Saturday, March 28, 2009

RTI and the Corporate Sector

The Right to Information Act, 2005 has been successful in inducing transparency in the decision-making process of the government. However, it has been reported, quoting the Chief Information Commissioner, that the there is a need for the concept of right to information (RTI) under the Act to be “directly applicable to corporate houses”. The report further states:


“[The Chief Information Commissioner] suggested that there should be different mechanisms for eliciting information from them. He said there was a possibility of the authority denying information related to corporate houses and other business concerns citing section 8(d) of the RTI Act. This section of the Act says that there shall be no obligation to give any citizen information, including commercial confidence trade secrets or intellectual property, the disclosure of which may harm the competitive position of a third party, unless the competent authority is satisfied that larger public interest warrants the disclosure of such information. Habibullah said the CIC plans to submit a proposal to bring corporate houses under the direct purview of the RTI Act.”


It is not entirely clear if, under this proposal, companies will be directly foisted with obligations to release information, but such a move would be wrought with several difficulties:


1. The Act currently applies to information that is “held by or under the control of any public authority”. Hence, companies in the private sector are not bound to release any information under the Act. It appears that any change to this position, as proposed, would require legislative amendment.


2. As the report above states, private information, if released inappropriately, could be subject to misuse, as in the case of confidential information that may harm the competitive position of the company.


3. Finally, from a regulatory perspective, it is not as if companies are devoid of obligations to ensure transparency. There exist fairly elaborate provisions under the Companies Act as well as the securities regulation (comprised in the SEBI Act, Securities Contract (Regulation) Act and the various regulations and guidelines issued under them, as well as the listing agreement with the stock exchanges) that establish a regime for release of information by companies, with careful regard for some of the sensitivities involved in corporate information. Inappropriate releases can result in disruption of stock markets. Considering these sensitivities, it will not augur well for the RTI principles to cover release of information by companies as it could conflict with information rights provided under securities laws. The purpose here is not to advocate opacity in the corporate sector: it is just that the principles that apply to the public sector (such as RTI) cannot be directly used in the private sector.

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