The Bombay High Court’s Ruling on NSE’s Defamation Case against Moneylife

In a significant judgment delivered yesterday, the Bombay High Court rejected the National Stock Exchange’s application for injunction, in a defamation action, against the journalist Sucheta Dalal (and others), for articles published on the financial news website, moneylife.in. Justice Gautam Patel also imposed heavy damages upon the NSE, in what seems to be an acknowledgment of the need to put a halt to proliferating SLAPP lawsuits (although imposing damages in an injunction application without disposing off the main suit seems a little incongruous). The imposition of damages will be particularly controversial, but it is not an issue I will deal with here.

The case is significant because it adds to a growing body of (High Court) jurisprudence on the relationship between defamation and the freedom of speech and expression. The constitutionalisation of defamation law, which began in the 1994 judgment of the Supreme Court in R. Rajagopal’s Case, has enjoyed an uneven history over the last twenty years.  The Bombay High Court’s decision bucks an emerging trend of subjecting defamation law standardsto rigorous constitutional scrutiny.

The disputed articles effectively accused the NSE of actively permitting illicit trading advantages to users of certain high-end technology. The two articles were written on the basis of a detailed anonymous letter that was sent to Sucheta Dalal. After receipt of the letters, Ms Dalal emailed the SEBI Chairman, as well as two persons “at the helm of” NSE’s affairs, but received no reply. A reminder email and a reminder SMS were also met with silence. After this failed correspondence, the two articles were published.

NSE claimed that the accusation was false, since the illicit advantage it talked about was technically impossible to arrange. NSE’s argument, consequently, was that the articles were defamatory, and not saved by the defences of truth, fair comment, or qualified privilege (the standard defences in civil defamation law).

In dealing with this submission, Justice Patel focused at length on Ms Dalal’s attempts at investigating the veracity of the claims made in the anonymous letter, and the NSE’s refusal to furnish her with the information they then put in their plaint, in order to argue that the Moneylife articles were false (i.e., the “illicit advantage” was not technically possible). Notice, however, that the common law of defamation is a strict liability offence: i.e., a false defamatory statement results in liability for the defendant, notwithstanding the care he or she took to establish its veracity. The relevance of Ms. Dalal’s investigations, therefore, depended upon modifying the common law standard of defamation, which is what Justice Patel proceeded to do. In paragraph 22, he noted:

“Mr. Basu has also done some quite formidable legal research. The point he makes is this: that there is a material difference when the complainant plaintiff is a public persona or figure or institution, as the NSE undoubtedly is, as opposed to a private citizen. He cites, of course, the classic decision in New York Times Co. v Sullivan, for its proposition that a public official cannot recover damages in a defamation action unless he proves with convincing clarity that the statement was made with knowledge of its falsity or with reckless disregard of whether or not it was false. This standard has been generally applied to public figures, but I will for the present, set this to one side since Sullivan seems to me to be closely hinged on the First and Fourteenth Amendments to the US Constitution. Mr. Basu’s reliance on Reynolds v Times Newspapers Ltd & Ors. may be more appropriate. That seems to me to be a case closer to our conception of the law in the field, though the law it states is somewhat different, as Radhakrishnan J noticed, from our own standard. I do not think this distinction is material, given the facts of this case. The House of Lords in Reynolds inter alia reviewed the law from other jurisdictions, including ours: it referenced the Supreme Court decision in Rajagopal v State of Tamil Nadu, 16 to much the same effect as Sullivan in relation to public officials. Now if there is no doubt, and I do not think there can be any doubt, that the NSE is very much a public body, then this standard must apply. In that situation, a demonstration that the defendant acted after a reasonable verification of the facts is sufficient to dislodge a claim for an injunction and a charge of malice.”

There is one crucial advance in this paragraph. In Rajagopal’s Case, the Supreme Court – following Sullivan – limited the higher threshold for defamation to public officials. As Justice Patel correctly notes, in the United States, “public officials” has subsequently been expanded to include public figures as well as issues of public importance. Although Justice Patel refuses to adopt the Sullivan standard here, in adopting the House of Lords decision in Reynolds, he definitively extends the threshold to public bodies and public figures. This is important, because a number of SLAPP defamation suits have been brought by large-scale private corporations that are (at least arguably) performing public functions. Justice Patel’s reasoning, therefore, opens the door to heightened scrutiny being applied to private corporate defamation claims as well. Something similar had been attempted six years ago by Justice Ravindra Bhat of the Delhi High Court in Petronetwhere in a claim injunction against disclosure of confidential information, a company with 50% state shareholding, and performing the important public function of gas distribution, was held to a Pentagon Papers-level threshold. Petronet, however, did not directly deal with defamation law. The Bombay High Court’s judgment is squarely on point.

It must also be noted that Rajagopal is a highly confusing judgment, which Justice Patel attempts to clarify in at least two ways. FirstRajagopal cites both Sullivan and Reynolds, which lay down very different tests, but does not specify which of them it is adopting. Justice Patel clarifies that he is adopting the latter. SecondlyRajagopal is entirely unclear about the issue of burdens. Under the Sullivan test, the burden of showing that the defendant acted with reckless disregard of the facts is upon the plaintiff. Under Reynolds, the burden of demonstrating reasonable verification of facts is upon the defendant. Justice Patel seems to adopt the latter, when he notes:

… where there is a factual demonstration of sufficient steps being taken to ascertain the ‘other side of the story’ and this opportunity, when presented, has been ignored, no more can be expected if it is also shown that the article when published was not unreasonable in its content, tone and tenor.”

In other words, insofar as a publication relates to a public official, public body or public figure, it is enough of a defence for the defendant to show that even if the publication is false in some respect, she acted only after a reasonable verification of the facts.

Unfortunately, much of the lucidity in the judgment so far is jeopardised in a rather unfortunate paragraph 26. Here, Justice Patel notes:

“For public bodies and figures, I would suggest that the legal standard is set higher to demonstrated actual malice and a wanton and reckless embracing of falsehood though countered at the first available opportunity. I do not think it is reasonable to propose a legal standard of utter faultlessness in reportage or public comment in relation to such bodies or persons. If there is indeed a factual error, can it be said to have been made in good faith, and in a reasonable belief that it was true? The ‘actual malice’ standard seems to me to suggest that one or both of these must be shown: intentional falsehood, or a reckless failure to attempt the verification that a reasonable person would. In this case, I do not think that the Plaintiffs have met that standard, or demonstrated either intentional falsehood or a failure to attempt a verification. The burden of proof in claiming the qualified privilege that attaches to fair comment can safely be said to have been discharged.”

Unfortunately, just like Rajagopal did, this paragraph conflates two very distinct legal standards. “Actual malice” and “reckless embracing of falsehood” is the Sullivan test, which requires proof of either intentional lying, or reckless disregard of truth. “Good faith” and “reasonable belief” in truth is modeled upon the tests currently in vogue in Canada, the UK and South Africa. “Reasonableness” is one step below “recklessness”, and imposes an affirmative burden upon the publisher to take certain measures towards establishing the truth of her claims. There is a further issue with the use of “qualified privilege” without explaining what, precisely, it means. Qualified privilege has now been statutorily abolished in the United Kingdom, and carries a very different meaning in Australia (applicable to statements on matters of political importance).

It is also a little unfortunate that the judgment makes very little mention of the appropriate legal standards to be followed in deciding upon an injunction in a defamation case. The High Courts of Delhi and Bombay have taken opposite views on the issue. The correct position at common law was laid down long ago in Bonnard vs Perryman, and prohibits the grant of an injunction unless it can be shown that the defendant has almost no chance of success at trial. In an otherwise erudite judgment, the failure to deal with the common law precedent directly on point is disappointing.

As an aside, it may also be noted that this judgment has an ancillary effect upon the criminal defamation challenge that has been reserved by a two-judge Bench of the Supreme Court. In affirming that civil defamation law allows for false defamatory statements to escape liability as long as they have been made after reasonable verification, it is once again established that Indian defamation law is unique in that, as it stands, criminal defamation is more stringent than civil defamation. It is to be hoped that this fact will be considered by the Supreme Court in deciding whether to strike down or read down Sections 499 and 500 of the IPC.

To sum up: Justice Patel’s judgment is significant in that it extends the higher threshold of defamation from public officials to all public figures or public bodies. It also seems adopts the Reynolds defence of reasonable verification of facts in case of false defamatory statements, with its attendant evidentiary burdens. Depending on how you read Rajagopal, this may or may not be correct. In any event, it is important to note, once more, that Sullivan (actual malice) is not equivalent to the reasonableness standard, but is considerably more speech-protective. We still await clarity for which of those standards is to be adopted under Indian civil defamation law.

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7 Comments

Filed under Defamation, Free Speech

7 responses to “The Bombay High Court’s Ruling on NSE’s Defamation Case against Moneylife

  1. Amadeus

    I must say that the discussion on the law of civil defamation and the available defences (including the defence actually raised by / in favor of the Defendants) is quite murky in this decision.

    It is quite surprising, as pointed out, that the Court never referred to the Bonnard rule or to the Delhi HC’s decision in Tata Sons (which elaborately sets out the law on granting injunctions in defamation proceedings). But, I believe this is to a large extent because the Court was not concered with the “plea of justification” at all as can be seen from para 14 of the order. Moreover, from a reading of para 11, it appears that the Plaintiff’s arguments were on three limbs: (a) the articles were per se defamatory; (b) it was neither fair comment; (c) nor can the defendants claim any qualified privilege. From my understanding of the order, it appears that the Court has held that per se there is no defamation due to NSE’s failure to adequately respond to the issues raised by the Defendants in the articles and their attempted misdirection (see para 12). In addition, it appears that the Court has held that Ms.Dalal was entitled to the defence of qualified privilege (see para 13 & 23) and that what was stated in the articles was fair comment (see para 19 & 20).

    That being said, I would add that there is inadequate reasoning by the Court while considering the defence of “fair comment” and “qualified privilege”. I believe at certain portions of the order, the Court has conflated these two concepts, as was warned by Beaman, J. in his concurring opinion in the Full Bench decision of Surajmal B. Mehta v. B.G.Horniman, (http://indiankanoon.org/doc/34660/). It is quite surprising that the Court never referred to the decision in Surajmal’s case, and I must say there is no better exposition on the concept of fair comment and the defences in a libel action, than that of Beaman, J.

    There is also the question of whether the Court’s observation at para 26 of higher standard for public bodies and the need to demonstrate actual malice and a wanton and reckless embracing of falsehood departs from the ratio laid down in Mitha Rustomji Murzban case and Justice Beaman’s observation in Surajmal’s case that the presence or absence of malice or has little effect on the defence of fair comment, except “where it become necessary to compute the fairness or unfairness of comment and the scales are fairly evenly balanced, it would be hard indeed to exclude the influence of such a factor as malice, were it proved in the writer”.

    A.

  2. Amadeus

    on the standard of “reasonable man”:

    The Court while considering Mitha Rustomji Murzban case observes:

    “Wadia J held that even if there is criticism in the press it must be fair and while it may not be necessary to prove malice by the defendant, the test must be this: whether any reasonable person, however prejudiced or however strong of opinion, could say that the work in question was a fair comment. Even allowing latitude for personal opinion and individual prejudice, the test must be that of a reasonable, and I would suggest in this particular case, a knowledgeable person, in such matters.” (@ para 13)

    However, in Surajmal’s case, Batchelor, A.C.J., while dealing with the issue of fair comment observed that:

    “The articles must be considered rather in their entirety than by separate insistence on isolated passages, and the Jury–where there is a Jury–in our case the Judges–must decide what impression would be produced on the mind of an unprejudiced reader, who, knowing nothing of the matter beforehand, read the articles straight through.”

    This raises a quandry regarding the applicable standard from which the articles ought to have been viewed / judges.

    • Thank you for your incisive and detailed comments.

      I agree with most of what you have said. One minor point, however – you quote Beaman J.’s concurring opinion in Surajmal B. Mehta vs B.G. Horniman for the role of malice. I would suggest that Justice Beaman was using the word “malice” in its tort law context. New York Times v Sullivan, however, uses malice quite differently, as a term of art. ‘Actual malice’, according to Brennan J., is simply intentional falsehood or reckless disregard for truth. So the issue is not whether the statement was made “with malice” in its tort law sense, or even in its common usage.

      I think it’s important to note that the Sullivan actual malice rule doesn’t apply to the defence of fair comment – it applies to cases where it is admitted that the disputed statement is false (i.e., that the defence of justification cannot apply). In such situations, Sullivan says that insofar as the statement referred to a public official, the plaintiff must show not only that it is false, but that it was made with “actual malice” (i.e., an intentional lie or made with reckless disregard for truth). So the malice rule is about false statements (i.e., matters of fact) rather than fair comment (i.e., matters of opinion).

      I agree that the terms “fair comment” and “qualified privilege’ needed a little more unpacking – especially after the fraught history of the latter phrase after Reynolds!

  3. Also, given that Justice Bhat in Tata Sons expressly relies upon Article 19(1)(a) to buttress Bonnard vs Perryman, I’m not sure whether pre-constitutional (i.e., pre-19(1)(a)) cases such as Surajmal would continue to bind benches. In all jurisdictions that have constitutionalised defamation to an extent (USA, Canada, South Africa, Australia), it’s been on the basis of a right to freedom of speech and expression, which didn’t exist at the time Surajmal was decided.

  4. Pingback: NSE v. Moneywise.com defamation case: examining the new legal standards | Spicy IP

  5. Srikanth

    Be forewarned. I will digress a little bit here. I was reading this order today in connection with some work and was struck by how beautifully it was worded. Is there another sitting Indian judge (HCs or SC) who clarifies legal concepts in such consistently gorgeous prose as Justice Patel? To buttress my case, I would also like to cite his judgments in Madras Cafe, Faber Castell and Great Grand Masti.

    While it not the duty of judges to simplify concepts or write elegant prose, it is certainly refreshing to find a judge who is committed to writing orders in simple yet elegant English without compromising on logic or reasoning. Having read many orders and judgments in law school and thereafter, I note with great disappointment that this is clearly a rare skill when it comes to judges. All too often, judges either have a higher estimation of their literary abilities than they actually do (The Mishras) or are content to write in dull platitudes. The latter sort of writing is especially rife and tell tale signs are huge chunks of passages reproduced from pleadings and precedents.
    I ask because I have become a fanboy of Justice Patel and would be grateful to read judgments of other similar minded judges.

    Another attribute of a great judge, I believe, is how receptive and aware they are about the criticism directed at their orders and the effects of their orders. Judges in India give the impression that they are ensconced in ivory towers far away from the hustle and bustle of every day news, discourses and narratives playing out in civil society and public life. While this is perhaps done to shield themselves from the media’s biased iterations or majoritarian views, living in a self created bubble is definitely not the solution. In this context, Justice Patel citing Prof Shamnad’s analysis on John Doe orders and setting the record straight after the “copyright warning” fiasco seem notable.

    Also note the sly dig at India’s premier rabble rouser in this judgment itself: “The scams that beleaguered our exchanges in the past, and those that continue to occupy the time of this Court have at least in part come to light because of persons like Ms. Dalal and her fellow travellers. If regulatory agencies have been compelled to make changes, and if our own Supreme Court has felt it necessary to step in with drastic orders, it is because every oversight process has either failed or been subverted. The Plaintiffs are in error when they describe Ms. Dalal as some out-of-control lone wolf. The nation may or may not want to know; Ms. Dalal does. So do her readers. And, as it happens, so do I.”

    *wolf whistle*

  6. Pingback: The Bombay High Court’s Ruling on NSE’s Defamation Case against Moneylife – burntbutteredtoast

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