The Securities Appellate Tribunal (SAT) on Tuesday set aside a Securities and Exchange Board of India (Sebi) order cancelling the licence of Brickwork Ratings India Ltd for repeatedly violating norms related to credit ratings.
The Securities Appellate Tribunal (SAT) on Tuesday set aside a Securities and Exchange Board of India (Sebi) order cancelling the licence of Brickwork Ratings India Ltd for repeatedly violating norms related to credit ratings.
A SAT bench led by Justice Tarun Agarwala said “considering the totality of the violations, we are of the opinion that the alleged violation of routine matters is not deliberate or fraught with mala fides or fraud and therefore cannot result in the cancellation of the licence.”
A SAT bench led by Justice Tarun Agarwala said “considering the totality of the violations, we are of the opinion that the alleged violation of routine matters is not deliberate or fraught with mala fides or fraud and therefore cannot result in the cancellation of the licence.”
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In its order, Sebi cited delayed default recognition and failure to document meetings with management and undertake site visits as the reasons for its decision to cancel the licence. The rating company also failed to undertake an independent analysis of the projection provided by the issuer, according to Sebi.
In its ruling, SAT directed Sebi to pass fresh orders on the quantum of penalty to be imposed on Brickwork other than the cancellation of the licence after providing Brickwork with an opportunity for a hearing.
“The tribunal’s order is likely to be appealed before the Supreme Court,” said a senior counsel familiar with the matter.
Citing SAT’s earlier order in the matter of Jindal Cotex Ltd and others vs Sebi, the tribunal held that Sebi (Intermediaries) Regulations, 2008, require Sebi to pass appropriate orders.
“In our opinion, the order of cancellation of the licence for the violations committed by Brickwork is unjustified and is not commensurate with the alleged violations,” said the 15-page order by SAT.
The order comes 7 months after the market regulator, on 6 October 2022, directed the rating firm to wind down operations within six months. It also restrained the company from taking any new clients or fresh mandates after the order was passed.
Sebi held Brickwork failed to exercise proper skill, care, and diligence while discharging its duties. However, in its interim order on 14 October 2022, SAT stayed the cancellation of the licence but allowed the restraint on the onboarding of new clients.
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