SEBI’s problem is its chronic discomfort with the rule of law

If SEBI is to command respect rather than reluctant compliance, it must accept that effective regulation and the rule of law are not adversaries

- Deepak Sanchety

The Delhi High Court's recent judgement in Siddharth Shankar vs SEBI, arising from a broker default, should prompt institutional introspection within SEBI. Experience suggests otherwise. SEBI has often dragged such matters to the Supreme Court. This case exposes a persistent resistance to constitutional fairness, even after clear and binding guidance from the Supreme Court. The dispute was straightforward. The petitioner sought access to the internal report prepared before initiating criminal prosecution. In Takano (2022), the Supreme Court had already settled that disclosure obligations turn on relevance and nexus to the decision-making, not on the regulator's claim of what it has "relied upon". Despite this, SEBI chose to contest disclosure before the High Court, advancing arguments already rejected at the highest level. This reflects an institutional discomfort with constitutional constraints.

The right to a fair trial under Article 21 separates lawful and arbitrary power. Courts have repeatedly held that all material influencing a decision must be disclosed. Yet, SEBI behaves as though disclosure is a matter of its grace rather than a constitutional obligation. SEBI is among the most powerful regulators, armed with sweeping powers. It has otherwise earned a strong reputation over the past three decades, especially in market development. When such an institution routinely starts contesting basic fairness, the issue ceases to be one of legal interpretation and becomes one of organisational culture, a culture that is against the motto close to the heart of the central government, promoting ease of doing business.