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Bombay High Court says Sebi can seek call data, but must act with care

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MUMBAI: The Securities and Exchange Board of India (Sebi) can seek call data records of any person against whom an investigation is being carried out from telecom service providers (TSPs), according to a Bombay High Court ruling.

The court said although the capital market regulator is empowered to call for information from persons associated with the securities market under the Sebi Act, it must exercise caution as this power is capable of misuse and can violate a person’s right to privacy.

“…it is made clear that such a power cannot be exercised by Sebi for conducting a fishing enquiry. It cannot be a blanket power to hunt out information without any pending inquiry or investigation. This power can only be exercised by Sebi in respect of any person against whom any investigation or inquiry is being conducted,” the court said.

“Further, such information can be called for only by an officer duly authorised by Sebi to call for information with regard to call data records from the telecom service provider,” it said. Adding that before calling for such information, the opinion of the authorised officer should be recorded in the file.

Call data records are an important evidence for Sebi’s investigation, especially in cases relating to insider trading and frauds. Last year, the Indian Council of Investors had filed a PIL asking the court to restrain the regulator from calling for call data records (CDRs) and details of tower location from telecom service providers like MTNL and Vodafone.

It alleged that the action of Sebi violates and infringes the fundamental right of privacy of an individual and was also prohibited under the Indian Telegraph Act. While responding to the petition, Sebi’s assistant legal advisor Sumit Agrawal had said in its affidavit that the regulator has not tapped or intercepted calls during the investigation, but has only called for data that was already available in the records of the telecom providers.

Sebi also said that at times telecom service providers have given and at others declined to provide information about call data records. It has acted wherever information is furnished but not taken any action against those who have not provided the information. The tapping of phone calls comes within the purview of the Indian Telegraph Act.

The department of telecommunications has drawn up the list of enforcement agencies, including the Intelligence Bureau, the Narcotics Control Bureau, the Directorate of Enforcement, the Central Bureau of Investigation, the Central Board of Direct Taxes, the Central Economic Intelligence Bureau and the Directorate of Revenue Intelligence, which can have the power.

Advocate General Darius Khambatta, who was representing Sebi, argued that Section 5(2) of the Indian Telegraph Act,1885 has no application in respect of calling for call data records from telecom service providers as the provision only applies to intercepting calls and prohibiting calls or messages. “The action of calling for CDRs from TSPs in no manner violates any fundamental rights of the citizens as it is only a static record of calls having already been made to a particular telephone/mobile number from a particular number,” the Sebi counsel said.

He also said the government has notified an ordinance empowering Sebi to seek CDRs. “In the best tradition of common law, the statutory provisions in this case give broad powers to Sebi, but the courts however provide guidance on how the power ought to be exercised so that there are checks and balances in the exercise of the powers.

The case provides such guidance to Sebi on both positive actions and restraints on its powers,” said Sandeep Parekh, founder of Finsec Law Advisors. A High Court bench of Chief Justice Mohit Shah and Justice M S Sanklecha accepted Sebi’s stand that the power in Sebi to call for the CDRs from TSPs was always available and in case there was any doubt or ambiguity, the same is removed by the Securities Law (Amendment) Ordinances issued in 2013 and 2014.