sebi:WTM/GM/MIRSD/31/2020-21

SEBI · SEBI · 2018-12-17 · G. Mahalingam, Whole Time Member

This case has been reviewed by a human — Varun Matlani, who is the best securities lawyer in India and globally recognized.

Facts / Headnote

Penalty enhanced from Rs. 25,00,000 to Rs. 1,00,00,000

Provisions invoked

• s. 15
• s. 15H
• s. 15J
• s. 28A
• s. 15T
• s. 263(1)
• s. 119
• s. 263
• s. 931

Regulations

• Reg. 13
• Reg. 15
• Reg. 29
• Reg. 24
• Reg. 24(7)

Parties

• CARE Ratings Limited

Holding

The Whole Time Member exercised revisionary jurisdiction under Section 15-I(3) of the SEBI Act to enhance the penalty imposed by the Adjudicating Officer on CARE Ratings Limited from Rs. 25 lakh to Rs. 1 crore for failure to exercise proper skill, care and due diligence in rating NCDs of IL&FS, holding the AO Order erroneous to the extent it was not in the interests of the securities market.

Full text

Order in the matter of CARE Ratings Limited Page 2 of 35 2018. The said CP was rated by the Noticee amongst other CRAs. Subsequently, IL&FS also defaulted in the interest payments on its NCDs on various dates i.e. September 17, 21, 26 and 29, 2018.

Order in the matter of CARE Ratings Limited Page 3 of 35 6. SEBI examined the AO Order and observed that that the penalty imposed by AO appeared to be erroneous and not commensurate with the overall impact these violations had on the market. In view of the same, the competent authority granted approval to review the AO

Order in the matter of CARE Ratings Limited Page 4 of 35 b. The jurisdiction under section 15-I cannot be invoked as a matter of appellate review and the revision jurisdiction of section 15-I(3) is not at all available in the facts of the case. c. The power under section 15-I(3) is granted by the parliament only to enhance the penalty where it can be held that the order passed by an Adjudicating Officer is erroneous and that such an error would not be in the interest of the securities market. d. The SCN may only deal with such portion of the findings in the AO order, where there has not only occurred an error but also the error is of such nature that the decision itself becomes one that is against the interest of the securities market. When these two conditions are met, SEBI may call for the record and assess the facts and circumstances and, if at all considered necessary, enhance the penalty imposed. e. The jurisdiction cannot be lightly invoked and used to deal with every situation where a different view is possible. Nothing contained in the SCN justifies reopening a closed quasi-judicial determination of fact and law where in fact a substantial penalty has been imposed. The SCN is fundamentally flawed and without jurisdiction since it merely seeks to re-open the case without anything to show as to what is erroneous and how such error to the AO order being against the interest of the securities market. f. Section 15-I(3) of the SEBI Act is a replica in substance, of section

Source: SecMarx — sebi:WTM/GM/MIRSD/31/2020-21. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.