Regulatory authorities — themselves mini-states with legislative, executive and quasi-judicial power all rolled into one — tend to be the worst offenders when it comes to judicial indiscipline. Despite the law being declared by courts, trenchant judicial indiscipline abound. A simple example is the denial of inspection of the record to a person accused of violating the regulations. Courts have time and again ruled that full inspection of the material on record — not just material used to level the accusations but also material that would undermine the allegations — must be provided.
When a regulator accuses you of violating the law, the regulator must not just tell you what it has against you, but must also give you access to all the material so that you are able to use it to undermine the accusations. If one can show that the material available with the regulator would lead no reasonable man to concluding that there is a violation, that is the process by which the truth is arrived at. Yet, in practice, even in this day and age, a clear and fair inspection of the entire record continues to be denied.
On a case by case basis, depending on the degree of aggression or timidity of the person accused of violation, courts have to be approached to get access to the basic material on record during an inspection process. A sweeping rejection of any request for inspection remains par for the course. A stellar exception to the rule is the Competition Commission of India, which has even codified a standard operating procedure for conducting a file inspection. Other regulators, such as the capital market regulator, are known to demonstrate an arbitrary variance in the approach of different officers and different whole-time members in how they would enable inspection.
When courts are approached, the regulator is prone to argue that the investigation material entails a lot of confidential information that cannot be shared. Courts could then direct that the report be provided with “sensitive” portions being blanked out. In one instance it so transpired that the same investigation report was inspected in two parallel proceedings only to find that the report that was provided in one of the proceedings had blanked out every finding of exoneration by the investigation team.
Likewise, despite superior courts having clearly declared the law, the authority below can keep reiterating its stance, blithely arguing that the decision has been appealed against. The Supreme Court has often ruled that such an approach is abhorrent, but with no one having to face any consequence for unleashing such chaos, the rulings remain mere exhortations. When the law is declared by a higher court with its interpretation, society is entitled to arrange its affairs in a manner that is consistent with known compliance. Yet, when regulators violate the interpretation laid down by the superior courts, society gets fearful — not of the law but of the law enforcer.
The Ease of Doing Business
rankings can never model for this kind of unease with conduct of business in any jurisdiction. It is only when state agencies see value in the rule of law that they would be able to attract real investment into business without having to tout the rankings that a statistical model throws up.
The author is an advocate and independent counsel. Tweets @SomasekharS