TaxTMI 
TaxTMI 
2023 (6) TMI 1509
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....Agency ('CRA' for short) in exercise of powers under Section 19 read with Section 12(3) of the SEBI Act, 1992 and Regulation 27 of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008 ('Intermediaries Regulations' for short). 2. The Appellant was granted registration by SEBI in 2008 as a CRA and a securities market intermediary. The Appellant has also been accredited by the Reserve Bank of India (RBI). In exercise of powers contained under the SEBI Act read with SEBI ( Credit Rating Agencies) Regulations, 1999 ('CRA Regulations' for short), the Respondent along with RBI conducted an inspection for the period October 1, 2019 to November 30, 2019 in January 2020 for ascertaining whether the Appellant has been complying with the provisions of SEBI Act and the CRA Regulations. This was the third inspection carried out by the Respondent. The first inspection was carried out for the period April 1, 2014 to September 30, 2015 and the second inspection for the period April 1, 2017 to September 30, 2018. 3. The impugned order was passed as a result of violation noticed in the third inspection and consequent enquiry proceedings. However, based on the inspection....
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.... in the inspection report seems plausible and relevant for financial firms. If two views are possible then benefit has to be given to the appellant. 8. On interaction with management, three instances were noticed of lack of interaction with management / site visit. The WTM holds that in two instances (IKF Finance Ltd and Entry India) there was lack of interaction with management as no supporting document could be produced to indicate that site visits and discussion with management took place. We find that in the case of IKF Finance, adverse inference has been drawn on the ground that there was no reference of site visit in the minutes of the rating committee. Evidence in the form of flight tickets to Hyderabad were filed to show some proof of site visit. We also find that the requirement to mention site visit in the minutes of the rating committee came into effect for the first time vide Circular dated November 8, 2019 whereas the alleged site visit was taken in May 2019. These aspects were not considered. Therefore, in our opinion, benefit of doubt can be granted to the appellant. In the case of Entry India, the fact that there was non-cooperation by the Issuer has not been dis....
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....f ratings in more than 75% of the cases and therefore violated the Circular dated November 1, 2016. In this regard we are of the opinion that the indicative timeline in an operational manual cannot be elevated to a statutory requirement and non- compliance of the timelines indicated in the internal manual cannot be a ground to impose a penalty. Further, the timeline are indicative in nature. They are not cast in stones and the completion of ratings depends on various factors which are supplied by third parties over whom the appellant has no control. These aspects have not been taken into consideration by the WTM. The Circular of 2016 does not stipulate any timeline for completion of ratings but merely requires the analysts to adhere to timelines. In view of the aforesaid, no penalty could be imposed for failure to adhere to the timelines. E. FAILURE TO ADDRESS THE ISSUE OF CONFLICT OF INTEREST. 13. The WTM has pointed out two violations regarding allegations of conflict of interest - IDFC First and IL&FS Group Entity. However, with regard to the IL&FS Group Entity, the WTM has decided not to draw an adverse inference. Thus, the allegation with regard to conflict of interest i....
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....d in the order; (iv) debarring a principal officer of the noticee from being employed or associated with any registered intermediary or other registered person for the period specified in the order; (v) debarring a branch or an office of the noticee from carrying out activities for the specified period; (vi) warning the noticee." 17. The WTM has decided to take action under Regulation 27(ii) as he arrived at the conclusion that "strict regulatory action, in my considered view, is required at this juncture to address the issue and protect the market eco system". The issue being "repeated lapses, noticed across multiple inspections conducted by SEBI, shows that governance changes recommended in earlier inspections, and monetary penalties imposed have not proved effective or deterred the Noticee (Appellant) in addressing very basic requirements of running a CRA". 18. In our view, the repeated violations, which remain after this Tribunal's order in Appeal no. 439 of 2018 (1st inspection), Appeal no. 475 of 2020 (2nd inspection) and this order, are basically two, namely, delay in recognition of default of NCDs (one instance each in three inspections) and....