Raising the threshold for defamation
Clockwise: Justice Patel, The NSE, and the Moneylife story
Although it has already been stayed, Justice Gautam Patel’s recent order in the defamation case filed by the National Stock Exchange (NSE) against Moneywise Media Pvt. Ltd. is a must read for anybody interested in the defamation litigation being waged between powerful private corporations and the media.
The lawsuit by the NSE against Moneywise was instituted after the publication of a news report on the website of moneylife.in by Sucheta Dalal alleging that the NSE was actively permitting some traders to conduct illegal, high frequency, trading. The story was based on an anonymous whistle-blower’s letter to the market regulator SEBI with the editors copied on it.
The story was published by the editors only after they sought the comments of the NSE and SEBI. The NSE responded to this story by filing a Rs. 100 crore defamation suit against Moneywise and its editors. Unlike the usual tale of such lawsuits, which are left to hopelessly meander through the legal system for years without pronouncement of a judgment, this case saw the delivery of a relatively quick interim order by Justice Gautam Patel.
Not only did Justice Patel refuse to grant the NSE any interim orders, he also awarded the defendants normal costs of Rs. 1.5 lakhs each along with punitive and exemplary costs of Rs. 47 lakhs, the amount of which would go to two hospitals. The award of such exemplary costs at the interim stage, before the trial, is quite irregular and appears to be grandstanding by Justice Patel.
The ‘grandstanding’ aside, the judgment is important because not only does it raise the threshold for a successful defamation action, it is also perhaps the first time that a judge has gently poked fun at a much beloved news anchor. At paragraph 25, Justice Patel comments: “The nation may or may not want to know; Ms. Dalal does. So do her readers. And, as it happens, so do I.” Perhaps I’m reading too much into that sentence but it does look like the Hon’ble Justice is mocking our beloved Arnab Goswami, whose favourite rhetorical phrase while grilling his guests at 9 o’clock Super Primetime on Times Now is: “The nation wants to know”. The phrase has inspired countless memes, commentary and also an entire website!
Now, let’s focus on how Justice Patel raises the threshold for a successful defamation action. The traditional standard of defamation, as explained in the 1941 case of Mitha Rustomji Murzban, has been one where the defendant is required to establish that his allegedly defamatory comments are actually fair comments supported by the facts.
The onus is therefore on the defendant to establish that his or her comments would appear fair to a reasonable person on the basis of the underlying facts. More often than not, that standard means the allegedly defamatory statement actually needs to be true or at least close to the truth.
Such a standard is rather onerous because it does not look at intent. Thus even a genuine error could attract liability. In legal terms, this is called the strict liability standard. Such a standard leaves little or no room for error and greatly increases the risk of liability for journalists. Take for example the case where Times Now was found to have defamed a retired Supreme Court judge merely because it mistakenly posted a photograph of the judge in a new report. The court came to this conclusion despites Times Now pleading that it had made a genuine error and had publicized the same on its channel.
Justice Patel seems to argue that even under this strict liability standard, Moneylife is protected.
However, with all due respect to the judge, that would appear to be a wrong conclusion for the simple reason that Moneylife’s entire report was based on an anonymous tip-off and there was no way for Moneylife to actually establish the veracity of the news report because both the NSE and SEBI did not respond to comments and I’m guessing Moneylife could not contact the source because it was anonymous.
The next part of the judgment is perhaps more convincing because Justice Patel essentially alters the test for defamation cases by citing two important foreign judicial precedents.
The first was the case of the New York Times v. Sullivan, a pivotal US Supreme Court case where the court had basically held that a public official could not claim damages for allegedly defamatory statements unless it could be proved that the statement was made with knowledge of it being false.
The second is the case of Reynolds v Times Newspapers Ltd. & Ors., a British judgment where the court laid down a list of the following ten criteria to determine whether a statement is in fact defamatory:
“1. The seriousness of the allegation. The more serious the charge, the more the public is misinformed and the individual harmed, if the allegation is not true.
2. The nature of the information, and the extent to which the subject matter is a matter of public concern.
3. The source of the information. Some informants have no direct knowledge of the events. Some have their own axes to grind, or are being paid for their stories.
4. The steps taken to verify the information.
5. The status of the information. The allegation may have already been the subject of an investigation which commands respect.
6. The urgency of the matter. News is often a perishable commodity.
7. Whether comment was sought from the plaintiff. He may have information others do not possess or have not disclosed. An approach to the plaintiff will not always be necessary.
8. Whether the article contained the gist of the plaintiff's side of the story.
9. The tone of the article. A newspaper can raise queries or call for an investigation. It need not adopt allegations as statements of fact.
10. The circumstances of the publication, including the timing.”
Of these 10 criteria, Justice Patel relied on 2, 4, 5, 6, 7 and 9 to insulate Moneylife and its editors from liability. The one overwhelming factor which appears to have tilted the case in favour of the defendants was the fact that they made repeated attempts to seek comment from the NSE before publishing the story.
The NSE never replied. The fact that the NSE didn’t disclose this in its pleadings certainly didn’t help its case. Justice Patel marries the Reynold’s defence with the Sullivan immunity for comments against public officials when he points out that the NSE is basically a public body because of its function. In the relevant part, he states:
“For public bodies and figures, I would suggest that the legal standard is set higher to demonstrate 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.”
This new standard prescribed by Justice Patel, requires persons instituting defamation proceedings to now establish that the defendant published or spoke certain words with actual malice. A failure to establish malice will excuse the defendant from any liability. Such a standard is a far cry from the traditional strict liability standard followed for defamation in India, where intent behind the words is rarely ever looked into by the Court. More importantly, it shifts the burden of proof to the Plaintiff unlike the old standard where the Defendant was required to establish that it had made a fair comment. Under the actual malice standard factual errors, such as the one committed by Times Now, would be entirely excused from liability.
For journalists and bloggers, the above judgment of Justice Patel must come as a big relief, especially in the recent climate where business houses have either been suing for defamation or threatening defamation proceedings against them.
For example, Caravan has been sued by Essar and IIPM. MCX, the commodities stock exchange, had instituted criminal defamation proceedings again Professor Ajay Shah. Natco, a pharma company had sued Professor Shamnad Basheer for his writing on SpicyIP. BSES sued BCCL. BCCL threatened defamation proceedings against 22 year old law student Aparajita Lath for her posts on SpicyIP covering a trademark litigation involving the Times group.
If the ‘actual malice’ standard is upheld on appeal it will herald a new era for defamation law in India. Unfortunately, it may also lower the already pathetic levels of due diligence followed by the Indian media.
For those of you interested in an academic dissection of the judgment, do read Gautam Bhatia’s blog here.
Prashant Reddy Thikkavarapu is a lawyer.