Arecent public interest litiga- tion filed before Bombay High Court by the Indian Council of Investors alleged that the Securities and Exchange Board of India (SEBI) “violates and infringes the fundamental right of privacy available to citizens of India” by possessing the power to seek call data records (CDRs) and details of tower location from telecom service providers, and that it should “cease, desist and refrain” from calling for this information. While the court upheld SEBI’s powers, it also advised caution in the exercise of these powers, in order to avoid possible misuse and violation of an individual’s right to privacy.
‘Metadata’ versus content
CDRs are kept by telecommunication companies for billing purposes, and contain specifics on who made a call, who received a call, and how long the call lasted, but do not disclose informa- tion about call content. Thus, CDRs in effect are “metadata” – a sort of “infor- mation about information”.
Currently, nine agencies are per- mitted to request phone-tapping in India under the Indian Telegraph Act, 1885, and the rules made under it, namely: (i) the Intelligence Bureau; (ii) the Narcotics Control Bureau; (iii) the Directorate of Enforcement; (iv) the Central Board of Direct Taxes; (v) the Directorate of Revenue Intelligence; (vi) the Central Bureau of Investigation; (vii) the National Investigation Agency; (viii) the Research and Analysis Wing (India’s foreign intelligence agency); and (ix) the Directorate of Signal Intelligence, Ministry of Defence.
The court’s findings
The court reasoned that SEBI is empowered to take a wide array of actions to protect the interest of investors and that calling for CDRs is covered under the ambit of sec- tion 11 and 11C of the SEBI Act, 1992. Further, the court pointed out that SEBI possesses powers of a civil court under section 11(3) of the SEBI Act and is empowered to call for “information” from “any person” under section 11(2)(ia) of the SEBI Act.
The court also placed reliance on a decision by the Supreme Court in the Sahara case, in which the term “by such measures as it thinks fit” in section 11(1) of the SEBI Act was interpreted broadly as “couched in open-ended terms having no prear- ranged limits”. In other words, the extent of the nature and the manner of measures which can be adopted by SEBI for giving effect to the functions assigned to SEBI have been left to the discretion and wisdom of SEBI.
The high court further disagreed with the petitioner’s argument that SEBI’s power to call for CDRs is in violation of section 5(2) of the Indian Telegraph Act, as that provision only applies to intercepting calls and pro- hibiting calls/messages.
On the point raised by the peti- tioner that the officers of SEBI and the central government themselves appear to be of the view that SEBI is not empowered to call for CDRs, the court relied on the Supreme Court decision in BK Garad & Others v Nasik Merchants Co-operative Bank Ltd & Others (1983) and held that the function of interpreting the legislation is vested in the court and that the opinion of the executive is hardly relevant.
Setting the limits on how SEBI’s power is to be exercised, the court noted that SEBI cannot use it for conducting a fishing enquiry nor can it be a blanket power to hunt for information without any pending inquiry or investi- gation. Further, such information can be called for only by an officer duly authorized by SEBI and the reason for calling for CDRs must be recorded.
While SEBI has in the past used CDRs as an investigation tool, for example, during its inquiry into fraudulent trading in the shares of Pyramid Saimira Theatre Ltd, SEBI must now also pay attention to social-messaging services such as BlackBerry Messenger and WhatsApp, and internal messaging on Facebook and Linkedin – platforms which can be used by manipulators to spread sensitive information about their target stocks.
When it comes to accessing CDRs, the government seems to be inclined to expand the powers of SEBI. The chairman of SEBI has stated that SEBI has never sought and has no intention to seek the power to intercept any conversation. However, many commentators are of the view that metadata and other forms of non-content data may reveal even more about an individual than the content itself, and thus deserve equivalent protection. While none can argue against the right to privacy, its limits will constantly be tested. On the facts of this case, the protection of investors by the market regulator has clearly prevailed.
Suhail Nathani, a partner at Economic Laws Practice, and Yogesh Chande, an associate partner, represented SEBI before Bombay High Court in the above matter. Malek-ul- Ashtar Shipchandler, a trainee, assisted with research for this article, which is intended for informational purposes and does not consti- tute a legal opinion or advice.
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