On Friday, the Supreme Court in National Stock Exchange vs. CIC, suspended the implementation of a 2007 order issued by the Central Information Commission (CIC), which had classified the National Stock Exchange of India (NSE) as a public authority under the Right to Information Act (RTI Act).
A Bench comprising Justices Vikram Nath and Sandeep Mehta issued an interim order while admitting NSE’s appeal against a Delhi High Court ruling that affirmed the applicability of the RTI Act to the stock exchange.
“In the meantime, the execution and operation of the order passed by the Central Information Commissioner dated 7th June, 2007 shall remain stayed,”Supreme Court
The CIC had classified stock exchanges, including the NSE, as public authorities under Section 2(h) of the RTI Act. It further instructed the NSE and the Jaipur Stock Exchange to set up a system for processing applications filed under the transparency law.
The Delhi High Court had affirmed this decision, which resulted in an appeal being filed before the Supreme Court.
During the hearing, the apex court observed that transparency has assumed increasing importance.
The dispute originates from 2007, when a full bench of the CIC determined that stock exchanges were covered by the RTI Act.
The NSE contested this decision in the Delhi High Court and obtained an interim stay on July 4, 2007.
On April 15, 2010, Justice Sanjiv Khanna dismissed the NSE’s petition and upheld the CIC’s conclusion.
Justice Khanna held that although the NSE was incorporated as a private company, its recognition under the Securities Contracts (Regulation) Act, 1956 transformed it into an authority performing public functions.
The NSE subsequently lodged an appeal before a Division Bench, which on May 4, 2010, suspended the single judge’s ruling. That appeal then remained unresolved for almost 16 years.
On July 1 this year, a Division Bench comprising Justices C Hari Shankar and Om Prakash Shukla rejected the appeal and upheld Justice Khanna’s decision.
The Division Bench determined that the NSE could not operate as a stock exchange without obtaining recognition from the Securities and Exchange Board of India (SEBI).
As SEBI conferred this recognition while acting as a delegate of the Central government, the recognition order effectively established the NSE as an authority or institution exercising self-governance.
The High Court further determined that the Central government exercised extensive and pervasive control over the exchange. It concluded that the NSE met the criteria of a public authority under both limbs of Section 2(h) of the RTI Act.
The NSE stated today that it is a privately held company with no government ownership. It added that approximately 40 per cent of its shares are owned by domestic investors and 27 per cent by foreign investors.
Citing the Supreme Court’s decision in Thalappalam Service Cooperative Bank Limited v. State of Kerala, the NSE argued that it did not meet any of the criteria under Section 2(h) required to be designated as a public authority.
The Court granted a stay on the CIC order and simultaneously issued notice regarding NSE's appeal.