Trade Secrets and the Right to Information: Thoughts on Ferani Hotels v. State Information Commissioner [Part II]

In my previous post, I discussed the Bombay HC’s ruling in Ferani Hotels v. State Information Commissioner and Ors., in which the Petitioner attempted (unsuccessfully) to prevent the Bombay Municipal Corporation from disclosing its real estate development plans under an RTI application.

As I mentioned there, the Supreme Court has never had to issue a decision on S. 8(1)(d) of the RTI Act, which provides for the protection of trade secrets and other information of commercial confidence from disclosure.

The High Courts haven’t had much of a chance to balance trade secret protection against the RTI, either – only two cases decided by High Courts even come close to such an adjudication. In State of Jharkhand v. Navin Kumar Sinhga, the court held that S. 8(1)(d) could not be invoked to justify the non-disclosure of tender documents submitted by a successful bidder, since such information would not ordinarily be expected to be of a confidential nature; and even if it was, its disclosure would not have any effect on the competitive advantage of the successful bidder since the outcome of the tender would not be affected. (Both these premises can be challenged, but we’ll leave that for another day.)

In Tata Motors v. State of West Bengal, Tata filed a writ petition in the Calcutta HC against the State Information Commission’s order to disclose documents surrounding the cost price of the Tata Nano that were part of a contract concluded with the state government. This had all the makings of a juicy encounter, with the parties arguing on whether the documents constituted trade secrets, and Tata even pointing to a clause in the agreement protecting its contents from RTI disclosures. However, the case did not have to be decided on merits since the court held that the State Information Commission was not validly constituted.

The complex interplay between these competing interests – the protection of trade secrets on the one hand and the fostering of open government on the other, manifests itself in a number of forms. One skirmish has been the question of trade secrets utilised by Public Sector Undertakings – what standards can be put in place to ensure that a balance is struck between public oversight of their activity and the secrecy of vital business information? Another skirmish involves tenders and other contracts between private entities and public authorities – here, the secrecy interest is that of the private entity. Finally, the most complex situation arises when public authorities are asked to disclose information collected from private entities in the course of their regulatory oversight. Ferani Hotels fell within this class of disputes, but the nature of the documents requested in this case (property cards, development plans, etc.) rendered it a fairly easy case to decide – without taking any credit away from the bench for a well-reasoned judgement.

The question that I’d like to deal with is this: when an executive agency makes a determination as to whether particular information merits protection within S. 8(1)(d), what is the standard of judicial review that a High Court may employ over such a decision?

Ferani Hotels seems to have employed strong judicial review – rigorously testing each claim made in front of the State Information Commission, with the court substituting itself for the SIC in deciding the viability of each of Ferani’s contentions. While it’s understandable that a court would want to engage in a robust re-examination of a judicial decision rendered by an administrative agency (especially where there exist strong public policy justifications for disclosure as well as non-disclosure, as detailed above), strong judicial review has not been the only way in which disclosure decisions have been evaluated by courts elsewhere.

In the US, the Freedom of Information Act brought with it a similar problem – in many cases, whether or not information was proprietary in nature had to be decided by executive agencies, leading to numerous grievances from submitters of confidential commercial information. The problem was compounded by the fact that the FOIA lacked a provision that placed an affirmative duty upon administrative agencies to notify submitters of confidential information of its impending disclosure. This was resolved by establishing a new legal process – the reverse-FOIA action. The reverse-FOIA action was a child born of the legal patchwork that governed the disclosure of confidential commercial information. The FOIA, with its obvious legislative intent, always leaned towards disclosure. Executive agencies largely retained discretion to disclose information even if it fell within an exemption to the FOIA. However, the Trade Secrets Act imposed an explicit criminal prohibition on the disclosure of trade secrets. Thus, FOIA authorities who disclosed trade secrets would be liable under the TSA, and consequently such action could be challenged under the Administrative Procedure Act. Such challenges would take the form of a reverse-FOIA suit.

It’s crucial to note two things here:

1. In India, the duty to notify the submitter was hardwired into the RTI Act itself, rather than promulgated as an administrative afterthought as it was in the US (Executive Order 12600). 11 of the RTI Act clearly provides for submitters to be notified at the point when third party information is to be disclosed.
2. In India, there exists a well-established procedure to hear objections from submitters of confidential information, while the US framework does not provide submitters with formal evidentiary hearings. Further, S. 11(4) of the RTI Act bestows upon the submitter a right to appeal an adverse decision, while no such administrative appeal is provided in the US.

In light of these differences, it should be clear that the potential for unjust disclosure or non-disclosure is much higher in the US as compared to the Indian framework. Despite this, however, reverse-FOIA actions are characterised by weak judicial review, with deference being paid to the judgement of the executive agency concerned. This is because of the presumption that executive agencies, being staffed by experts in the fields they regulate, can make easier and more accurate determinations as to whether a particular piece of information is, in reality, worthy of protection. This is borne out by the manner in which our High Courts have gone about reviewing RTI disclosures – the sweeping statements in Navin Kumar Sinhga are one example, while the judgement in Tata Motors readily furnishes us with another:

“Predominantly, the documents bore arithmetical figures reached on calculations. Annexure – 1 related to certain benefits which the Government of Uttarakhand had extended to the petitioners while annexure – 2 related to the factory at Singur. Finding it difficult to understand contents of annexure – 2, I admitted my failure whereupon Mr. Pal offered assistance of a representative of the first petitioner to explain how the cost price of ‘Nano’ could be worked out from those figures.”

The Ferani bench appears to have adopted strong judicial review over third party objections to RTI Act disclosures of confidential commercial information, but without directly answering this question. Despite the American treatment of reverse-FOIA suits, the fact is that general legal principles require that the High Court, in Indian “reverse-RTI” suits, act as an appellate court – conducting a de novo evaluation where questions of law are concerned, and showing deference to the SIC or other administrative authority where questions of fact are concerned (unless there exists a manifest error on the face of the record).