to it. Institutions such as the PM CARES Fund, the Prime Minister’s National Relief Fund, and the BCCI — all of which occupy spaces of immense public significance — have successfully resisted the RTI framework. On the other hand, the RTI is being gradually expanded to cover entities performing purely commercial functions.
The Delhi High Court judgment is problematic as it equates government control with government regulation in classifying NSE as a “public authority”. While Indian court judgments are generally critiqued for their unintended consequences, this judgment has obvious and harmful consequences for the integrity of the securities markets, and more generally, for all regulated entities. Courts appear to have lost sight of why transparency obligations exist for the government and not for private entities performing commercial functions in the first place.
Confusing regulation with control
The case in question began in 2007 when the NSE challenged the Central Information Commission’s order in the Delhi High Court. Three years later, Justice Sanjiv Khanna held that NSE was subject to the RTI Act. NSE appealed before a two–judge bench of the same court. Sixteen years, 29 hearings, and six bench changes later, the court confirmed the single judge’s conclusion on 1 July.
Nearly two decades of litigation were spent deciding what the court has itself described as a narrow question of law: whether the NSE is a ‘public authority’ under Section 2(h) of the RTI Act. That is, is NSE an “authority or body or institution of self-government established or constituted by or under the Constitution, any law made by Parliament or State legislature, a notification issued or order made by the appropriate Government”. Or, is NSE “owned, controlled or substantially financed, directly or indirectly by funds provided by the appropriate Government”. The court held that stock exchanges performed a public function, and that the government, through SEBI, controlled NSE.
Much of the judgment expounds the dictionary meanings of words such as ‘authority’, ‘establish’, and ‘constitute’. But, the judges derive the substance of the reasoning from two earlier judgments of the Supreme Court. To avoid belaboring the reader with the details of these precedents, let’s just say that the court reached its conclusion through two simple steps. First, it held that stock exchanges perform a public function because they are critical institutions in India’s securities markets. Secondly, it held that SEBI exercises such extensive statutory supervision over stock exchanges — through recognition, inspections, rule approvals and regulatory oversight — that the government effectively “controls” them through the board. According to the court, these two features together make the NSE a “public authority” under the RTI Act.
The difficulty with this reasoning is that it changes the meaning of “public authority”. The RTI Act does not say that a body performing a public function is a public authority. As described earlier, the RTI’s definition of a public authority is narrower. Nor does it say that every heavily regulated private company becomes one. Yet that is effectively the test the court adopts.
The most damaging aspect of the court’s reasoning is that it blurs the distinction between regulation and control. That leap is difficult to justify. Every major private institution today operates under an extensive regulatory regime. Banks answer to the RBI. Insurers answer to the IRDAI. Telecom companies answer to TRAI. Airlines answer to the DGCA. Payment service providers answer to the RBI. Regulation does not make these companies part of the government. Yet, the judgment offers no principled reason why its logic should stop with stock exchanges.
The judgment has no limiting principle
The consequences of making NSE, and more generally private corporations, amenable to the RTI are perfectly obvious. It weaponises the RTI and simultaneously undermines it. Expansion of the RTI to include private corporations will make it a tool for ordinary commercial discovery. While the RTI exempts trade secrets and commercially sensitive information from disclosure, companies will have to spend considerable time and resources in battling RTI requests, proving in each instance that the information sought is indeed commercially sensitive.
Making market infrastructure institutions such as stock exchanges amenable to RTI can undermine market integrity. Imagine a RTI application seeking information on: surveillance algorithms, fraud detection systems, cybersecurity architecture, market surveillance triggers, investigations, and confidential compliance communications. These are precisely the kinds of information whose disclosure could damage market integrity.
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Why RTI exists
There is a deeper conceptual problem with the Delhi High Court judgment, and more generally, the jurisprudence on what constitutes a ‘public authority’ under the RTI Act. Transparency obligations are imposed on governments because governments exercise a monopoly over coercive power. They tax us, prosecute us, regulate us, and, in the ultimate case, deprive us of our liberty. RTI exists because citizens cannot “exit” the state. We cannot choose another government. We can choose another stock exchange. We cannot choose another tax department. Transparency is, therefore, the price the state pays for wielding coercive monopoly power.
Markets also possess economic power, but they are disciplined differently — through competition, consumers, shareholders, creditors and regulation. These mechanisms act as feedback loops to which corporations are bound to respond.
The logic of regulation is accountability to consumers, the logic of RTI is democratic accountability. By stretching RTI to cover private markets while simultaneously shrinking its reach over public institutions, our jurisprudence risks confusing two very different ideas of accountability. In trying to make markets look more like governments, we may end up making governments less accountable.
The question is not whether the NSE should be transparent. It should. The question is how that transparency should be achieved. The RTI Act was enacted to make governments answerable to citizens because governments exercise coercive public power. Stretching it to cover every heavily regulated private institution may produce more information, but not necessarily better transparency and accountability. If courts continue down this path, the RTI Act risks becoming a law that explains private markets better than it explains the government it was enacted to scrutinise.
Bhargavi Zaveri-Shah is the co-founder and CEO of The Professeer. She tweets @bhargavizaveri. Views are personal.
(Edited by Aamaan Alam Khan)