TaxTMI 
TaxTMI 
2025 (11) TMI 1209
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....Dada, learned Senior Advocate for the respondent. 3. Brief facts of the case are, CARE Ratings Ltd. ('CARE' for short) is a SEBI and RBI Reserve Bank of India registered 'credit rating agency'. It is listed on BSE BSE Ltd. and NSE National Stock Exchange of India Ltd. SEBI received complaints from December, 2018 onwards alleging that the two noticees, namely, Shri S.B. Mainak, Non-Executive Chairman and the appellant herein (Shri Rajesh Mokashi, Managing Director) were interfering with the rating process and granting AAA ratings to the clients who were paying higher fee. SEBI forwarded a complaint to the CARE with an advice to appoint an independent auditor to enquire into the allegations. CARE appointed Borkar & Muzumdar, Chartered Accountants to conduct the enquiry. The report submitted by Borkar & Muzumdar was not accepted by SEBI and SEBI instructed CARE to appoint an independent law/audit firm to examine the allegations in the complaints. Accordingly, Ernst & Young LLP ('E&Y' for short) was appointed as the forensic auditor. After considering E&Y's report, SEBI directed CARE to institute a full- fledged inquiry. Accordingly, Hon'ble Justice Shri B.N. Srikrishna, former J....
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....€¢ SEBI has ignored the fact that in the cross examination of several employees, whose WhatsApp messages have been considered by the SEBI have stated that there was no pressure from the appellant in the rating decision. 6. In substance, appellant's case is that Justice B. N. Srikrishna report was based on the very same E&Y report and the statements recorded by E&Y. SEBI has concurred with the said report except with regard to the allegation of interference in the rating of DHFL. The impugned order is based on misinterpretation of Justice B. N. Srikrishna report and incorrect appreciation of evidence on record. 7. In reply, Shri Rafique Dada, Senior Advocate supporting the impugned order strongly urged that CARE's ratings seriously affected the securities market because the investors would be guided by its ratings. The WTM has recorded cogent reasons in support of the impugned order. 8. It is pleaded in the reply and it was argued during the hearing that Justice B. N. Srikrishna report was found to be reliable in all respects except the findings in the case of DHFL for reasons stated in para No.107 of the impugned order. 9. It is urged in the written submissions that ....
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.... The next meeting was held on December 31, 2018 and it was deferred. 16. The next meeting was on January 18, 2019 and it was headed by Mr. Milind Gadkari. The Committee decided to keep the rating under 'Credit watch'. 17. The last meeting was held on January 25, 2019 and it was headed by Mr. Arun Kumar. 18. During the course of investigation the statements of employees of CARE have been recorded. The statements of following are relevant. a. Ms. Revati Kasture - Chairman of Rating Committee. b. Mr. Arun Kumar - Chairman of Rating Committee. c. Mr. Mithul Budh bhatti - Member of Rating Committee d. Mr. Ranjan Sharma - Member of Rating Committee e. Mr. Ravi Dasari - General Head of Rating Team 19. Before analyzing the evidence, we may record that 'Rating Team' of a rating agency comprising of analysts prepares a rating note and it is placed before the rating committee. The composition of the rating committee is decided by the Chief Rating Officer (CRO). It is the rating committee which independently assesses the information received from the client and decides the rating to be assigned to the client. In case, the rating committee requires any further informa....
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....the process of rating and influenced the outcome of the rating committee's decision. It is not possible to accept this charge as proved." (Emphasis Supplied) 25. Finally, it is held in the Justice B.N. Srikrishna report as follows: "22. In my opinion, there is no substance in the charges levelled against Mr. Rajesh Mokashi with regard to the allegation that he had interfered with the rating process and influenced the ratings of DHFL, Yes Bank or ILFS." (Emphasis Supplied) 26. Thus, the finding in Justice B. N. Srikrishna report is unambiguous holding that there is no evidence to suggest that there was any interference or influence by the appellant. But unfortunately the WTM has proceeded on the incorrect premise that the Justice B. N. Srikrishna report was considering the question whether interference by the appellant had an 'impact' on the rating decision by recording thus: "107. .............. I concur with the conclusions reached in the said report on all issues barring the allegation against Noticee 2 for interfering in the rating of DHFL, for the following reasons: a. The report considers the question of whether the interference by Notice....
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....en conveniently left out and it reads as follows: "Q. 19. Is it possible for a single person in the Rating Committee to decide the rating outcome in a case? Ans: Rating Committee works on a consensus basis, so while members can have different views they have to deliberate and arrive at a consensus. Q. 20. Have you ever recorded a dissent in a Rating Committee Meeting? Ans: In my capacity as a Rating Committee Member, No. Q. 21. Has anybody in any rating committee meeting that you have attended recorded dissent? Ans: No." 32. Although, Mr. Budh bhatti has stated that the recommendations were influenced by discussions with Mr. Mokashi, he has admitted in his cross examination that neither he nor any other member of rating committee had recorded 'dissent'. A careful evaluation of the evidence on record does not support SEBI's case that the appellant had influenced the rating process. 33. A conjoint reading of pleadings on record, the oral evidence and the written submissions leads to an irresistible inference that the WTM has grossly erred in recording a distorted finding from Justice B.N. Srikrishna report, which has resulte....