SC-2010-‘fiduciary relationship’ In Reserve Bank of India
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 10044 OF 2010
CENTRAL PUBLIC INFORMATION OFFICER,
SUPREME COURT OF INDIA ….. APPELLANT(S)
VERSUS
SUBHASH CHANDRA AGARWAL ….. RESPONDENT(S)
W I T H
CIVIL APPEAL NO. 10045 OF 2010
A N D
CIVIL APPEAL NO. 2683 OF 2010
J U D G M E N T
SANJIV KHANNA, J.
Appeal No. 10044 of 2010 & Ors. Page 44 of 108
33. In Reserve Bank of India (supra) this Court had expounded upon the expression ‘fiduciary relationship’ used in clause (e) to subsection (1) of Section 8 of the RTI Act by referring to the definition of ‘fiduciary relationship’ in the Advanced Law Lexicon, 3rd Edition, 2005, which reads as under:
“57. [...] Fiduciary relationship. — A relationship in which one person is under a duty to act for the benefit of the other on matters within the scope of the fiduciary relationship. Fiduciary relationship usually arises in one of the four situations: (1) when one person places trust in the faithful integrity of another, who as a result gains superiority or influence over the first, (2) when one person assumes control and responsibility over another, (3) when one person has a duty to act for or give advice to another on matters falling within the scope of the relationship, or (4) when there is a specific relationship that has traditionally been recognised as involving fiduciary duties, as with a lawyer and a client, or a stockbroker and a customer.”
Thereafter, the Court had outlined the contours of the fiduciary relationship by listing out the governing principles which read:
“58. [...] (i) No conflict rule — A fiduciary must not place himself in a position where his own interest conflicts with that of his customer or the beneficiary. There must be ‘real sensible possibility of conflict’. (ii) No profit rule — A fiduciary must not profit from his position at the expense of his customer, the beneficiary.
(iii) Undivided loyalty rule — A fiduciary owes undivided loyalty to the beneficiary, not to place himself in a position where his duty towards one person conflicts Civil with a duty that he owes to another customer. A consequence of this duty is that a fiduciary must make available to a customer all the information that is relevant to the customer’s affairs.
(iv) Duty of confidentiality — A fiduciary must only use information obtained in confidence and must not use it for his own advantage, or for the benefit of another person.”
34. Fiduciary relationships, regardless of whether they are formal, informal, voluntary or involuntary, must satisfy the four conditions for a relationship to classify as a fiduciary relationship. In each of the four principles, the emphasis is on trust, reliance, the fiduciary’s superior power or dominant position and corresponding dependence of the beneficiary on the fiduciary which imposes responsibility on the fiduciary to act in good faith and for the benefit of and to protect the beneficiary and not oneself. Section 8(1)(e) is a legal acceptance that there are ethical or moral relationships or duties in relationships that create rights and obligations, beyond contractual, routine or even special relationships with standard and typical rights and obligations. Contractual or non-fiduciary relationships could require that the party should protect and promote the interest of the other and not cause harm or damage, but the fiduciary relationship casts a positive obligation and demands that the fiduciary should protect the beneficiary and not promote personal self-interest. A fiduciary’s loyalty, duties and obligations are stricter than the morals of the market place and it is not honesty alone, but the punctilio of an honour which is the most sensitive standard of behaviour which is applied {See – Opinion of Cardozo, J. in Meinhard v. Salmon17}. Thus, the level of judicial scrutiny in cases of fiduciary relationship is intense as the level of commitment and loyalty expected is higher than non-fiduciary relationships. Fiduciary relationship may arise because of the statute which requires a fiduciary to act selflessly with integrity and fidelity and the other party, that is the beneficiary, depends upon the wisdom and confidence reposed in the fiduciary. A contractual, statutory and possibly all relationships cover a broad field, but a fiduciary relationship could exist, confined to a limited area or an act, as relationships can have several facets. Thus, relationships can be partly fiduciary and partly non-fiduciary with the former being confined to a particular act or action which need not manifest itself in entirety in the interaction and relationship between two parties.
What would distinguish non-fiduciary relationship from fiduciary relationship or an act is the requirement of trust reposed, higher standard of good faith and honesty required on the part of the fiduciary with reference to a particular transaction(s) due to moral, personal or statutory responsibility of the fiduciary as compared to the beneficiary, resulting in dependence of the beneficiary. This may arise due to superior knowledge and training of the fiduciary or the position he occupies