Author: Gauri Shukla, Student at Jagran Lakecity University, Bhopal, [M.P]
Introduction
The importance of information and information relations cannot be underestimated in the modern world. The swift development of information and communication technology (ICT) has presented the world with a new challenge: striking a balance between the right to privacy and the ease of information transmission. When explained in the context of banking, this turns into an issue of bank secrecy.
Banking secrecy refers to the obligation of banks to keep their customers’ financial information confidential, ensuring privacy and fostering trust in the banking system. But this idea often clashes with the concept of public interest, which calls for responsibility and transparency, particularly when it comes to matters involving public funds, corruption, or financial irregularities.
While banking secrecy protects individual rights, public interests prioritize the greater good, such as exposing wrongdoing or ensuring regulatory oversight. This issue was notably addressed in the legal friction of Reserve Bank of India v. Jayantilal N. Mistry. This case raised a constitutional question: Can financial institutions and regulators withhold information under the veil of fiduciary duty and confidentiality when the larger public interests are at stake?
Use of Legal Jargon
Fiduciary Relationship: A relationship is a bond wherein one party (the fiduciary) is trusted to act in the best interests of another (the principal or beneficiary).
Public Interests Overrides: A principle allowing disclosure of information if the public good outweighs the need for secrecy.
RTI Act: A statutory act that empowers citizens to request information from public authorities.
Exemption under Section 8(1): Specific grounds on which disclosure of information can be denied under the RTI Act.
Regulatory Mandate: The legal and ethical duty of regulators like the RBI is to supervise financial institutions transparently.
Abstract
The RBI v. Jayantilal N. Mistry case serves as a seminal decision on the balance between transparency and confidentiality in the Indian banking sector. The Apex court in its judgment stated that the RBI, being a statutory regulator, is not in a fiduciary relationship with the banks and hence cannot withhold information on that ground. The ruling emphasized that public interest in maintaining transparency in the banking sector outweighs the banks’ interest in confidentiality. The reach of the Right to Information Act was greatly broadened by this judgment, particularly with reference to financial institutions and regulatory agencies
.
The Proof
Citation: Reserve Bank of India v. Jayantilal N. Mistry, AIR 2021 SUPREME COURT 2180
Bench: Vineeta Saran, L. Nageswara Rao
The main point of contention in this case was the conflict between the RTI Act’s Sections 8(1)(e) and 8(1)(j), which safeguard personal and fiduciary information, while Section 8(2) permits its disclosure when it is more in the public interest.
An RTI activist, Jayantilal Mistry, sought information from the RBI concerning the audit reports and the classification of banks under asset quality reviews. But the request was denied by the RBI, citing fiduciary connections with the relevant institutions. When Mistry approached the Central Information Commission (CIC), it directed the RBI to furnish the information. Later. The RBI challenged the order, eventually leading to the Supreme Court’s judgment.
Case Laws
Reserve Bank of India v. Jayantilal N. Mistry, (2016) 3 SCC 525
Facts—
In 2015, the RBI was ordered by the apex court to disclose the information in the public interest.
It was held by the court that the RBI did not have a fiduciary relationship with banks or any financial institutions.
Rather, the RBI was mandated by law to protect the interests of the banking industry, the nation’s economy, and the public depositors.
In the Girish Mittal v. Parvati V. Sundaram case, a contempt petition was brought against the RBI in 2019. The SC, again, directed the RBI to make necessary disclosures, but the RBI failed to follow through on this directive.
The RBI was trying to submit a review petition under the pretence of a recall application, the Supreme Court noted. The RBI should adhere to the 2015 order, the court reaffirmed.
Issues
Does the RBI hold the authority to deny disclosure under the RTI Act by claiming a fiduciary relationship with banks?
Can economic interests and commercial confidentiality be considered valid grounds under the RTI Act to withhold such regulatory information?
Does the RTI Act override other laws containing confidentiality clauses, such as the Banking Regulation Act?
Does the CIC hold the power to direct the RBI to disclose information despite the RBI’s claim of potential harm to the banking system?
Judgment and Reasoning
The RBI’s claim of a fiduciary relationship was rejected; it regulates banks for the public, not on behalf of banks.
Transparency overrides confidentiality when public interest is involved.
RTI Act provisions override conflicting secrecy clauses in other laws.
CIC has the authority to order disclosure if exemptions are not validly applied.
Held
The CIC’s order was upheld by the Supreme Court, directing the RBI to disclose information unless specific, valid exemptions apply. Regulators must act in the public interest, and citizens have the right to know how public institutions function.
Principle—
Regulatory bodies are meant to act in the public interest and cannot shield unlawful or poor financial conduct behind confidentiality clauses.
Reserve Bank of India v. Santosh Kumar, AIR 2021 SC 1370
This case reaffirmed and reinforced the RBI’s post-Jayanti Lal stance, stating that information maintained by the RBI must be disclosed and shared if it serves the public interest, regardless of the source of transmission, even if it is received from third parties.
Central Public Information Officer, Supreme Court v. Subhash Chandra Agarwal, (2019) 11 SCC 404
It was held that the judiciary is also subject to the RTI Act, reinforcing the message that no public institution is exempt from transparency.
Union of India v. Association for Democratic Reforms, (2002) 5 SCC 294
According to the Supreme Court’s ruling, voters have a fundamental right to know the background of the people running for office. The “right to know” premise was expanded to include the general public’s interest in economic governance.
Analysis
Role of RBI: watchdog or safe-keeper?
In the past decade, the RBI has protected banking secrecy by frequently putting the system’s stability and trust ahead of public disclosure. This instance, however, called into question the notion that maintaining confidentiality inevitably promotes financial integrity.
The ruling noted that banks’ wrongdoings, such as poor loans, fraud, or regulatory violations, cannot be shielded by confidentiality. The court emphasized that the RBI has a responsibility to act in the public interest as a regulator and not on behalf of the private interests of banks.
Public Interests vs. Fiduciary Duty-
Section 8(1)(e) of the RTI Act was clarified by the SC in its ruling to provide a clear interpretation of it, that the RBI does not share a fiduciary relationship with banks as it is not acting on their behalf. On the contrary, the RBI supervises banks on behalf of the public, thereby making itself accountable to the people.
Furthermore, Section 8(2) of the RTI Act states that even if information is exempt from disclosure under Section 8(1) or the Official Secrets Act, it must be disclosed if the public interest outweighs the potential harm to the protected interests. Simply put, the public interest can override the reasons for keeping certain information secret.
Impact on Banking Sector and Regulatory Transparency
Given the rise in non-performing assets (NPAs), intentional defaulters, and regulatory failures, the ruling was viewed as an advancement in the right direction towards democratic accountability.
Critics warned, however, of the potential erosion of depositor confidence and a chilling effect on frank disclosure during inspections. The contempt proceedings resulted from the RBI’s initial resistance to enforcing the judgment.
Eventually, in 2019, the RBI issued a circular directing the disclosure of such information under other valid reasons, thus accepting the apex court’s reasoning.
Future Complications: Privacy and Data Protection Concerns
The case highlights significant issues for the future, given the impending enactment of the Digital Personal Data Protection Act and the growing digitization of financial data:
Is it permissible to share specific borrower information with the public interest?
What measures will be in place to stop sensitive financial data from being misused?
How can India strike a balance between public accountability and informational privacy, which is a fundamental right?
These concerns indicate that while the Jayanti Lal case advanced transparency, it also started a discussion about Indian data protection jurisprudence.
Conclusion
The RBI v. Jayantilal N. Mistry case remains a landmark in administrative transparency and accountability. It established that public regulators cannot hide behind outdated notions of secrecy when governance and financial integrity are at stake. The judgment made it clear that fiduciary duties do not override public interest, especially in regulatory functions. While challenges remain in balancing transparency and confidentiality, the judgment has undeniably strengthened the right to information and set the foundation for further reforms in financial disclosure practices.
Reference
https://theamikusqriae.com/reserve-bank-of-india-v-s-jayantilal-mistry/#:~:text=FACTS%20OF%20RESERVE%20BANK%20OF%20INDIA%20V%2FS%20JAYANTILAL%20MISTRY&text=The%20court%20held%20that%20the,economy%2C%20and%20the%20banking%20sector.
https://rti.gov.in/rti-act.pdf
https://www.thehindu.com/opinion/editorial/transparency-in-banking/article26381289.ece
https://www.casemine.com/judgement/in/66329c9dffc4ed0dfd7cae8c
https://privacylibrary.ccgnlud.org/case/central-public-information-officer-supreme-court-of-india-vs-subhash-chandra-agarwal
https://globalfreedomofexpression.columbia.edu/cases/union-india-uoi-v-respondent-association-democratic-reforms-another-peoples-union-civil-liberties-pucl-another-v-union-india-uoi-another/
https://www.livelaw.in/top-stories/supreme-court-orders-rbi-disclose-information-under-rti-149697
FAQs
Why did the RBI deny information under the RTI Act?
The RBI asserted that disclosure might undermine trust and destabilize financial institutions, citing fiduciary responsibility and economic interest under Section 8(1)(a) and 8(1)(e) of the RTI Act.
What was the Supreme Court’s main reasoning?
As a regulator, the court ruled that the RBI has a duty to the public and not to the banks it supervises. Therefore, it cannot claim a fiduciary relationship to avoid disclosure.
Does this mean all banking information is now public?
Not all. Information that is exempt under other valid RTI exemptions or concerns unrelated to personal data may still be withheld. However, inspection reports, defaulter lists, and regulatory actions are now more open to public scrutiny.
Can private banks also be made to disclose information under RTI?
Private banks are not directly under RTI. However, information submitted by them to the RBI or any public authority can be disclosed by that authority if it serves the public interest.
Has the RBI fully complied with the judgment?
Initially resistant, the RBI eventually issued guidelines for partial compliance. However, transparency activists argue that the spirit of the judgment is still being diluted in practice.
