The Securities Appellate Tribunal (SAT) has ruled that the SEBI has the power to initiate proceedings under Section 15-I(3) of the SEBI Act against India Ratings and Research Pvt Ltd and enhance the penalty on the rating agency for violating norms in granting credit rating to the crisis-ridden IL&FS.
A penalty of Rs 25 lakh was imposed on India Ratings in December 2019 for violating the Code of Conduct under the Securities and Exchange Board of India (Credit Rating Agencies) Regulations, 1999 while granting credit rating to IL&FS for the financial year 2018-19.
After the order, the SEBI issued a second show cause notice dated January 28 by exercising powers under Section 15-I(3) of the SEBI Act directing the agency to show cause, why the penalty should not be enhanced as in their opinion the order was not in the interest of the securities market.
"Having heard the learned counsel for the parties at some length, we are prima facie of the opinion that SEBI has the power to initiate proceedings under Section 15-I(3) of the SEBI Act," said the SAT order.
The three member bench also directed the SEBI to file a reply within four weeks from the date of order (July 1) and three weeks thereafter is allowed to the appellant, India Ratings to file rejoinder.
In the meanwhile, the SAT directed India Ratings to deposit a sum of Rs 25 lakh pursuant to the impugned order dated December 26, 2019 before the respondent within four weeks which would be subject to the result of the appeal.
"We further direct that the proceedings in pursuance to the second show cause notice dated 28th January, 2020 will continue and the respondent (SEBI) will pass appropriate orders after giving an opportunity of hearing to the appellant either through physical hearing or through video conferencing but any order that is passed by the respondent shall not be given effect to during the pendency of this appeal," the order said.
The matter would be listed for admission and for final disposal on August 20, it said.
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