RBI held to be subject to Right to Information Act

By Vivek Vashi and Krishnendu Sayta, Bharucha & Partners

The Supreme Court recently decided several transferred matters on the issue of whether the Reserve Bank of India (RBI) can deny information sought by third parties under the guise that divulging of information would violate its fiduciary relationship with banks or be prejudicial to the “economic interest” of the country. The RBI had invoked the exemptions under section 8(1)(a), (d) and (e) of the Right to Information Act, 2005 (RTI Act), to refuse disclosure of even basic information such as details of wilful defaulters.

Vivek Vashi

In RBI v Jayantilal N Mistry, the RBI argued that the RTI Act (being a general act) could not supersede the special statute under which the relevant banks had shared information. Moreover, the RBI should be permitted to refuse disclosure of information which it believed would prejudice the economic interests of the state.

The Supreme Court observed that section 22 of the RTI Act clearly stated that the RTI Act superseded all acts, including the Official Secrets Act. In any event, since the RTI Act was a later statute for a specific purpose, it would override earlier general statutes.

Krishnendu Sayta

The court held that the test under section 8 of the RTI Act was whether giving information to the public would be detrimental to the economic interests of the country. Applying the test, the court found that information in relation to currency, foreign investment and proposed expenditure may not be released but information in relation to errant bankers and wilful defaulters ought to be made available.

Upholding the RBI’s statutory duty to act in consonance with the larger public interest, the court held that RBI was duty bound to disclose information sought by the applicants. The court also came down heavily on the RBI for trying to cover up disreputable business practices of the banks, and stated that it was the RBI’s duty to take stringent action against such banks. The court expressed surprise that despite being a watchdog, the RBI was not more dedicated to disclosing information to the general public under the RTI Act. However, in the same breath, the court also recognized that the RBI cannot be required to account for its every act.

Retired central information commissioners lauded the judgment on the basis that if it is effectively implemented it may offer relief to the Indian economy, which is presently bleeding due to the large burden of non-performing assets.

States can permit liquor service in 5-star hotels only

In Kerala Bar Hotels Association & Anr v State of Kerala & Ors, the Supreme Court upheld the controversial “Liquor-Free Kerala” policy, which sought to restrict the serving of liquor to 5-star hotels in the state of Kerala. The ban was upheld on the ground that it is aimed at curtailing public consumption of alcohol, so as to protect public health and nutrition. The court also noted that Kerala was facing an acute social problem because of widespread and excessive consumption of alcohol in the state.

The hotel owners’ first argument was that in cancelling their liquor licences, the state violated their rights under article 19 of the constitution.

The court, while rejecting this argument, held that the state could use every weapon in its arsenal to regulate trade where, in the words of a 1978 judgment, the profits came from “tempting the customer to take reeling roiling trips into the realm of the jocose, bellicose, lachrymose and comatose”. Moreover, the court noted that the consumption of tobacco products as well as liquor is undeniably deleterious to human health. “Vulnerable persons, either because of age or proclivity towards intoxication or as a feature of peer pressure, more often than not, succumb to this temptation.” The court also observed that the social stigma around alcohol is still prevalent in families.

The second argument presented by the hotel owners was that the distinction between 5-star and 3-star hotels was unreasonable and therefore in violation of article 14 of the constitution.

Upholding the exemption granted to 5-star hotels, the court noted that there was a reasonable nexus as the tariff of alcohol in 5-star hotels is usually prohibitively high, which acts as a deterrent to individuals going on a binge. Further, the consumption in these hotels was only 0.8% of the state’s consumption. The court also clarified that, were it not for tourism, it would have struck down this exemption as well. Accordingly, the court concluded that the ban did not violate article 14 of the constitution.

Observing that courts must exercise restraint and avoid venturing into an evaluation of state policy, the court also noted that if a policy proves to be unwise, oppressive or mindless, the electorate has been quick to make the government aware of its folly.

This judgment has reignited historic arguments over the effectiveness of a prohibition and the consequent loss of revenue. It has also set a precedent legitimizing the ban on the sale of liquor for states such as Bihar.

Vivek Vashi is the mainstay of the litigation team at Bharucha & Partners, where Krishnendu Sayta is an associate.


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